Table of Contents

As filed with the Securities and Exchange Commissionon January 21, 2022

 

Registration No. 333-       

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIESACT OF 1933

 

KISSES FROMITALY INC.

(Exact name of registrant as specified in its charter)

 

Florida	5810	46-2388377
(State or other jurisdiction of Incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

 

80 SW 8th ST.

Suite 2000

Miami, Florida 33130

305 423-7129

(Address, including zip code, and telephone number,including area code,

of registrant’s principal executive offices)

 

Michele Di Turi, Chief Executive Officer

KISSES FROM ITALY INC.

80 SW 8^th ST.

Suite 2000

Miami, Florida 33130

305 423-7129

(Name, address, including zip code, and telephonenumber, including area code, of agent for service)

 

Copies to:

Mark Crone, Esq.

Liang Shih, Esq.

The Crone Law Group, P.C.

500 Fifth Avenue, Suite 938

New York, New York 10110

Telephone: (646) 861-7891

 

As soon as practicable after the effectivedate of this Registration Statement
(Approximate date of commencement of proposed sale to the public)

 

Ifany of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under theSecurities Act of 1933, check the following box: ☒

Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check thefollowing box and list the Securities Act registration statement number of the earlier effective registration statement for the sameoffering: ☐

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 emerginggrowth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Class of Securities to be Registered		Amount to be Registered				Proposed Maximum Offering Price per Share				Proposed Maximum Aggregate Offering Price				Amount of Registration Fee(5)
Common stock, $0.001 par value per share, issuable pursuant to the Standby Equity Commitment Agreement (1)(2)			75,000,000				$0.08 (3)			$	6,000,000
Common stock, $0.001 par value per share, issuable upon exercise of common stock purchase warrants by the Selling Stockholders (1)(2)			750,000				$0.10 (4)				75,000
Total			75,750,000							$	6,075,000			$	563.15

__________________

(1)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”).
(2)	Pursuant to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
(3)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act, based upon the average of the high and low sales prices of the registrant’s Common Stock on the OTCQB of $0.08 per share on January 14, 2022.
(4)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(g) under the Securities Act, based upon the price at which the warrants may be exercised.
(5)	Paid herewith.

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATIONSTATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICHSPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIESACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION8(a), MAY DETERMINE.

 

 

 

 

Subject to Completion, dated January21, 2022

 

PROSPECTUS

 

PRELIMINARY

PROSPECTUS

 

a Florida corporation

75,750,000 Shares of Common Stock

 

This Prospectus relates to the offer and saleof up to 75,750,000 shares of our Common Stock (“Common Stock”) by Selling Stockholders listed on page 23 of this Prospectus(the “Selling Stockholder”), (the “Offering”). See “SELLING STOCKHOLDERS.”

 

The Selling Stockholders, or their respectivetransferees, pledgees, donees or other successors-in-interest, may sell their shares of our Common Stock (the “Shares”) fromtime to time at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The SellingStockholders may sell any, all or none of the securities offered by this prospectus, and we do not know when or in what amount the SellingStockholders may sell their Shares hereunder following the effective date of this registration statement.

 

We do not currently have a sufficient number ofauthorized shares of Common Stock to cover all of the shares issuable pursuant to that certain StandbyEquity Commitment Agreement dated November 22, 2021, by and between the Selling Stockholders and us. As a result, we will seekwritten consent by a majority of our stockholders in lieu of a meeting to amend to our articles of incorporation to implement an increasein the number of authorized shares of our Common Stock (the “Charter Amendment”) for this purpose, and complete the CharterAmendment prior to effectiveness of this Registration Statement.

 

Our Common Stock is currently traded on the OTCQB Marketplace operatedby the OTC Markets Group, Inc. (the “OTCQB”) under the symbol “KITL.” On January 20, 2022, the last reported saleprice for our common stock was $0.08 per share. Each Selling Stockholder may be an underwriter within the meaningof Section 2(a)(11) of the Securities Act. See “DETERMINATION OF OFFERING PRICE,” “SELLING STOCKHOLDERS”and “PLAN OF DISTRIBUTION.”

 

We will pay the expenses of registering theseShares. We will not receive any proceeds from the sale of Shares of Common Stock in this Offering. All of the net proceeds from the saleof the Shares will go to the Selling Stockholders.

   

We are an “emerging growth company”as defined under the federal securities laws and are subject to reduced public company reporting requirements.

 

Investing in our Common Stock involves a highdegree of risk. You should invest in our Common Stock only if you can afford to lose your entire investment.

 

SEE “RISK FACTORS” BEGINNINGON PAGE 5.

 

The information in this Prospectus is not completeand may be changed. This Prospectus is included in the registration statement that was filed by Kisses From Italy Inc. with the Securitiesand Exchange Commission. The Selling Stockholders may not sell these Shares until the registration statement becomes effective. This Prospectusis not an offer to sell these Shares and is not soliciting an offer to buy these Shares in any State where the offer or sale is not permitted.

 

Neitherthe Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determinedif this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this Prospectus is ____________,2022

 

 

 

 

 

TABLE OF CONTENTS

 

	Page No.
Prospectus Summary	1
Special Note About Forward-Looking Statements	4
Risk Factors	5
Use of Proceeds	22
Determination of the Offering Price	22
Market Price of and Dividends on the Company’s Common Equity and Related Stockholder Matters	22
Selling Stockholders	23
Plan of Distribution	24
Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Description of Business	34
Management	42
Executive Compensation	44
Summary Compensation Table	44
Security Ownership of Certain Beneficial Owners & Management	45
Certain Relationships and Related Transactions	46
Description of Securities	46
Shares Eligible for Future Sale	49
Legal Matters	50
Experts	50
Disclosure of Commission Position on Indemnification for Securities Act Liabilities	50
Additional Information	50
Financial Statements	F-1

 

 

 

 

 

PROSPECTUS SUMMARY

 

This summary provides an overview of certaininformation contained elsewhere in this Prospectus and does not contain all of the information that you should consider or that may beimportant to you. Before making an investment decision, you should read the entire Prospectus carefully, including the “RISK FACTORS”section and the financial statements and the notes to the financial statements. In this Prospectus, the terms “the “Company,”“we,” “us” and “our” refer to Kisses From Italy Inc., unless otherwise specified herein.

 

We were incorporated in the State of Florida onMarch 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business of corporate-owned restaurants and expandingthrough a nationwide/international franchise and territory sales program. We commenced operations by opening our initial corporate-ownedrestaurant in Fort Lauderdale, Florida in May 2015. By April 2016, we opened three additional restaurants located in various Wyndham Hotelproperties in the Pompano Beach, Florida area. In September 2017, Hurricane Irma caused significant damage to the area, which resultedin Wyndham halting operations at its hotel properties for repairs and renovations and the closure of our Wyndham hotel locations. In December2017, we vacated one of our restaurants in the Wyndham Hotel properties due to damage from the hurricane and have not re-opened such restaurant.During the three months ended June 30, 2021, we consolidated the remaining two Wyndham stores into one location to become more efficient.

 

In May 2017, we completed our National FranchiseLicense, which permits us to sell franchises in all of the states in the United States except for New York, Virginia, and Maryland, whichlicenses we may obtain if sufficient demand exists in the future.

 

We opened our inaugural European location in Cegliedel Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. Managementis currently scouting various locations in regions of Italy and believes that the regions of Rome and Puglia may offer opportunities foradditional corporate-owned and franchise expansion. However, there are no agreements currently in place to open any new facilities, eitherCompany-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

 

All three of our corporate-ownedrestaurants, located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, have fully re-openedsubject to recommended social distancing guidelines.

 

In June of 2020, the Company entered into a multi-unitdevelopment agreement (the “Development Agreement”) pursuant to which it granted development rights to Demasar Management,Inc. to open and operate up to 100 restaurants in Canada. Under this Development Agreement, thedeveloper is obligated to open a minimum of 20 restaurants by June 17, 2025. On November 20, 2021, we opened a franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

In September of 2020, we entered retail food andgrocery stores with Kisses From Italy branded products in Canada. The product launch began in November of 2020 and Kisses From Italy brandedproducts were in nine retail stores by the end of 2020. Currently, Kisses From Italy branded products are in 35 stores across Ontarioand Quebec, Canada.

 

In April of 2021, we entered into a ConsultingAgreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”),pursuant to which we engaged Fransmart as our exclusive global franchise developer and representative for a period of ten years.

 

 

 

 

In May of 2021, we opened our first franchisein Chino, California. Due to the onset of Covid-19, we temporarily waived any franchise fees so that the franchisee could well establishits operations at such location. On November 20, 2021, we opened a second franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

COVID-19

 

On March 11, 2020, the World Health Organizationdeclared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having anegative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states andmany countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S.’s response to thepandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemicmay have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the fullextent of the effects on the economy, the markets we serve, our business, or our operations.

 

All of the Company’s three corporate-ownedrestaurants which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, havefully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than othersites due to CDC recommendations. 

 

For the nine months ended September 30, 2021 and 2020, we recognizedapproximately $328,479 and $454,998, respectively, in revenues. For the years ended December 31, 2020 and 2019, we recognized approximately$514,038 and $461,298, respectively, in revenues. 

 

Our principal offices are located at 80 SW 8^thSt. Suite 2000, Miami, Florida, 33130, and our phone number is (305) 423-7024. Our website is www.kissesfromitaly.com

 

 

 

 

 

 

 

AboutThe Offering

 

Common Stock to be Offered by Selling Stockholders		75,750,000 shares, consisting of 75,000,000 shares of our Common Stock issuable pursuant to that certain Standby Equity Commitment Agreement dated November 22, 2021, by and between the Selling Stockholders and us, and 750,000 shares of our common stock issuable upon exercise of outstanding warrants held by the Selling Stockholders.
Common Stock outstanding before the Offering		183,913,582 shares of Common Stock
Common Stock outstanding after the Offering (assuming all of the shares offered in the Offering have been issued and sold)		259,663,582 shares of Common Stock
OTCQB symbol		KITL
Use of Proceeds		We will not receive any proceeds from the sale of the Common Stock.
Risk Factors		See the discussion under the caption “RISK FACTORS” and other information in this Prospectus for a discussion of factors you should carefully consider before deciding to invest in our Common Stock.

 

 

 

  

 

 

 

 

 

 

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

We have made some statements in this Prospectus,including some under “RISK FACTORS,” “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” “DESCRIPTION OF BUSINESS” and elsewhere, which constitute forward-looking statements. These statementsmay discuss our future expectations or contain projections of our results of operations or financial condition or expected benefits tous resulting from acquisitions or transactions and involve known and unknown risks, uncertainties and other factors that may cause ouractual results, levels of activity, performance or achievements to be materially different from any results, levels of activity, performanceor achievements expressed or implied by any forward-looking statements. These factors include, among other things, those listed under“RISK FACTORS” and elsewhere in this Prospectus. In some cases, forward-looking statements can be identified by terminologysuch as “may,” “should,” “could,” “expects,” “intends,” “plans,”“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue”or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in forward-lookingstatements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RISK FACTORS

 

Investing in our Common Stock involves a highdegree of risk. Before investing in our Common Stock, you should carefully consider the risks described below, as well as the other informationin this prospectus, including our consolidated financial statements and the related notes. In addition, we may face additional risks anduncertainties not currently known to us, or which as of the date of this registration statement we might not consider significant, whichmay adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations couldbe materially adversely affected. In such case, the trading price of our Common Stock could decline due to any of these risks or uncertainties,and you may lose part or all of your investment.

 

Risks Related to Our Business

 

Our independent accountants have expressed a "going concern"opinion.

 

Our financial statements accompanying this prospectushave been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation ofliabilities in the normal course of business. The financial statements do not include any adjustment that might result from the outcomeof this uncertainty. We have a minimal operating history and minimal revenues or earnings from operations. We have no significant assetsor financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues for the immediate future.See “DESCRIPTION OF BUSINESS” and “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources.” There are no assurances thatwe will generate profits from operations.

 

We have not generated profits from our operations.

 

We incurred net losses of $3,821,644 and $3,364,381in the nine months ended September 30, 2021 and 2020, respectively. There can be no assurances that we will ever establish profitableoperations. As we pursue our business plan, we are incurring significant expenses without corresponding revenues. In the event that weremain unable to generate significant revenues to pay our operating expenses, we will not be able to achieve profitability or continueoperations.

 

Our financial condition andresults of operations have been and may continue to be adversely affected by the COVID-19 pandemic or future pandemics ordisease outbreaks.

 

During March 2020,a global pandemic was declared by the World Health Organization related to the rapidly spreading outbreak of a novel strain ofcoronavirus (“COVID-19”). The COVID-19 pandemic has caused businesses, including our business, as well asfederal, state and local governments to implement significant actions to attempt to mitigate this public health crisis in the UnitedStates. Our operations have been impacted by the COVID-19 pandemic. Future pandemics (or epidemics on a local basis) couldhave a similar impact on our business.

 

During 2020 and2021, individuals in areas where we operate our restaurants were required to practice social distancing, restricted from gatheringin groups and/or mandated to “stay home” except for “essential” purposes. In response to theCOVID-19 pandemic and government restrictions, we were required to close or restrict our locations. The mobility restrictions,fear of contracting COVID-19 and the sharp increase in unemployment caused by the closure of businesses in response tothe COVID-19 pandemic, have adversely affected and may continue to adversely affect our guest traffic, which in turnadversely impacts our business, financial condition or results of operations. Even as the mobility restrictions were loosened orlifted, we believe that some guests remained reluctant to return and the impact of lost wages due to COVID-19 relatedunemployment has dampened consumer spending. Our restaurant operations have been and could continue to be adversely affected byemployees who are unable or unwilling to work, whether because of illness, quarantine, fear of contracting COVID-19 orcaring for family members due to COVID-19 disruptions or illness. Restaurant closures, limited service options or modifiedhours of operation due to staffing shortages could materially adversely affect our business, liquidity, financial condition orresults of operations.

 

 

 

 

 

The extent of the impactof the COVID-19 pandemic on our operations and financial results depends on future developments and is highly uncertain due to the unknownduration and severity of the outbreak, including the potential impact of the COVID-19 delta and omicron variants. The situation is changingrapidly and future impacts may materialize that are not yet known. We intend to continue to actively monitor the evolving situation andmay take further actions that alter our business operations as may be required by federal, state or local authorities or that we determineare in the best interests of our team members, customers, suppliers and shareholders. The further spread of COVID-19 or otherinfectious diseases, and the requirements or measures imposed or taken by federal, state and local governments and businesses to mitigatethe spread of such diseases, could disrupt our business or impact our ability to carry out our business as usual. Depending on the durationand severity of any such business interruption, we may need to seek additional sources of liquidity. There can be no guarantee that additionalliquidity, whether through the credit markets or government programs, will be readily available or available on favorable terms to us.The ultimate impact of adverse events in the future on our operations is unknown and will depend on future developments, which are highlyuncertain and cannot be predicted with confidence, including the duration, and any additional preventative and protective actions thatgovernments, or we, may direct, which may result in an extended period of continued business disruption, reduced guest traffic, damageto our reputation and reduced operations, any of which could have a material adverse effect on our business, financial condition and resultsof operations. The COVID-19 pandemic or other infectious diseases may also have the effect of heightening other risks disclosedin this prospectus, including, but not limited to, those related to our growth strategy, access capital markets and other funding sources,changes in consumer spending behaviors, supply chain interruptions and/or commodity price increases.

 

We are vulnerableto changes in economic conditions and consumer preferences that could have a material adverse effect on our business, financial conditionand results of operations.

 

The restaurant industrydepends on consumer discretionary spending and is often affected by changes in consumer tastes, national, regional and local economicconditions and demographic trends, including changes in behavior caused by the COVID-19 pandemic. In addition, factors suchas traffic patterns, weather, fuel prices, local demographics, local regulations and the type, number and locations of competing restaurantsmay adversely affect the performances of individual locations. In addition, economic downturns, inflation or increased food or energycosts could harm the restaurant industry in general and our restaurants in particular. Adverse changes in any of these factors couldreduce consumer traffic or impose practical limits on pricing that could have a material adverse effect on our business, financial conditionand results of operations. There can also be no assurance that consumers will continue to regard our menu offerings favorably, that wewill be able to develop new menu items that appeal to consumer preferences or that there will not be a drop in consumer demand. Restauranttraffic and our resulting sales depend in part on our ability to anticipate, identify and respond to changing consumer preferences andeconomic conditions. In addition, the restaurant industry is subject to scrutiny due to the perception that restaurant company practiceshave contributed to poor nutrition, high caloric intake, obesity or other health concerns of their customers. If we are unable to adaptto changes in consumer preferences and trends, we may lose customers, which could have a material adverse effect on our business, financialcondition and results of operations.

 

Changes in customer preferences,general economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and locationof competing restaurants affect the restaurant industry. Our success depends to a significant extent on consumer confidence, which isinfluenced by general economic conditions, local and regional economic conditions in the markets in which we operate, and discretionaryincome levels. Our sales may decline during economic downturns, which can be caused by various economic factors such as high gasolineprices, or during periods of uncertainty, such as those during the Covid-19 pandemic. Any material decline in consumer confidence or adecline in spending could cause our sales, operating results, business or financial condition to decline. If we fail to adapt to changesin customer preferences and trends, we may lose customers, fail to gain customers, and our sales may deteriorate.

 

Customer preference onhow and where they purchase food may change because of advances in technology or alternative service channels. If we are not able to respondto these changes, or our competitors respond to these changes more effectively, our business, financial condition and results of operationscould be adversely affected.

 

 

 

 

Changes in the cost of food could havea material adverse effect on our business, financial condition and results of operations.

 

Our profitability dependsin part on our ability to anticipate and react to changes in the cost of sales of food items. We are susceptible to increases in the costof food due to factors beyond our control, such as freight and delivery charges, general economic conditions, seasonal economic fluctuations,weather conditions, global demand, food safety concerns, infectious diseases, fluctuations in the U.S. dollar, tariffs and import taxes,product recalls and government regulations. Dependence on frequent deliveries of food products subjects our business to the risk thatshortages or interruptions in supply could adversely affect the availability, quality or cost of ingredients or require us to incur additionalcosts to obtain adequate supplies. Deliveries of supplies may be affected by adverse short-term weather conditions or long-term changesin weather patterns, including those related to climate change, natural disasters, labor shortages, or financial or solvency issues ofour distributors or suppliers, product recalls or other issues. Further, increases in fuel prices could result in increased distributioncosts. In addition, a material adverse effect on our business, financial condition and results of operations could occur if any of ourdistributors, suppliers, vendors, or other contractors fail to meet our quality or safety standards or otherwise do not perform adequately,or if any one or more of them seeks to terminate its agreement or fails to perform as anticipated, or if there is any disruption in anyof our distribution or supply relationships or operations for any reason. Changes in the price or availability of certain food products,including as a result of the COVID-19 pandemic, could affect our profitability and reputation.

 

Changes in the cost ofingredients can result from a number of factors, including seasonality, short-term weather conditions or long-term changes in weatherpatterns, natural disasters, currency exchange rates, increases in the cost of grain, consumer demand, disease and viruses and other factorsthat affect availability and greater international demand for domestic products. In the event of cost increases with respect to one ormore of our raw ingredients, we may choose to temporarily suspend or permanently discontinue serving menu items rather than paying theincreased cost for the ingredients. Any such changes to our available menu could negatively impact our restaurant traffic, business andresults of operations during the shortage and thereafter. While future cost increases can be partially offset by increasing menu prices,there can be no assurance that we will be able to offset future cost increases by such menu price increases. If we implement menu priceincreases, there can be no assurance that increased menu prices will be fully absorbed by our guests without any resulting change to theirvisit frequencies or purchasing patterns. Competitive conditions may limit our menu pricing flexibility and if we implement menu priceincreases to protect our margins, restaurant traffic could be materially adversely affected.

 

An important aspectof our growth strategy involves opening new restaurants in existing and new markets. We may be unsuccessful in opening new restaurantsor establishing new markets and our new restaurants may not perform as well as anticipated, which could have a material adverse effecton our business, financial condition and results of operations.

 

A key part of our growthstrategy includes opening new restaurants in existing and new markets and operating those restaurants on a profitable basis. We mustidentify target markets where we can enter or expand, and we may not be able to open our planned new restaurants within budget or ona timely basis, and our new restaurants may not perform as well as anticipated. Our ability to successfully open new restaurants is affectedby several factors, many of which are beyond our control, including our ability to:

 

	·		identify available, appropriate and attractive restaurant sites;
	·		compete for restaurant sites;
	·		reach acceptable agreements regarding the lease or purchase of restaurant sites;
	·		obtain or have available the financing required to develop and operate new restaurants, including construction and opening costs, which includes access to leases and equipment leases at favorable interest and capitalization rates;
	·		respond to unforeseen engineering or environmental problems with our selected restaurant sites;
	·		respond to landlord delays and the failure of landlords to timely deliver real estate to us;
	·		mitigate the impact of inclement weather, natural disasters and other calamities on the development of restaurant sites;
	·		hire, train and retain the skilled management and other team members necessary to meet staffing needs of new restaurants;
	·		obtain, in a timely manner and for an acceptable cost, required licenses, permits and regulatory approvals and respond effectively to any changes in local, state or federal law and regulations that adversely affect our costs or ability to open new restaurants; and
	·		respond to construction and equipment cost increases for new restaurants.

 

 

 

 

 

There is no guaranteethat a sufficient number of available, appropriate and attractive restaurant sites will be available in desirable areas or on terms thatare acceptable to us in order to achieve our growth plan. If we are unable to open new restaurants, or if planned restaurant openingsare significantly delayed, it could have a material adverse effect on our business, financial condition and results of operations.

 

As part of our long-termgrowth strategy, we may open restaurants in geographic markets in which we have little or no prior operating experience. The challengesof entering new markets include: difficulties in hiring experienced personnel; unfamiliarity with local real estate markets and demographics;consumer unfamiliarity with our brand; and different competitive and economic conditions, consumer tastes and discretionary spending patternsthat are more difficult to predict or satisfy than in our existing markets. Consumer recognition of our brand has been important in thesuccess of our restaurants in our existing markets, and we may find that our concept has limited appeal in new markets. Restaurants weopen in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction,occupancy and operating costs than existing restaurants. Any failure on our part to recognize or respond to these challenges may adverselyaffect the success of any new restaurants and could have a material adverse effect on our business, financial condition and results ofoperations.

 

We intend to continueto make investments to support our business growth and may require additional funds to respond to business challenges or opportunities,including the need to open additional restaurants. Accordingly, we may need to engage in equity or debt financings to secure additionalfunds. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtainadequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growthand to respond to business challenges could be significantly limited, which could have a material adverse effect on our business, financialcondition and results of operations.

 

New restaurants may not be profitableor may close, and the performance of our restaurants that we have experienced in the past may not be indicative of future results.

 

In new markets, the lengthof time before average sales for new restaurants stabilize is less predictable as a result of our limited knowledge of these markets andconsumers’ limited awareness of our brand. Our ability to operate our restaurants profitably will depend on many factors, some ofwhich are beyond our control, including:

 

	·		consumer awareness and understanding of our brand;
	·		general economic conditions, which can affect restaurant traffic, local labor costs and prices we pay for the food products and other supplies we use;
	·		consumption patterns and food preferences that may differ from region to region;
	·		changes in consumer preferences and discretionary spending;
	·		difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets;
	·		increases in prices for commodities;
	·		inefficiency in our labor costs as the staff gains experience;
	·		competition, either from our competitors in the restaurant industry or our own restaurants;
	·		temporary and permanent site characteristics of new restaurants;
	·		changes in government regulation; and
	·		other unanticipated increases in costs, any of which could give rise to delays or cost overruns.

 

If our new restaurantsdo not perform as planned or close, it could have a material adverse effect on our business, financial condition and results of operations.

 

 

 

Our growth strategy also includes continued developmentof our business through franchising. The opening and successful operation of our restaurants by franchisees depends on a number of factors,including those identified above, as well as the availability of suitable franchise candidates and the financial and other resources ofour franchisees such as our franchisees’ ability to receive financing from banks and other financial institutions, which may becomemore challenging in the current economic environment. As noted above, identifying and securing an adequate supply of suitable new restaurantsites presents significant challenges because of the intense competition for those sites in our target markets, and increasing developmentand leasing costs. This may be especially true as we continue to expand. Further, any restrictions or limitations of credit markets mayrequire developers to delay or be unable to finance new projects. Delays or failures in opening new restaurants due to any of the reasonsset forth above could materially and adversely affect our growth strategy and our expected results.

 

Our success in part depends on the successof our franchisees’ business.

 

To achieve our expansion goals within our desiredtimeframe, we have adopted a franchising and area developer model into our business strategy. We hope to continue to open new company-ownedrestaurants, while also moving forward to developing our franchised operation where we will solicit others to become our franchisees.We have not used a franchising or area developer model in the past and may not be successful in attracting franchisees and developersto our business concept or identifying franchisees and developers that have the business abilities or access to financial resources necessaryto open our restaurants or to develop or operate successfully our restaurants in a manner consistent with our standards. Incorporatinga franchising and area developer model into our strategy will required us to devote significant management and financial resources toprepare for and support the eventual sale of franchises. If we are not successful in incorporating a franchising or area developermodel into our strategy, we may experience delays in our growth or may not be able to expand and grow our business.

 

Our success also depends in part on the operationsof our franchisees. While we provide training and support to, and monitor the operations of, our franchisees, the product quality andservice they deliver may be diminished by any number of factors beyond our control, including financial pressures and their own businessoperations, such as employment related matters. We strive to provide our customers with the same experience at company-owned restaurantsand franchise-operated restaurants. Our customers may attribute to us problems which originate with one of our franchisees, particularlythose affecting the quality of the service experience, food safety, litigation or compliance with laws and regulations, thus damagingour reputation and brand value and potentially adversely affecting our results of operations. Our growth expectations and revenues couldbe negatively impacted by a material downturn in sales at and to franchise-operated locations or if one or more key franchisees becomeinsolvent.

 

Our franchisees could take actions thatcould harm our business.

 

Franchisees are independently owned and operated,and they are not our employees. Although we provide certain training and support to franchisees, our franchisees operate their shops asindependent businesses. Consequently, the quality of franchised shop operations may be diminished by any number of factors beyond ourcontrol. Moreover, franchisees may not operate shops in a manner consistent with applicable laws and regulations or in accordance withour standards and requirements. Also, franchisees may not successfully hire and train qualified managers and other shop personnel. Althoughwe believe we currently generally enjoy a positive relationship with our franchisees, there is no assurance that future developments,some of which may be outside our control, may significantly harm our future relationships with existing and new franchisees. In addition,our image and reputation, and the image and reputation of other franchisees, may suffer materially if our franchisees do not operate successfully,or in accordance with our standards and requirements, which could result in a significant decline in our sales, our revenues and our profitability.

 

Our failure tomanage our growth effectively could harm our business and results of operations.

 

Our growth plan includesopening new restaurants. Our existing restaurant management systems, financial and management controls and information systems may beinadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, proceduresand controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that ourexpansion will impose on our management, restaurant teams and existing infrastructure, which could have a material adverse effect on ourbusiness, financial condition and results of operations. These demands could cause us to operate our existing business less effectively,which in turn could cause a deterioration in the financial performance of our existing restaurants. If we experience a decline in thefinancial performance, we may decrease the number of or discontinue restaurant openings, or we may decide to close restaurants that weare unable to operate in a profitable manner.

 

 

 

 

Opening new restaurantsin existing markets may negatively impact sales at our existing restaurants.

 

The consumer target areaof our restaurants varies by location, depending on a number of factors, including population density, other local retail and businessattractions, area demographics and geography. As a result, if we open new restaurants in or near markets in which we already have restaurants,it could have a material adverse effect on sales at these existing restaurants. Existing restaurants could also make it more difficultto build our consumer base for a new restaurant in the same market. Our core business strategy does not entail opening new restaurantsthat we believe will materially affect sales at our existing restaurants over the long term. However, due to brand recognition and logisticalsynergies, as part of our growth strategy, we also intend to open new restaurants in areas where we have existing restaurants. This plancould have a material adverse effect on the results of operations and same-restaurant sales for our restaurants in such markets due tothe close proximity with our other restaurants and market saturation. Unintentional sales cannibalization or sales cannibalization inexcess of what was intended may become significant in the future as we continue to open new restaurants, and could affect our sales growth,which could, in turn, have a material adverse effect on our business, financial condition and results of operations.

 

Our plans to opennew restaurants, and the ongoing need for capital expenditures at our existing restaurants, require us to spend capital.

 

Our growth strategy dependson opening new restaurants, which will require us to use cash flows from operations and proceeds from equity or debt offerings. We cannotassure you that cash flows from operations and the net proceeds of any offering will be sufficient to allow us to implement our growthstrategy. If this cash is not allocated efficiently among our various projects, or if any of these initiatives prove to be unsuccessful,we may experience reduced financial results and we could be required to delay, significantly curtail or eliminate planned restaurant openings,which could have a material adverse effect on our business, financial condition, results of operations and the price of our stock.

 

In addition, as our restaurantsmature, our business will require capital expenditures for the maintenance, renovation and improvement of existing restaurants to remaincompetitive and maintain the value of our brand standard. This creates an ongoing need for cash, and, to the extent we cannot fund capitalexpenditures from cash flows from operations, funds will need to be borrowed or otherwise obtained.

 

If the costs of fundingnew restaurants or renovations or enhancements at existing restaurants exceed budgeted amounts, and/or the time for building or renovationis longer than anticipated, our profits could be reduced. If we cannot access the capital we need, we may not be able to execute on ourgrowth strategy, take advantage of future opportunities or respond to competitive pressures.

 

Incidents involving food-borne illnessand food safety, including food tampering or contamination could adversely affect our brand perception, business, financial conditionand results of operations.

 

Food safety is a toppriority, and we dedicate substantial resources to help ensure that our guests enjoy safe, quality food products. However, food-borneillnesses and other food safety issues have occurred in the food industry in the past, and could occur in the future. Incidents or reportsof food-borne or water-borne illness or other food safety issues, food contamination or tampering, team member hygiene and cleanlinessfailures or improper team member conduct, guests entering our restaurants while ill and contaminating food ingredients or surfaces atour restaurants could lead to product liability or other claims. Such incidents or reports could negatively affect our brand and reputationand could have a material adverse effect on our business, financial condition and results of operations.

 

 

 

 

 

We cannot guarantee toconsumers that our food safety controls, procedures and training will be fully effective in preventing all food safety and public healthissues at our restaurants, including any occurrences of pathogens (i.e., Ebola, “mad cow disease,” “SARS,” “swineflu,” Zika virus, avian influenza, hepatitis A, porcine epidemic diarrhea virus, norovirus or other virus), bacteria (i.e., salmonella,listeria or E. coli), parasites or other toxins infecting our food supply. These public health issues, in addition to food tampering,could adversely affect food prices and availability of certain food products, could generate negative publicity and litigation, and couldlead to closure of restaurants, resulting in a decline in our sales or profitability. In addition, there is no guarantee that our restaurantlocations will maintain the high levels of internal controls and training we require at our restaurants. Furthermore, some food-borneillness incidents could be caused by third-party food suppliers and transporters outside of our control, and may affect multiple restaurantlocations as a result. We cannot assure you that all food items will be properly maintained during transport throughout the supply chainand that our team members will identify all products that may be spoiled and should not be used in our restaurants. The risk of food-borneillness may also increase whenever our menu items are served outside of our control, such as by third-party food delivery services, guesttake out or at catered events. We do not have direct control over our third-party suppliers, transporters or delivery services, includingin their adherence to additional sanitation protocols and guidelines as a result of the COVID-19 pandemic or other infectiousdiseases, and may not have visibility into their practices. New illnesses resistant to our current precautions may develop in the future,or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or moreinstances of food-borne illness in one of our restaurants could negatively affect sales at all our restaurants if highly publicized, suchas on national media outlets or through social media. This risk exists even if it were later determined that the illness was wrongly attributedto one of our restaurants. Food safety incidents, whether at our restaurants or involving our business partners, could lead to wide publicexposure and negative publicity, which could materially harm our business. Additionally, even if food-borne illnesses were not identifiedat our restaurants, our restaurant sales could be adversely affected if instances of food-borne illnesses at other restaurants were highlypublicized.

 

Damage to our reputationand negative publicity could have a material adverse effect on our business, financial condition and results of operations.

 

Any incident thaterodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected bynegative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints orlitigation alleging illness or injury, health inspection scores, integrity of our or our suppliers’ food processing and otherpolicies, practices and procedures, team member relationships and welfare or other matters at one or more of our restaurants. Anypublicity relating to health concerns, perceived or specific outbreaks of a food-borne illness attributed to one or more of ourrestaurants, or non-compliance with food handling and sanitation requirements imposed by federal, state and localgovernments could result in a significant decrease in guest traffic in all of our restaurants and could have a material adverseeffect on our results of operations. Furthermore, similar negative publicity or occurrences with respect to other restaurants orother restaurant chains could also decrease our guest traffic and have a similar material adverse effect on our business. Inaddition, incidents of restaurant commentary have increased dramatically with the proliferation of social media platforms. Negativepublicity may adversely affect us, regardless of whether the allegations are valid or whether we are held responsible. In addition,the negative impact of adverse publicity may extend far beyond the restaurant involved, and affect some or all our otherrestaurants.

 

The digital anddelivery business, and expansion thereof, is uncertain and subject to risk.

 

As the digital spacearound us continues to evolve, our technology needs to evolve concurrently to stay competitive with the industry. If we do not maintainand innovate our digital systems that are competitive with the industry, our digital business may be adversely affected and could damageour sales. We rely on third-parties for our ordering and payment platforms. Such services performed by these third-parties could be damagedor interrupted by technological issues, which could then result in a loss of sales for a period of time. Information processed by thesethird-parties could also be impacted by cyber-attacks, which could not only negatively impact our sales, but also harm our brand image.

 

 

 

 

 

Recognizing the risein delivery services offered throughout the restaurant industry, we understand the importance of providing such services to meet our guestswherever and whenever they want. We rely on third-parties to fulfill delivery orders timely and in a fashion that will satisfy our guests.Errors in providing adequate delivery services may result in guest dissatisfaction, which could also result in loss of guest retention,loss in sales and damage to our brand image. Additionally, as with any third-party handling food, such delivery services increase therisk of food tampering while in transit. We are also subject to risk if there is a shortage of delivery drivers, which could result ina failure to meet our guests’ expectations.

 

Third-party deliveryservices within the restaurant industry is a competitive environment and includes a number of players competing for market share. If ourthird-party delivery partners fail to effectively compete with other third-party delivery providers in the sector, our delivery businessmay suffer resulting in a loss of sales. If any third-party delivery provider we partner with experiences damage to their brand image,we may also see ramifications due to our partnership with them.

 

Natural disasters,unusual weather conditions, pandemic outbreaks, political events, war and terrorism could disrupt our business and result in lower sales,increased operating costs and capital expenditures.

 

Our home office, restaurantlocations, suppliers and distributors, and their respective facilities, as well as certain of our vendors and customers, are located inareas, south as southern Florida, that have been and could be subject to natural disasters such as floods, drought, hurricanes, tornadoes,fires or earthquakes. Adverse weather conditions or other extreme changes in short-term weather conditions or long-term changes in weatherpatterns related to climate change, including those that may result in electrical and technological failures, may disrupt our businessand may adversely affect our ability to obtain food and supplies and sell menu items. Our business may be harmed if our ability to obtainfood and supplies and sell menu items is impacted by any such events, any of which could influence customer trends and purchases and maynegatively impact our revenues, properties or operations. Such events could result in physical damage to one or more of our properties,the temporary closure of some or all of our restaurants and our suppliers and distributors, the temporary lack of an adequate work forcein a market, temporary or long-term disruption in the transport of goods, delay in the delivery of goods and supplies to our restaurantsand our suppliers and distributors, disruption of our technology support or information systems, or fuel shortages or dramatic increasesin fuel prices, all of which would increase the cost of doing business. These events also could have indirect consequences such as increasesin the costs of insurance if they result in significant loss of property or other insurable damage. Any of these factors, or any combinationthereof, could have a material adverse effect on our business, financial condition and results of operations.

   

Our financial results may fluctuate fromperiod to period as a result of several factors which could adversely affect our stock price.

 

Our operating results may fluctuate significantlyin the future as a result of a variety of factors, many of which are outside our control. Factors that will affect our financial resultsinclude:

 

	·	acceptance of our restaurant concept and market penetration;
	·	the amount and timing of capital expenditures and other costs relating to the implementation of our business plan;
	·	the introduction of new products by our competitors;
	·	seasonality applicable to our geographic location; and
	·	general economic conditions and economic conditions specific to our industry.

 

As a strategic response to changes in the competitiveenvironment, we may from time to time make certain pricing, service, or marketing decisions or acquisitions that could have a materialadverse effect on our business, prospects, financial condition, and results of operations.

   

The fast-food segment of the restaurant industry is highly competitive.

 

We operate in the fast food segment of the restaurantindustry, which is highly competitive with respect to, among other things, taste, consumer trends, price, food quality and presentation,service, location and the ambiance and condition of the restaurant. Our competition includes a variety of locally owned restaurants, aswell as national and regional chains. Our competitors offer dine-in, carry-out, delivery and drive-through services. Most of our competitorshave existed longer and often have a more established brand and market presence with substantially greater financial, marketing, personneland other resources than us. Among our main competitors include Jimmy John’s, Chipotle Mexican Grill, Miami Subs Grill, Subway andStarbucks, most of whom have expanded nationally. As we expand, our existing restaurants may face competition from existing and new restaurantsthat operate in these markets.

 

 

 

 

 

Several of our competitors compete by offeringmenu items that are specifically identified as low in fat, carbohydrates and calories, allegedly better for customers, or otherwise targetedat healthier consumer preferences. Many of our competitors in the fast food segment of the restaurant industry also emphasize lower cost,“value meal” menu options, which is a strategy we also pursue.

 

Moreover, new companies will likely enter ourmarkets and target our customers. For example, additional competitive pressures have come recently from the deli sections and in-storecafés of several major grocery chains, including those targeted at customers who want higher quality and healthier food, as wellas from convenience stores and casual dining outlets.  These competitors may have, among other things, lower operating costs,better locations, better brand awareness, better facilities, better management, more effective marketing and more efficient operationsthan we do.

 

In the restaurant industry, labor is a primaryoperating cost component. Competition for qualified employees could also require us to pay higher wages to attract a sufficient numberof employees. We also expect to compete for restaurant locations with other fast food restaurants. Until our name is better recognized,landlords may prefer well-known fast food restaurants over us and we may experience difficulties in securing desirable restaurant locations.All of these competitive factors may adversely affect us and reduce our sales and profits.

   

Our expansion into new markets may presentincreased risks due to our unfamiliarity with those areas and our target customers’ unfamiliarity with our brand.

 

Our initial restaurants are located, and futurerestaurants will be located, in markets where we have no operating experience and our restaurants may be less successful than restaurantswhere established restaurants are more familiar. Consumers in our new markets will not be familiar with our brand, and we will need tobuild brand awareness in those markets through investments in advertising and promotional activity. We may find it more difficult in ourmarkets to secure desirable restaurant locations and to hire, motivate and keep qualified employees.

 

We expect to incur losses in the near future, which may impactour ability to implement our business strategy and adversely affect our financial condition.

 

We expect to significantly increase our operatingexpenses by expanding our marketing activities and increasing our level of capital expenditures in order to grow our business. Such increasesin operating expense levels and capital expenditures may adversely affect our operating results if we are unable to immediately realizebenefits from such expenditures.  In addition, if we are unable to manage a significant increase in operating expenses, ourliquidity will likely decrease and negatively impact our cash flow and ability to sustain operations. In turn, this would have a negativeimpact on our financial condition and share price.

 

We also cannot assure you that we will be profitableor generate sufficient profits from operations in the future. If our revenues do not grow, we may experience a loss in one or more futureperiods. We may not be able to reduce or maintain our expenses in response to any decrease in our revenue, which may impact our abilityto implement our business strategy and adversely affect our financial condition. This would also have a negative impact on our share price.

  

Failure to receive frequent deliveries ofhigher quality food ingredients and other supplies could harm our operations.

 

Our ability to maintain our menu depends in parton our ability to acquire ingredients that meet our specifications from reliable suppliers. Interruptions or shortages in the supply ofingredients caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather or other conditionscould adversely affect the availability, quality and cost of our ingredients, which could harm our operations If any of our distributorsor suppliers fails to perform adequately, or our distribution or supply relationships are disrupted for any reason, our business, financialcondition, results of operations or cash flows could be adversely affected. Our inability to replace or engage distributors or supplierswho meet our specifications in a short period of time could increase our expenses and cause shortages of food and other items at our restaurant,which could cause a restaurant to remove items from its menu. If that were to happen to our restaurants that affected our key ingredientssuch as beef, chicken, cheese and produce, it could adversely affect our operating results. We are susceptible to increases in food costsas a result of factors beyond our control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, foodsafety concerns, product recalls, labor disputes and government regulations. In addition to food, we purchase electricity, oil and naturalgas needed to operate our restaurants, and suppliers purchase gasoline needed to transport food and supplies to us. Any significant increasein energy costs could adversely affect our business through higher rates and the imposition of fuel surcharges by our suppliers. Becausewe provide moderately priced food, we may choose not to, or be unable to, pass along commodity price increases to our customers. Additionally,significant increases in gasoline prices could result in a decrease of customer traffic at our restaurants. We rely on third-party distributioncompanies to deliver food and supplies to our restaurant. Interruption of distribution services due to financial distress or other issuescould impact our operations.

 

 

 

 

 

Our operating costs also include premiums thatwe pay for our insurance (including workers’ compensation, general liability, property and health). The cost of insurance has risensignificantly in the past few years and we expect could experience significant reductions in sales during the shortage or thereafter,if our customers change their dining habits as a result.

 

In addition, we intend to use a substantial amountof naturally raised and organically grown ingredients, and try to make our food as fresh as we can, in light of pricing considerations.As we increase our use of these ingredients, the ability of our suppliers to expand output or otherwise increase their supplies to meetour needs may be constrained. Our inability to obtain a sufficient and consistent supply of these ingredients on a cost-effective basis,or at all, could cause us difficulties in aligning our brand with the principle of “fresh and healthy,” which could in turnmake us less popular among our customers and cause sales to decline.

 

If we fail to retain our key personnel orif we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business couldsuffer.

 

Our future success and ability to implement ourbusiness strategy depends, in part, on our ability to attract and retain key personnel, and on the continued contributions of membersof our senior management team and key technical personnel, each of whom would be difficult to replace. All of our employees, includingour senior management, are free to terminate their employment relationships with us at any time. Competition for highly skilled technicalpeople is extremely intense, and we face challenges identifying, hiring and retaining qualified personnel in many areas of our business.If we fail to retain our senior management and other key personnel or if we fail to attract additional qualified personnel, we may notbe able to achieve our strategic objectives and our business could suffer.

 

Changes in accounting standards and subjectiveassumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.

 

Generally accepted accounting principles and relatedpronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business,such as, but not limited to, revenue recognition, stock-based compensation, trade promotions, and income taxes are highly complex andinvolve many subjective assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changesin underlying assumptions, estimates or judgments by our management could significantly change our reported results.

 

If we are unable to build and sustain properinformation technology infrastructure, our business could suffer.

 

We depend on information technology as an enablerto improve the effectiveness of our operations and to interface with our customers, as well as to maintain financial accuracy and efficiency.If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we couldbe subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage tointellectual property through security breach. Our information systems could also be penetrated by outside parties’ intent on extractinginformation, corrupting information or disrupting business processes. Such unauthorized access could disrupt our business and could resultin the loss of assets.

 

We are dependent upon third party suppliers of our raw materials.

 

We are dependent on outside vendors for our suppliesof raw materials. While we believe that there are numerous sources of supply available, if the third-party suppliers were to cease productionor otherwise fail to supply us with quality raw materials in sufficient quantities on a timely basis and we were unable to contract onacceptable terms for these services with alternative suppliers, our ability to produce our products would be materially adversely affected.

 

 

 

 

 

Our inability to protect our trademarks,patents and trade secrets may prevent us from successfully marketing our products and competing effectively.

 

Failure to protect our intellectual property couldharm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectualproperty rights, including our trademarks, patents, copyrights and trade secrets, could result in the expenditure of significant financialand managerial resources. We regard our intellectual property, particularly our trademarks, patents and trade secrets to be of considerablevalue and importance to our business and our success. We rely on a combination of trademark, patent, and trade secrecy laws, confidentialityprocedures and contractual provisions to protect our intellectual property rights. There can be no assurance that the steps taken by usto protect these proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, patentedprocesses, trade secrets or similar proprietary rights. In addition, there can be no assurance that other parties will not assert infringementclaims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation couldbe costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could havea material adverse effect on our ability to market or sell our brands, profitably exploit our products or recoup our associated researchand development costs.

   

We may be subject to legal claims againstus or claims by us which could have a significant impact on our resulting financial performance.

 

At any given time, we may be subject to litigation,the disposition of which may have an adverse effect upon our business, financial condition, or results of operation. Such claims includebut are not limited to and may arise from product liability and related claims in the event that any of the products that we sell is faultyor contains defects in materials or design. We may be subject to infringement claims from our products. In addition, we may be subjectto claims by our lenders, claims for rent, and claims from our vendors on our accounts payable; and although we have been able to obtainunderstandings with the foregoing and have informal forbearance agreements from those parties, one or more of them may elect to commencecollection proceedings which could result in judgments against us and have a significant negative impact on our operations.

 

The requirements of being a public companymay strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualifiedboard members.

 

As a public company, we are subject to the reportingrequirements of the Securities Exchange Act of 1934, as amended, and the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, andother applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliancecosts, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources, particularly afterwe are no longer an “emerging growth company,” as defined in the Jumpstart our Business Startups Act, or the JOBS Act. TheExchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operatingresults. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internalcontrol over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal controlover financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’sattention may be diverted from other business concerns which could adversely affect our business and operating results. We may need tohire more employees in the future or engage outside consultants who will increase our costs and expenses.

 

In addition, changing laws, regulations and standardsrelating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliancecosts and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, inmany cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is providedby regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitatedby ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations andstandards, and this investment may result in increased general and administrative expenses and a diversion of management’s timeand attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standardsdiffer from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatoryauthorities may initiate legal proceedings against us and our business may be adversely affected.

 

 

 

 

 

However, for as long as we remain an “emerginggrowth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to public companiesthat are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestationrequirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any goldenparachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerginggrowth company.”

 

We would cease to be an “emerging growthcompany” upon the earliest of: (i) the first fiscal year following the fifth anniversary of our becoming a reporting company, (ii)the first fiscal year after our annual gross revenues are $1.0 billion or more, (iii) the date on which we have, during the previous three-yearperiod, issued more than $1.0 billion in non-convertible debt securities, or (iv) as of the end of any fiscal year in which the marketvalue of our Common Stock held by non-affiliates exceeded $75 million as of the end of the second quarter of that fiscal year.

 

We also expect that being a public company andthese new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be requiredto accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult forus to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee,and qualified executive officers.

 

As a result of disclosure of information in thisProspectus and in future filings required of a public company, our business and financial condition will become more visible, which webelieve may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful,our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved inour favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adverselyaffect our business and operating results.

 

We are an “emerging growth company”and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock lessattractive to investors.

 

As a reporting company under the Exchange Act,we are classified as an "emerging growth company," as defined in the JOBS Act. We may take advantage of certain exemptions fromvarious reporting requirements that are applicable to other public companies, including, but not limited to, not being required to complywith the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory voteon executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investorswill find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractiveas a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

 

Section 107 of the JOBS Act provides that an “emerginggrowth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933(the “Securities Act” or “33 Act”) for complying with new or revised accounting standards. In other words, an“emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise applyto private companies. We have irrevocably opted out of the extended transition period for complying with new or revised accounting standardspursuant to Section 107(b) of the JOBS Act.

 

We could remain an “emerging growth company”for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which wouldoccur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our mostrecently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt duringthe preceding three-year period.

 

 

 

 

 

Notwithstanding the above, we are a “smallerreporting company.” In the event that we are still considered a “smaller reporting company,” at such time are we ceasebeing an “emerging growth company,” the disclosure we will be required to provide in our SEC filings will increase, but willstill be less than it would be if we were not considered either an “emerging growth company” or a “smaller reportingcompany.” Specifically, similar to “emerging growth companies,” “smaller reporting companies” are able toprovide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-OxleyAct requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal controlover financial reporting; and have certain other decreased disclosure obligations in their SEC filings. Decreased disclosures in our SECfilings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder forinvestors to analyze our results of operations and financial prospects. Should we cease to be an “emerging growth company”but remain a “smaller reporting company”, we would be required to: (1) comply with new or revised US GAAP accounting standardsapplicable to public companies, (2) comply with new Public Company Accounting Oversight Board requirements applicable to the audits ofpublic companies, and (3) to make additional disclosures with respect to related party transactions, namely Item 404(d).

 

Our management and principal shareholdershave the ability to significantly influence or control matters requiring a shareholder vote and other shareholders may not have the abilityto influence corporate transactions.

 

Currently, our principal shareholders own approximately59.4% of our outstanding Common Stock. As a result, they have the ability to determine the outcome on all matters requiring approval ofour shareholders, including the election of directors and approval of significant corporate transactions.

 

Risks Relating to our CommonStock

 

The sale of a large number of shares ofCommon Stock by our principal shareholders could depress the market price of our common stock.

 

As of January 21, 2022, our principle shareholdersbeneficially owned approximately 59.4% of our common stock outstanding. The shares may become available for resale, subject to the requirementsof the U.S. securities laws. The sale or prospect of a sale of a substantial number of these shares could have an adverse effect on themarket price of our common stock.

 

If we fail to remain current on our reportingrequirements, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our securities in the secondarymarket.

 

Companies trading on the OTCQB must be reportingissuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, inorder to maintain price quotation privileges on the OTCQB. As a result, the market liquidity for our securities could be severely andadversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securitiesin the secondary market. In addition, we may be unable to relist on the OTCQB, which may have an adverse material effect on the Company.

 

Our Common Stock is considered a “pennystock,” and any investment in our shares is considered to be a high-risk investment and is subject to restrictions on marketability.

 

Our Common Stock is considered a “pennystock” because it is quoted on the OTCQB and it trades for less than $5.00 per share. The OTCQB is generally regarded as a lessefficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange. The SEC has rules that regulate broker-dealerpractices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price ofless than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, providedthat current price and volume information with respect to transactions in such securities is provided by the exchange or system). Thepenny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver astandardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significanceof risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock,the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market valueof each penny stock held in the customer’s account. In addition, the penny stock rules require that, prior to effecting a transactionin a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stockis a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirementsmay have the effect of reducing the trading activity in the secondary market for our Common Stock. Since our Common Stock is subject tothe regulations applicable to penny stocks, the market liquidity for our Common Stock could be adversely affected because the regulationson penny stocks could limit the ability of broker-dealers to sell our Common Stock and thus your ability to sell our Common Stock in thesecondary market in the future. We can provide no assurance that our Common Stock will be quoted or listed on the OTCQB, NASDAQ or anyexchange, even if eligible in the future.

 

 

 

 

The market price of our Common Stock may fluctuate significantlyin the future.

 

We expect that the market price of our CommonStock may fluctuate in response to one or more of the following factors, many of which are beyond our control:

 

	·	competitive pricing pressures;
	·	our ability to market our services on a cost-effective and timely basis;
	·	our inability to obtain working capital financing, if needed;
	·	changing conditions in the market;
	·	changes in market valuations of similar companies;
	·	stock market price and volume fluctuations generally;
	·	regulatory developments;
	·	fluctuations in our quarterly or annual operating results;
	·	additions or departures of key personnel; and
	·	future sales of our Common Stock or other securities.

 

Sales of substantial amounts of our Common Stock,or in anticipation that such sales could occur, may materially and adversely affect prevailing market prices for our Common Stock, ifand when such market develops in the future.

  

The price at which you purchase shares of ourCommon Stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your shares of CommonStock at or above your purchase price, which may result in substantial losses to you and which may include the complete loss of your investment.In the past, securities class action litigation has often been brought against a company following periods of stock price volatility.We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management’sattention and our resources away from our business. Any of the risks described above could adversely affect our sales and profitabilityand also the price of our Common Stock.

 

Provisions of our Articles of Incorporationand Bylaws may delay or prevent a take-over that may not be in the best interests of our stockholders.

 

Provisions of our Articles of Incorporation andBylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called,and may delay, defer or prevent a takeover attempt.

  

The market price for our Common Stock maybe particularly volatile given our status as a relatively unknown company, with a lack of profits, which could lead to wide fluctuationsin our share price. You may be unable to sell your Common Stock at or above your purchase price, which may result in substantial lossesto you.

 

The price of our Common Stock in the future maybe particularly volatile when compared to the shares of larger, more established companies that trade on a national securities exchangeand have large public floats. The volatility in our share price will be attributable to a number of factors. First, our Common Stock willbe, compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence of this limitedliquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of thoseshares in either direction. The price for our shares could decline precipitously in the event that a large number of our Common Stockare sold on the market without commensurate demand. Secondly, we are a speculative or “risky” investment due to our lack ofprofits to date, and uncertainty of future market acceptance for our products. As a consequence of this enhanced risk, more risk-adverseinvestors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclinedto sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more establishedcompany that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and maydecrease the market price of our Common Stock, regardless of our operating performance. We cannot make any predictions or projectionsas to what the prevailing market price for our Common Stock will be at any time.

 

 

 

 

 

Our future results may vary significantly which may adverselyaffect the price of our Common Stock.

 

It is possible that our quarterly revenues andoperating results may vary significantly in the future and that period-to-period comparisons of our revenues and operating results arenot necessarily meaningful indicators of the future. You should not rely on the results of one quarter as an indication of our futureperformance. It is also possible that in some future quarters, our revenues and operating results will fall below our expectations orthe expectations of market analysts and investors. If we do not meet these expectations, the price of our Common Stock may decline significantly.

   

Our internal controls may be inadequate,which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

 

Our management is responsible for establishingand maintaining adequate internal control over our financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control overfinancial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer andeffected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principlesand includes those policies and procedures that:

 

	·	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
	·	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and
	·	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Our internal controls may be inadequate or ineffective,which could cause financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relyingupon this misinformation may make an uninformed investment decision.

 

Failure to achieve and maintain an effective internalcontrol environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information,either of which could have a material adverse effect on the Company’s business, financial condition, results of operations and futureprospects.

 

However, our auditors will not be required toformally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an“emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions available to us through the JOBSAct.

 

The costs of being a public company couldresult in us being unable to continue as a going concern.

 

As a public company, we are required to complywith numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of maintainingpublic company reporting requirements could be significant and may preclude us from seeking financing or equity investment on terms acceptableto us and our shareholders. We estimate these costs to be in excess of $100,000 per year and may be higher if our business volume or businessactivity increases significantly. Our current estimate of costs does not include the necessary expenses associated with compliance, documentationand specific reporting requirements of Section 404 as we will not be subject to the full reporting requirements of Section 404 until weexceed $700 million in market capitalization or we decide to opt-out of the “emerging growth company” as defined under theJOBS Act. This exemption is available to us under the JOBS Act or until we have been public for more than five years.

 

If our revenues are insufficient or non-existent,and/or we cannot satisfy many of these costs through the issuance of shares or debt, we may be unable to satisfy these costs in the normalcourse of business. This would certainly result in our being unable to continue as a going concern.

  

 

 

 

Shareholders may be diluted significantlythrough our efforts to obtain financing and satisfy obligations through issuance of additional shares.

 

Our Board of Directors has authority, withoutaction or vote of the shareholders, to issue all or part of our authorized shares that are not issued. In addition, we may attempt toraise additional capital by selling shares, possibly at a deep discount to market. These actions will result in dilution of the ownershipinterests of existing shareholders, further dilute Common Stock book value, and that dilution may be material.

 

There is a limited trading market for ourshares of common stock on the OTCQB. You may not be able to sell your shares of common stock if you require funds.

 

Our Common Stock is traded on the OTCQB, an inter-dealerautomated quotation system for equity securities. There has been limited trading activity in our Common Stock. We consider our CommonStock to be “thinly traded” and any last reported sale prices might not be a true market-based valuation of the Common Stock.Stockholders may experience difficulty selling their shares if they choose to do so because of the illiquid market and limited publicfloat for our Common Stock.

    

Our stock price may be volatile, or maydecline regardless of our operating performance, and you could lose all or part of your investment as a result.

 

You should consider an investment in our CommonStock to be risky, and you should invest in our Common Stock only if you can withstand a significant loss and wide fluctuation in themarket value of your investment. The market price of our Common Stock could be subject to significant fluctuations in response to thefactors described in this section and other factors, many of which are beyond our control. Among the factors that could affect our stockprice are:

 

	·	Actual or anticipated variations in our quarterly and annual operating results or those of companies perceived to be similar to us;
	·	Weather conditions;
	·	Changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors, or differences between our actual results and those expected by investors and securities analysts;
	·	Fluctuations in the market valuations of companies perceived by investors to be comparable to us;
	·	The public’s response to our or our competitors’ filings with the SEC or announcements regarding new products or services, enhancements, significant contracts, acquisitions, strategic investments, litigation, restructurings or other significant matters;
	·	Speculation about our business in the press or the investment community;
	·	Future sales of our shares;
	·	Actions by our competitors;
	·	Additions or departures of members of our senior management or other key personnel; and
	·	The passage of legislation or other regulatory developments affecting us or our industry.

 

In addition, the securities markets have experiencedsignificant price and volume fluctuations that have affected and continue to affect market price of equity securities of many companies.These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad marketfluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor confidence,interest rate changes, or international currency fluctuations, may negatively affect the market price of our shares.

 

If any of the foregoing occurs, it could causeour stock price to fall and may expose us to securities class action litigation that, even if unsuccessful, could be costly to defendand a distraction to management.

  

The trading market for our Common Stock will beinfluenced by the research and reports that equity research analysts publish about us and our business. The price of our Common Stockcould decline if one or more securities analysts downgrade our Common Stock or if those analysts issue a sell recommendation or otherunfavorable commentary or cease publishing reports about us or our business. If one or more of the analysts who elect to cover us downgradeour common shares, our share price could decline rapidly. If one or more of these analysts cease coverage of us, we could lose visibilityin the market, which in turn could cause our share price and trading volume to decline.

 

 

 

 

 

We do not intend to pay dividends on ourCommon Stock.

 

We intend to retain all of our earnings, if any,for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. Any futuredetermination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and anycontractual provisions, and will depend on, among other factors, our results of operations, financial condition, capital requirementsand other factors that our board of directors deems relevant. As a result, you should expect to receive a return on your investment inour Common Stock only if the market price of the Common Stock increases, which may never occur.

 

RisksRelating To This Offering

  

FINRA sales practice requirements may limita stockholder’s ability to buy and sell our stock.

 

The Financial Industry Regulatory Authority (“FINRA”)has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believingthat the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutionalcustomers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probabilitythat speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficultfor broker-dealers to recommend that their customers buy our Common Stock, which may have the effect of reducing the level of tradingactivity in our Common Stock. As a result, fewer broker-dealers may be willing to make a market in our Common Stock, reducing a stockholder’sability to resell shares of our Common Stock.

 

State securities laws may limit secondarytrading, which may restrict the states in which you can sell the shares offered by this Prospectus.

 

If you purchase shares of our Common Stock soldin this Offering, you may not be able to resell the shares in any state unless and until the shares of our Common Stock are qualifiedfor secondary trading under the applicable securities laws of such state or there is confirmation that an exemption, such as listing incertain recognized securities manuals, is available for secondary trading in such state. There can be no assurance that we will be successfulin registering or qualifying our Common Stock for secondary trading, or identifying an available exemption for secondary trading in ourCommon Stock in every state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, ourCommon Stock in any particular state, our Common Stock could not be offered or sold to, or purchased by, a resident of that state. Inthe event that a significant number of states refuse to permit secondary trading in our Common Stock, the market for our Common Stockwill be limited which could drive down the market price of our Common Stock and reduce the liquidity of the shares of our Common Stockand a stockholder’s ability to resell shares of our Common Stock at all or at current market prices, which could increase a stockholder’srisk of losing some or all of his investment.

 

 

 

 

 

USE OF PROCEEDS

 

We will receive none of the proceeds from thesale of the Common Stock by the Selling Stockholders in this Offering.

 

 

DETERMINATION OF THE OFFERING PRICE

 

The Selling Stockholders will offer shares ofour Common Stock at the prevailing market prices or privately negotiated prices. The offering price of our Common Stock does not necessarilybear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value.Our Common Stock may not trade at the market prices in excess of the offering prices for Common Stock in any public market, will be determinedin the marketplace and may be influenced by many factors, including the depth and liquidity of the market for our Common Stock.

 

 

MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S

COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Our Common Stock is quoted on the OTCQB over-the-countermarket under the symbol “KITL.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downor commissions and may not necessarily represent actual transactions. On January 20, 2022, the closing price on the OTCQB of our CommonStock was $0.08.

 

Holders

 

As of January 20, 2022, there were 122 holders of record of our CommonStock.

 

Dividend Policy

 

We have not paid any dividends since our incorporationand do not anticipate the payment of dividends in the foreseeable future. At present, our policy is to retain earnings, if any, to developand market our products and implement our business plan. The payment of dividends in the future will depend upon, among other factors,our earnings, capital requirements, and operating financial conditions. 

 

 

 

 

 

 

 

SELLING STOCKHOLDERS

 

On November 29, 2021,we entered into a Standby Equity Commitment Agreement (the “Standby Equity Commitment Agreement”), dated November 22, 2021,with MacRab LLC, a Florida limited liability company (the “MacRab”), pursuant to which we have the right to sell to MacRabup to $7,500,000 in shares of Common Stock, subject to certain limitations. MacRab was also issued a five-year warrant (the“Warrant”) to purchase 750,000 shares of Common Stock (the “Warrant Shares”) with standard anti-dilution provisionsand cashless exercise.

 

Under the terms and subject to the conditionsof the Standby Equity Commitment Agreement, MacRab is obligated to purchase up to $7,500,000 in shares of Common Stock, subject to certainlimitations, from time to time over the 24-month period commencing on November 22, 2021. The number of shares of Common Stockshall be calculated using an initial purchase price of ninety percent (90%) of the volume weighted average price on the trading day immediatelyprior to the put date associated with the put notice delivered by us to MacRab. The price per share of Common Stock shall be ninety percent(90%) of the average of the two lowest volume weighted average prices of the Common Stock for six trading days following the clearingdate associated with the put notice delivered by us to MacRab. The minimum amount of each put shall be $10,000 and the maximum shall bethe lower of 200% of the average daily trading volume and $250,000. In order for any of Company’s sale of Common Stock to MacRabunder the Standby Equity Commitment Agreement to occur, the closing price of the Common Stock during each of the six trading days immediatelypreceding the respective “put date” (as defined in the Standby Equity Commitment Agreement) must not be lower than $0.10 pershare.

 

The Company’s salesof shares of Common Stock to MacRab under the Standby Equity Commitment Agreement are limited to no more than the number ofshares that would result in the beneficial ownership by MacRab and its affiliates, at any single point in time, of more than 4.99% ofthe then outstanding shares of the Common Stock.

 

We have agreed with MacRabthat we will not enter into any other credit equity line agreements without the prior consent of MacRab.

   

J.H. Darbie acted asplacement agent in connection with the execution and delivery of the agreements with the Investor.

 

The issuance and saleof the Common Stock and the Warrant by us to MacRab under the Standby Equity Commitment Agreement was made without registration underthe Securities Act of 1933, as amended (the “Act”), or the securities laws of the applicable state, in reliance on the exemptionsprovided by Section 4(2) of the Act and Regulation D promulgated thereunder, and in reliance on similar exemptions under applicable statelaw, based on the offering of such securities to one investor, the lack of any general solicitation or advertising in connection withsuch issuance, the representations of MacRab to the Company that, among others, it was an accredited investor (as that term is definedin Rule 501(a) of Regulation D), and that it was purchasing the shares for its own account and without a view to distribute them.

 

The Selling Stockholders may dispose of the sharescovered by this Prospectus from time to time at such prices as it may choose. The following table provides as of the date of this Prospectus,information regarding the beneficial ownership of our Common Stock held by the Selling Stockholders and the percentage owned by the SellingStockholders. Assuming all of the shares registered below are sold by the Selling Stockholders, none of the Selling Stockholders willown one percent or more or our Common Stock.

 

 

Selling Stockholders		Beneficial Ownership Before the Offering				Number of Shares Being Offered				Beneficial Ownership After the Offering				Percentage of Ownership After the Offering
MacRab LLC (3)			75,750,000	(1)(2)			75,750,000				0				0	%

______________________

(1) Represents 75,000,000shares of our Common Stock issuable pursuant to the Standby Equity Commitment Agreement and750,000 shares of our Common Stock issuable upon exercise of the outstanding Warrant held by the Selling Stockholders. 

 

(2) Such amount of CommonStock is solely for the purposes of making a good faith estimate as to the number of shares issuable to be registered.

 

(3) Mackey McFarlane,manager of MacRab LLC, has sole voting and dispositive power over the shares held by or issuable to MacRab LLC. Mr. McFarlane disclaimsbeneficial ownership over the securities listed except to the extent of his pecuniary interest therein. The principal business addressof MacRab LLC is 738 Mandalay Grove Ct. Merritt Island, FL 32953.

 

Other than as disclosed above, none of the SellingStockholders has had a material relationship with us or any of our affiliates other than as a stockholder at any time within the pastthree years.

 

 

 

PLAN OF DISTRIBUTION

 

The Selling Stockholders and any of their respectivepledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on any tradingmarket, stock exchange or other trading facility on which the securities are traded or in private transactions. These sales may be atfixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling securities:

 

	·	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	·	block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
	·	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	·	an exchange distribution in accordance with the rules of the applicable exchange;
	·	privately negotiated transactions;
	·	settlement of short sales;
	·	in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;
	·	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
	·	a combination of any such methods of sale; or
	·	any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securitiesunder Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholdersmay arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders(or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, exceptas set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commissionin compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securitiescovered hereby, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, whichmay in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may alsosell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealersthat in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealersor other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or otherfinancial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution mayresell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealersor agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the SecuritiesAct in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resaleof the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are requestingthat each Selling Stockholder inform us that it does not have any written or oral agreement or understanding, directly or indirectly,with any person to distribute the securities. We will pay certain fees and expenses incurred by us incident to the registration of thesecurities.

 

Because the Selling Stockholders may be deemedto be an “underwriter” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirementsof the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuantto Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. We are requesting that each SellingStockholder confirm that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securitiesby the Selling Stockholders.

 

 

 

 

 

We intend to keep this prospectus effective untilthe earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regardto any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the currentpublic information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securitieshave been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securitieswill be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, incertain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicablestate or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under theExchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activitieswith respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder,including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any otherperson. We will make copies of this prospectus available to the Selling Stockholders and are informing the Selling Stockholders of theneed to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172under the Securities Act).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION

AND RESULTS OF OPERATIONS

 

The followingdiscussion should be read in conjunction with our 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 of1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in herein and any otherstatement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statementsare 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, economicand competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future businessdecisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differmaterially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-lookingstatements.

 

Overview

 

The Company’s mainfocus is to develop a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/internationalfranchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Fort Lauderdale,Florida. Three additional restaurants, which are located in various Wyndham Hotel properties in the Pompano Beach, Florida area, werethen opened within the following ten months. All locations, which are in leased facilities, were fully operational by April 2016. In December2017, the Company vacated one of its restaurants due to a hurricane and did not re-open. During the three months ended June 30, 2021,the Company consolidated its two Wyndham stores into one location to become more efficient. The Company opened its inaugural Europeanlocation in Ceglie del Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for Europeanlocations.

 

In May 2017, we completed our National FranchiseLicense, which permits us to sell franchises in all of the states in the United States except for New York, Virginia, and Maryland, whichlicenses we may obtain if sufficient demand exists in the future.

 

We opened our inaugural European location in Cegliedel Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. Managementis currently scouting various locations in regions of Italy and believes that the regions of Rome and Puglia may offer opportunities foradditional corporate-owned and franchise expansion. However, there are no agreements currently in place to open any new facilities, eitherCompany-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

 

All three of our corporate-ownedrestaurants, located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, have fully re-openedsubject to recommended social distancing guidelines.

 

In June of 2020, the Company entered into a multi-unitdevelopment agreement (the “Development Agreement”) pursuant to which it granted development rights to Demasar Management,Inc. to open and operate up to 100 restaurants in Canada. Under this Development Agreement, thedeveloper is obligated to open a minimum of 20 restaurants by June 17, 2025. On November 20, 2021, we opened a franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

 

 

 

 

In September of 2020, we entered retail food andgrocery stores with Kisses From Italy branded products in Canada. The product launch began in November of 2020 and Kisses From Italy brandedproducts were in nine retail stores by the end of 2020. Currently, Kisses From Italy branded products are in 35 stores across Ontarioand Quebec, Canada.

 

In April of 2021, we entered into a ConsultingAgreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”),pursuant to which we engaged Fransmart as our exclusive global franchise developer and representative for a period of ten years.

 

In May of 2021, we opened our first franchisein Chino, California. Due to the onset of Covid-19, we temporarily waived any franchise fees so that the franchisee could well establishits operations at such location. On November 20, 2021, we opened a second franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

COVID-19

 

On March 11, 2020, the World Health Organizationdeclared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having anegative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states andmany countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S.’s response to thepandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemicmay have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the fullextent of the effects on the economy, the markets we serve, our business, or our operations.

 

All of the Company’s three corporate-ownedrestaurants, which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, havefully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than othersites due to CDC recommendations. 

 

For the nine months ended September 30, 2021 and 2020, we recognizedapproximately $328,479 and $454,998, respectively, in revenues. For the years ended December 31, 2020 and 2019, we recognized approximately$514,038 and $461,298, respectively, in revenues. 

 

Our principal offices are located at 80 SW 8^thSt. Suite 2000, Miami, Florida, 33130, and our phone number is (305) 423-7024. Our website is www.kissesfromitaly.com

 

Results of Operations

 

Comparison of Results of Operations forthe three months ended September 30, 2021 and 2020

 

Revenue and Cost ofSales

 

Total revenues for thethree months ended September 30, 2021 were $85,727 compared to $44,331 during the three months ended September 30, 2020. Revenues forthe three months ended September 30, 2021 was comprised of $82,371 in food sales and $3,356 in sales of branded products to retail locationsin Canada, which the Company began selling in the fourth quarter of 2020, compared to food sales of $44,331 during the three months endedSeptember 30, 2020. The significant increase in food sales in the three months ended September 30, 2021 compared to the three months endedSeptember 30, 2020 is due to the mitigation of some of the impact of Covid-19 on the restaurant industry.

 

Cost of goods sold duringthe three months ended September 30, 2021 was $43,644 compared to $29,164 during the three months ended September 30, 2020. This increaseis attributable to higher sales volumes in the 2021 period.

 

 

 

 

 

Operating expenses

 

Operating expenses were$157,166 for the three months ended September 30, 2021, compared to $940,854 during the three months ended September 30, 2020. Non-cashstock-based compensation was $-0- and $770,000, for the periods ended September 30, 2021 and September 30, 2020, respectively. Excludingthe stock-based compensation in both periods, operating expenses were $157,166 for the three months ended September 30, 2021 comparedto $170,854 for the three months ended September 30, 2020. The reduction in operating expenses for the three months ended September 30,2021 is attributable to a reduction of consulting fees of $12,370, a reduction of depreciation expense of $12,465, and a reduction ofexecutive compensation of $4,950; offset by an increase in payroll of $13,017 and an increase in general and administrative expenses of$6,130.

 

Other income and expense

 

Other expenses comprisinginterest expense on debt and interest expense related to the beneficial conversion feature of Preferred C stock was $95,545 for the threemonths ended September 30, 2021 compared to $34,943 during the three months ended September 30, 2020. The increase in other expenses isattributable to the recording of approximately $95,100 in the beneficial conversion features of Preferred C Stock.

 

Net Loss/Net Profit

 

As a result of the forgoing,the net loss attributable to Kisses From Italy Inc. for the three month period ended September 30, 2021 was $204,754 for the period endedSeptember 30, 2021 compared to a loss of $954,265 for same period ended September 30, 2020.

 

Comparison of Results of Operations forthe nine months ended September 30, 2021 and 2020

 

Revenue and Cost ofSales

 

Total revenues for thenine months ended September 30, 2021 were $328,479 compared to $454,998 during the nine months ended September 30, 2020. Revenues forthe nine months ended September 30, 2021 comprises $302,176 in food sales and $26,303 in sales of branded products to retail locationsin Canada, which the Company began selling in the fourth quarter of 2020, compared to food sales of $163,413 and franchise sales of $291,585during the nine months ended September 30, 2020. The decrease in total revenue in 2021 compared to 2020 is due to $291,585 in franchisesales in the 2020 period compared to zero in 2021, offset to a lesser extent by the increase in food sales in the nine months ended September30, 2021 due to the mitigation of the impact of Covid-19.

 

Cost of goods sold duringthe nine months ended September 30, 2021 was $155,953 compared to $80,649 during the nine months ended September 30, 2020. This increaseis attributable to higher food sales volumes in 2021 and franchise sales in 2020 with no cost of goods sold associated with those sales.

 

Operating expenses

 

Operating expenses were$3,646,423 for the nine months ended September 30, 2021, compared to $3,241,362 during the nine months ended September 30, 2020. Non-cashstock-based compensation was $3,231,573 and $2,788,301 for the nine month periods ended September 30, 2021 and September 30, 2020, respectively.Excluding the stock-based compensation in both periods, operating expenses were $414,850 for the nine months ended September 30, 2021compared to $453,122 for the nine months ended September 30, 2020. This decrease is primarily attributable to a decrease in depreciationexpense of $34,907, a decrease in executive compensation of $17,631, a decrease of $11,334 in payroll, a decrease of rent of $8,226; offsetby an increase in consulting and professional fees of $11,511 and an increase in general and administrative expenses of $22,315.

 

 

 

 

 

Other income and expense

 

Other expenses comprisinginterest expense was $347,747 for the nine months ended September 30, 2021 compared to $497,367 during the nine months ended September30, 2020. The decrease in other expenses is attributable to fewer conversions of equity instruments with beneficial conversion issuesin which interest expense was recognized.

 

Net Loss

 

As a result of the forgoing,the net loss attributable to Kisses From Italy Inc. for the period ended September 30, 2021 was $3,831,930 for the period ended September30, 2021 compared to a loss of $3,358,312 for same period ended September 30, 2020.

 

Liquidity and CapitalResources

 

On September 30, 2021,we had $13,347 in cash and cash equivalents.

  

Net cash used in operatingactivities was $317,079 during the nine months ended September 30, 2021, compared to net cash used of $69,079 during the nine months endedSeptember 30, 2020. The increase in net cash used in operating activities of $248,000 is primarily attributable to our increase in lossesin the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 after subtracting non-cash items in bothperiods.

 

Net cash provided byfinancing activities was $295,000 for the nine months ended September 30, 2021, compared to $142,261 during the nine months ended September30, 2020. The increase in net cash provided by financing activities is primarily attributable to sales of common stock of $175,000 in2021 compared to zero in the same period in 2020.

 

Net cash used in investingactivities was $1,910 due to the purchase of fixed assets during the nine months ended September 30, 2021 compared to $-0- during theperiod ended September 30, 2020.

 

We estimate that we willneed approximately $1,000,000 to fully effectuate our business development plans, including opening additional company-owned restaurantsand continuing to develop and enhance the marketing of our franchise concept. Subject to the continued impact of Covid-19, we currentlybelieve that we can open at least two additional restaurants for approximately $300,000. We may use some of the cash we received fromthe Development Agreement to open additional locations or for franchise marketing. We believe that continuing to open company-owned restaurantswill assist us to market other locations.

 

There can be no assurancesthat additional financing, either through equity or debt, will be available on a timely basis, on favorable terms or at all. While wehave had discussions with potential investors and investment bankers, we have no agreement with any third party to provide additionalfinancing. Our inability to obtain additional financing may have a significant negative impact on our continued development and resultsof our operations.

 

Covid-19 has also causedsignificant disruptions to the global financial markets, which impacts our ability to raise additional capital. If the Company is unableto obtain adequate capital due to the continued spread of Covid-19, the Company may be required to reduce the scope, delay, or eliminatesome or all of its planned operations.

 

 

 

 

 

Going Concern

 

Our consolidated financialstatements were prepared assuming that we will continue as a going concern and do not include adjustments for the recoverability and therealization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date ofthese financial statements that may be necessary should we be unable to continue in operation. In addition, the Company continues to experiencenegative cash flows from operations. Also, if the Company is unable to obtain adequate capital due to the continued spread of Covid-19,the Company may be required to further reduce the scope, delay, or eliminate some or all of its planned operations. These factors, amongothers, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

 

Off-Balance SheetArrangements

 

We have no off-balance sheet arrangements.

 

Comparison of Results of Operations for the years ended December31, 2020, and 2019

 

Revenue and Cost of Sales

 

Total revenues for the year ended December 31,2020 was $514,038 compared to $461,298 during the same period ended December 31, 2019. The 2020 revenues are comprised of 222,453 in foodsales and $291,585 in franchise sales. 2019 revenues are comprised of $461,298 in food sales and zero in franchise sales.

 

During the year ended December 31, 2020, our revenuesfrom food sales at our restaurants were $222,453 compared to $461,298 for the year ended December 31, 2019, representing a decrease of$238,845. We believe the decrease in revenue is attributable to the Covid-19 mandated shutdowns at various times during 2020 as well asCovid mandated capacity restrictions of all of our locations.

 

During 2020, we entered into a Development Agreementin which we received a fee of 400,000 CAD, or $291,585. This fee falls under the guidelines of ASC 606 which states that the entire amountof revenue can be recognized because we have no future performance obligations associated with the Agreement, and the fee is non-refundable.As a result, we recorded the entire amount as revenue during the year ended December 31, 2020. Franchise sales for the year ended December31, 2020 were $291,585 compared to no franchise sales during the year ended December 31, 2019.

 

During the fourth quarter of 2020 we began offeringour branded products to retail locations in Canada. For the year ended December 31, 2020 we generated $5,761 in revenues compared to $-0-in the prior period. Currently these retail sales for 2021 are trending 25-30% higher than the fourth quarter of 2020. These revenueswere included in food sales on our Statements of Operations for the period ended December 31, 2020.

 

Cost of goods sold during the year ended December31, 2020, was $114,101 compared to $214,357 during the year ended December 31, 2019. This decrease is attributable to lower sales volumesdue to the impact of Covid-19.

 

Operating expenses

 

Operating expense increased to $3,640,846 duringthe year ended December 31, 2020, compared to $3,011,531 during the year ended December 31, 2019. The increase is primarily attributableto 3,028,201 in stock-based compensation expense in the year ended December 31, 2020, compared to stock-based compensation of 2,309,797in the year ended December 31, 2019. Excluding the stock-based compensation, operating expenses were $612,645 for the year ended December31, 2020 compared to $701,734 or the year ended December 31, 2019, representing a decrease of $89,089. This decrease is primarily attributableto a reduction in payroll expenses of $111,699 due to the impact of Covid-19 on sales levels.

 

Due to the impact of Covid-19 the Company hasbegun a process to reduce its store operating expenses. There can be no assurance the Company will be successful in doing so.

 

 

 

 

 

Other income and expense

 

Other expense was $497,367 during the year endedDecember 31, 2020, compared to $339,362 during the year ended December 31, 2019. The increase in other expenses is attributable to increasedinterest expense due to the issuance of Series C preferred stock with a beneficial conversion features that was charged to interest expenseduring the year ended December 31, 2020.

 

Net Loss

 

During the year ended December 31, 2020, we incurreda net loss of $3,738,522 and a net loss of $29,120 attributable to non-controlling interests, compared to a net loss of $3,103,952 anda net loss of $21,092 attributable to non-controlling interests for the year ended December 31, 2019. The increase in the net loss duringthe year ended December 31, 2020 is primarily attributable to an increase in operating expenses of $629,315 and an increase in interestexpense of $158,251 offset by an increase of $152,996 in gross profit margin.

 

Liquidity and CapitalResources

 

On December 31, 2020, we had $37,336 in cash.

 

Net cash used in operating activities was $169,984during the year ended December 31, 2020, compared to $422,871 during the year ended December 31, 2019. This decrease in the cash usedin the year ended December 31, 2020, was primarily due to a decreased loss in the year ended December 31, 2020, net of stock based compensation.

 

Cash flows used in investing activities were $1,136for the purchase of equipment in the year ended December 31, 2020 compared to cash used in operating activities of $12,069 during thesame period in 2019 for the purchase of equipment for the Bari, Italy restaurant.

 

Cash flows provided by financing activities was$181,761 for the year ended December 31, 2020 compared to cash provided in financing activities of $438,904 for the year ended December31, 2019. The decrease is primarily attributable to proceeds from convertible notes we received in the year ended December 31, 2019 of$388,547 compared to no proceeds in the year ended December 31, 2020 offset by proceeds from the sale of preferred stock in the year endedDecember 31, 2020 of $155,600 compared to no proceeds in the year ended December 31, 2019.

 

Going Concern

 

Our consolidated financial statements have beenprepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities inthe normal course of business for the twelve-month period following the date of our financial statements. We have incurred annual lossessince inception and expect to incur additional losses in future periods.

 

In addition, the Company continues to experiencenegative cash flows from operations. Also, if the Company is unable to obtain adequate capital due to the continued spread of Covid-19,the Company may be required to further reduce the scope, delay, or eliminate some or all of its planned operations. These factors, amongothers, raise substantial doubt about the Company's ability to continue as a going concern, These factors raise substantial doubt aboutthe Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from theoutcome of this uncertainty.

 

Historically we have raised cash from the proceedsfrom the private placement of our shares, and through the sale of convertible debentures. We can provide no assurance that additionalfunding will be available on a timely basis, on terms acceptable to us, or at all. While we have had discussions with potential investorsand investment bankers, we have no agreement with any third party to provide us this additional financing and there can be no assurancesthat we will obtain this financing, either debt or equity or both, on favorable terms, or at all. Our inability to receive financing willhave a significant negative impact on our continued development and results of our operations.

 

 

 

 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Inflation

 

Although our operations are influenced by generaleconomic conditions, we do not believe that inflation had a material effect on our results of operations during the year ended December31, 2020.

 

CriticalAccounting Policies and Estimates

 

Critical accounting estimates –The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidatedfinancial 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 experienceand on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differfrom 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 operationsand that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimatesabout the effects of matters that are inherently uncertain.

 

Stock-based Compensation –We account for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB AccountingStandards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employeeservices 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 requisiteservice period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not renderthe requisite service.

 

Leases – We follow theguidance in ASC 840 “Leases,” which requires us to evaluate the lease agreements we enter into to determine whetherthey represent operating or capital leases at the inception of the lease.

 

On November 15, 2019, the FASB has issued ASU2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the creditlosses, derivatives, and leases standards (ASC 842) for certain companies. Since we are classified as a “emerging growth company”and we have a calendar-year end we are eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

ASC 842 will be effective for us beginning onDecember 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will have nothave any impact on our financial statements.

 

RecentAccounting Pronouncements

 

Under the Jumpstart Our Business Startups Act,or the JOBS Act, we meet the definition of an “emerging growth company.” We have irrevocably elected to opt out of the extendedtransition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As a result,we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. 

 

 

 

 

 

On January 1, 2018, we adopted AccountingStandards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using themodified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reportingperiods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to bereported in accordance with our historic accounting under ASC 605. As of and for the year ended December 31, 2018, ourconsolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic605.

 

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 anentity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative andquantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginningafter December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, CodificationImprovements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, CodificationImprovements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) TargetedImprovements, which provides an optional transition method whereby the new lease standard is applied at the adoption dateand recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as thenew lease standard.

 

On November 15, 2019, the FASB has issued ASU2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses,derivatives, and leases standards (ASC 842) for certain companies. Since we are classified as a “emerging growth company”and we have a calendar-year end we are eligible for deferring the adoption of ASC 842 to December 15, 2021. While we continue to evaluatethe impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

 

 

 

 

 

DESCRIPTION OF BUSINESS

 

Overviewand History

 

Kisses From Italy Inc. (hereinafter referred toas “us,” “our,” “we,” the “Company” or “Kisses”) was incorporated in the Stateof Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business of corporate-owned restaurantsand expanding through a nationwide/international franchise and territory sales program. We commenced operations by opening our initialcorporate-owned restaurant in Fort Lauderdale, Florida in May 2015. By April 2016, we opened three additional restaurants located in variousWyndham Hotel properties in the Pompano Beach, Florida area. In September 2017, Hurricane Irma caused significant damage to the area,which resulted in Wyndham halting operations at its hotel properties for repairs and renovations and the closure of our Wyndham hotellocations. In December 2017, we vacated one of our restaurants in Wyndham Hotel properties due to damage from the hurricane and have notre-opened such restaurant. During the three months ended June 30, 2021, we consolidated the remaining two Wyndham stores into one locationto become more efficient.

 

In May 2017, we completed our National FranchiseLicense, which permits us to sell franchises in all of the states in the United States except for New York, Virginia, and Maryland, whichlicenses we may obtain if sufficient demand exists in the future.

 

We opened our inaugural European location in Cegliedel Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. Managementis currently scouting various locations in regions of Italy and believes that the regions of Rome and Puglia may offer opportunities foradditional corporate-owned and franchise expansion. However, there are no agreements currently in place to open any new facilities, eitherCompany-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

 

All three of our corporate-ownedrestaurants, located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, have fully re-openedsubject to recommended social distancing guidelines.

 

In June of 2020, the Company entered into a multi-unitdevelopment agreement (the “Development Agreement”) pursuant to which it granted development rights to Demasar Management,Inc. to open and operate up to 100 restaurants in Canada. Under this Development Agreement, thedeveloper is obligated to open a minimum of 20 restaurants by June 17, 2025. On November 20, 2021, we opened a franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

In September of 2020, we entered retail food andgrocery stores with Kisses From Italy branded products in Canada. The product launch began in November of 2020 and Kisses From Italy brandedproducts were in nine retail stores by the end of 2020. Currently, Kisses From Italy branded products are in 35 stores across Ontarioand Quebec, Canada.

 

In April of 2021, we entered into a ConsultingAgreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”),pursuant to which we engaged Fransmart as our exclusive global franchise developer and representative for a period of ten years.

 

In May of 2021, we opened our first franchisein Chino, California. Due to the onset of Covid-19, we temporarily waived any franchise fees so that the franchisee could well establishits operations at such location. On November 20, 2021, we opened a second franchise location underthe Development Agreement in Montreal, Quebec, Canada.

 

 

 

 

 

COVID-19

 

On March 11, 2020, the World Health Organizationdeclared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having anegative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. statesand many countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S.’s response to thepandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemicmay have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the fullextent of the effects on the economy, the markets we serve, our business, or our operations.

 

All of the Company’s three corporate-ownedrestaurants which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, havefully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than othersites due to CDC recommendations. 

 

For the nine months ended September 30, 2021 and2020, we recognized approximately $328,479 and $454,998, respectively, in revenues. For the years ended December 31, 2020 and 2019, werecognized approximately $514,038 and $461,298, respectively, in revenues. 

 

Our principal offices are located at 80 SW 8^thSt. Suite 2000, Miami, Florida, 33130, and our phone number is (305) 423-7024. Our website is www.kissesfromitaly.com

 

Our Strategy

 

We strive to provide the highest level of service,high-quality ingredients, and products. Enveloped in our mission is our philosophy to support and partner with local producers and supplierswithin the regions in order to provide a truly authentic experience to our customers. Our vision is to leverage the success of our flagshipstore and our initial hotel location in the South Florida market and to expand into other regions on a local, state, national, and globallevel. The main focus is doing so through our continued corporate-owned store expansion, along with the development and sales of additionallocations through the advancement of our franchise and territorial rights program.

 

Our Menu

 

Our menu includes grilled paninis including anItalian-style Panini, sausage, beef, sliced pork, or chicken topped with quality natural “sott’olio” (grilled and marinatedvegetable) products. We also offer deli paninis including fresh cheese Panini, prosciutto, salami, capocollo, bresaola, and turkey paninis.All of our paninis include lettuce, tomato, and one choice of cheese and three choices of marinated vegetables, or three choices of grilledvegetables. We also offer desserts including a Nutella sandwich, a variety of fresh Danish, cannoli, Italian biscotti, sfogliatelle ora corneti. Our breakfast menu is served all day. We also have a full menu of coffee and tea favorites, including espresso, cappuccino,and other coffee drinks, soft drinks, bottled water, and juices, as well as various flavors of granite (ices).

  

Our vision is to transport true authentic andrustic taste from the provinces of Italy through our menu items. We intend to offer products that will cater to all diets, including gluten-freediets, and emphasize fresh products with no preservatives.

 

All of our sott’olio and coffee productsare made in Italy. Our management is in constant communication with our product manufacturers and search for high quality and authenticproducts from different regions from Southern Italy, including Sicily, Calabria, Puglia, Napoli, Potenza, and Toscana. Ensuring freshnessand quality, our representatives work closely with local farmers and ranchers for all meats and fresh vegetables. All our products areD.O.P. (Protected Designation of Origin) certified and defined in the European Commission Regulations.

 

 

 

 

 

Quick Service Restaurants

 

Our initial restaurant is located at 3146 NE 9^th Streetin Fort Lauderdale, Florida. This location is across the street from an Atlantic Ocean public beach and consists of approximately 1,000square feet of retail restaurant space with seating for up to 25 guests.

 

Our restaurant within the Wyndham location inPompano Beach, Florida arose out of our relationship with Wyndham Vacation Ownership, Inc., which operates timeshare apartment complexes.Our lease agreements provide for our restaurant to provide room service that can be charged to a customer’s room, as well as anopportunity to provide food and beverage service to various sales, orientations, marketing, and owner events held by Wyndham regularlyat this property. Wyndham remits payments for these services bi-weekly and charges us a 5% administration fee for processing costs.

  

We have continued our discussions with Wyndham,as well as other similar companies, and believe that our continued expansion of our restaurant concept will be enhanced as a result ofour developing a more extensive relationship with Wyndham or another similar company. There are no assurances this will occur.

 

We opened our inaugural European location in Cegliedel Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. Managementis currently scouting various locations in regions of Italy and believes that the regions of Rome and Puglia may offer opportunities foradditional corporate-owned and franchise expansion. However, there are no agreements currently in place to open any new facilities, eitherCompany-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

 

All of our three corporate-ownedrestaurants, located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, have fully re-openedsubject to recommended social distancing guidelines.

  

Each location is managedby one senior employee/manager and individually assessed based on foot traffic, seasonality, and other demographic factors. Our U.S. locationsabide by the standards and rules set forth by the State of Florida Department of Health, and our Italian location abides by the standardsand rules set forth by Italy’s Ministry of Health and the Puglia (Apulia) region’s legislative/administrative authority. MicheleDi Turi, our CEO, possesses the Certified Food Manager accreditation and has the proper authority to provide necessary food safety courses.

 

Restaurant Franchising

 

In addition to opening our company-owned restaurants,we are engaged in franchising of our restaurant concept so that we can build market share and brand awareness. In May 2017, we completedour National Franchise License, which permits us to sell franchises in all of the states in the United States except New York, Virginia,and Maryland, which licenses we may obtain if sufficient demand exists in the future.

 

In January of 2020, the Company completed itsfirst franchise agreement for a restaurant in the State of California. In May of 2021, we opened our first franchise in Chino, California.Due to the onset of Covid-19, we temporarily waived any franchise fees so that the franchisee could well establish its operations at suchlocation.

 

In June of 2020, the Company entered into theDevelopment Agreement pursuant to which it granted development rights to Demasar to open and operate up to 100 restaurants in Canada.Under this Development Agreement, the developer is obligated to open a minimum of 20 restaurantsby June 17, 2025. Demasar will be taking the lead for franchise expansion and assisting in the Canadian brand building for theKisses From Italy brand. On November 20, 2021, we opened a franchise location under the DevelopmentAgreement in Montreal, Quebec, Canada.

 

Each of our franchiserestaurants is required to conform to a standard of interior design, featuring a distinctive and comfortable Italian décor. Ourprior approval is required for each specific location of a proposed franchise restaurant, which includes a requirement that the same bein a clearly identifiable commercial location built in accordance with our standards. Franchisees are also required to satisfactorilycomplete training and purchase certain equipment and supplies from us and other approved suppliers. We also require the purchase of apoint-of-sale system and data polling services from a specified supplier and a computer system that meets established system standards.

 

 

 

 

 

Franchisees will be required to purchase approximately90% to 95% of their supplies and food inventory either directly from us or from approved suppliers. We attempt to negotiate system-widevolume discounts and/or rebates for our franchisees from approved suppliers and, if successful, pass such discounts and/or rebates onto franchisees based on the volume of their purchases from the suppliers providing the discounts.

 

Our franchise agreement with franchisees alsorequires our franchisee to pay royalties of 9% of gross sales, which are defined to be total actual charges for all products (food andnon-food) and services, such as catering and delivery, sold to customers, exclusive of taxes, on a weekly basis. We retain 6% of thisroyalty and the remaining 3% goes towards our marketing fund. 2% of the remaining 3% is utilized for local marketing and 1% is utilizedfor national marketing. We anticipate that until national coverage is warranted, only local and/or regional marketing campaigns will beimplemented.

 

We also require that our franchisee enter intoa collateral assignment and assumption of lease through which we are granted a security interest in all of the furniture, removable tradefixtures, inventory, licenses, and supplies located in the restaurant as collateral for (1) the payment of any obligation owed to us,(2) any default or breach under the terms of the lease, and (3) any default or breach of any of the terms and provisions of the franchiseagreement. In the event of a breach of or default under the lease or payment by a franchisee as a result of a breach or default, we maybe entitled to possession of the restaurant and all of our rights, title, and interest in and to the lease. We also enter into a conditionalassignment of telephone numbers and listings that assigns us telephone numbers and directory listings upon termination or expiration ofa franchise relationship.

 

The initial term of a franchise agreement is ten years, with a renewalprovision of between 2-5 years on the terms and conditions of the franchise agreement so long as there has been substantial compliancewith the franchise agreement and payment of a to-be-determined fee for each renewal. 

 

Franchisees are also required to replace any franchisethat terminates or expires or any restaurant that closes within the territory if necessary, to maintain the number of our named restaurantsrequired in the development schedule. If a franchisee fails to meet the development schedule, we have the right to terminate the franchiseagreement or adjust that territory to eliminate any state in the territory where they have not achieved the minimum number of restaurantsrequired for that state.

 

We are required to perform the following services:

 

	·	Solicitation of new franchise owners - Actively and continuously market and promote through advertising and solicit prospective franchise owners in their territory according to an annual plan and budget that a franchisee develops and submits for our approval.
	·	Site selection, leasing, and build-out - Consult and advise franchise owners with site selection and lease negotiation of the restaurants. Develop and maintain relationships with landlords for purposes of obtaining sites for restaurants and coordinating efforts with franchise owners to lease such sites. Develop relationships with landlords, contractors, equipment suppliers, and service providers in the territory and assist in the supervision of the build-out for the restaurants in our territory.
	·	Training - Provide all initial training to the franchise owners, as well as supplemental and refresher training at our training restaurant. Schedule and coordinate all training of all franchise owners with our required mode of operations.
	·	Opening assistance - Provide grand opening support, including coordinating marketing with local television, radio, newspapers, and trade publications. Provide franchise owners with supervisory assistance and guidance in connection with the opening and initial operations of their restaurants. Provide pre-opening and post-opening assistance for each new restaurant.
	·	Monitoring, audit, and inspection - Monthly monitoring of the operation of their restaurants, including monitoring and reporting of the sales volume and other data as determined from time to time. Monitor and communicate to our franchisee the marketing efforts of our restaurants. Conduct or assist franchisees with inspecting or auditing restaurants and their owners, with visits no less than monthly and in-depth reports at least quarterly.
	·	Vendors and suppliers - Notify vendors and, if necessary, locate new vendors for the franchises and coordinate distribution and purchasing programs. Assist franchisees in developing programs for suppliers and distributors of approved products. Maintain positive relationships and evaluate additional incentive programs and marketing programs from approved and preferred suppliers, vendors, and other designated parties.
	·	Continuing assistance to franchise owners - Provide continuing operating assistance and assist in facilitating transfers and renewals of franchises.

 

 

 

 

 

We also require our franchisees to maintain certainstaffing levels. For the first development year, we require each location to have 2 corporate employees, increasing to 3 in the fifthdevelopment year.

 

If a franchisee fails to perform services andwe need to assume such tasks, we require that they pay us an amount equal to 125% of the expenditures incurred by us, and we have theright to terminate the agreement after notice of a 30-day cure period.

 

Each franchisee must refer all inquiries for franchisesin their territory to us. Under the terms of an Area Representative Agreement, we have the sole right to grant franchises in all of ourunsold territories, terminate a franchise agreement, and approve site selections, leases, and other franchise real estate transactions.

 

Franchise Marketing

 

Our marketing strategy for establishing multi-unitfranchises is to contact individuals or entities that have previously developed franchises in other concepts. This strategy allows usto find people with the proper knowledge, experience, and financial resources to develop a successful franchise operation in a timelyfashion.

 

We seek individuals or groups with the skillsand financial strength to operate multi-unit franchise organizations within specific geographic territories.  We anticipate thata franchise territory will consist of areas that are either cities or counties depending on population. We seek to identify people withconsiderable experience in the management of food service venues who also have sufficient start-up capital to open several of our restaurants.

 

We will consider the skills and investment capitalthat each potential multiple franchise owner presents to determine the size and nature of the territory and the minimum number of ourrestaurants that the franchise owner will be required to maintain in the territory in order keep the exclusive rights to that territory.We will review the demographics of each proposed location to consider the appropriate number of restaurants in each area based upon populationand other factors, including per capita income, and then set the minimum number of restaurants at half the amount. Franchisees will notbe restricted from opening additional restaurants beyond the minimum for their territory.

 

RetailProducts

 

In September of 2020, we entered retail food andgrocery stores with Kisses From Italy branded products in Canada. The product launch began in November of 2020 and Kisses From Italy brandedproducts were in nine retail stores by the end of 2020. Currently, Kisses From Italy branded products were in 35 stores across Ontarioand Quebec, Canada.

 

Commissary System

 

We plan to develop centralized commissary facilitiesthat will serve all of the restaurants that we own in a given region. We believe that a commissary that serves a region of restaurantswill improve efficiency and consistency for the restaurant concept. We also believe that a commissary system will allow our restaurantsto be approximately 500 square feet smaller than they would otherwise be. We plan to build commissaries in areas with lower rent. In thismanner, we plan to save the difference between the 500 fewer square feet that retail rental space would cost and the commissary’scosts located in a lower rent area. Our commissary will have storage space for paper products as well as walk-in coolers to store food.Food preparation for sauces, salad dressings, and other base ingredients will be done in the commissary “clean room” and thendelivered to local restaurants daily. We believe central food preparation of sauces and base ingredients will maintain the consistencyof our restaurants’ products and possibly reduce labor costs.

  

 

 

 

 

Restaurant Advertising

 

Our advertising has and will consist primarilyof newspaper print ads, direct mailing efforts and also through social media, including Facebook, Twitter, and other social media outlets.We also participate in other forms of advertising. For example, we intend to use an airplane to advertise our Kisses banner to the FortLauderdale beach crowd, offering promotional free coffee and t-shirts. Our ads will contain a coupon for a free coffee with the purchaseof any meal item.

 

As we open restaurants in new markets we planto duplicate the advertising effort we employed in Fort Lauderdale and to initially spend approximately 2% to 3% of monthly revenue forlocal advertising on a per company-owned restaurant basis. Since we plan to build multiple restaurants simultaneously within a specificgeographic region, we believe our advertising cost as a percentage of revenue will decrease as we increase the number of restaurants withina region.

 

Employees

 

We currently employ 5 full-time persons, plusour officers. We have two part-time employees. Employees include five hosts/hostesses and an inventory manager. Our employees work atwill and are not represented by a collective bargaining unit. We believe our relationship with our employees is excellent in most cases.We require all of our employees and consultants to sign a confidentiality and non-disclosure agreement. Our success relies on our abilityto hire additional employees, particularly on the local sales side. We believe there are numerous quality people to choose from throughoutour area of targeted expansion.

 

As we grow, we anticipate we will require a franchisedirector and a Chief Financial Officer/Controller, as well as various administrative support personnel.

 

Competition

 

The fast-food segment of the restaurant industryis highly competitive and fragmented. In addition, fast food restaurants compete against other segments of the restaurant industry, includingfast-casual restaurants and casual dining restaurants. The number, size, and strength of our competitors vary by region. Our competitorsalso compete based on a number of factors, including taste, the speed of service, value, name recognition, restaurant location, and customerservice.

 

The restaurant industry is often affected by changesin consumer tastes; national, regional, or local economic conditions; currency fluctuations; demographic trends; traffic patterns; thetype, number, and location of competing food retailers and products; and disposable purchasing power. Our restaurant concept is expectedto compete with international, national, and regional restaurant chains as well as locally-owned restaurants. We will compete not onlyfor customers, but also for management and hourly personnel, suitable real estate sites, and qualified franchisees.

 

We believe that each of the following restaurantsmay provide competition to our restaurants because they are franchise operations that sell sandwiches and coffee:

 

	·	Jimmy John’s
	·	Subway
	·	Chipotle Mexican Grill
	·	Miami Subs Grill
	·	Starbucks

 

Of the above-listed restaurants, all are largerand have significantly greater financial resources than we currently have available.

 

 

 

 

 

GovernmentRegulations

 

We are subject to various federal, state, andlocal laws affecting our business. Our restaurants must comply with licensing and regulation by a number of governmental authorities,which include health, sanitation, safety, and fire agencies in the state or municipality in which the restaurant is located. In addition,we must comply with various state laws that regulate the franchisor/franchisee relationship.

 

We are also subject to federal and state lawsgoverning employment and pay practices, overtime, tip credits, and working conditions. The bulk of our employees are paid on an hourlybasis at rates related to the federal and state minimum wages.

 

In addition, we are subject to federal and statechild labor laws which, among other things, prohibit the use of certain “hazardous equipment” by employees 18 years of ageor younger. Under the Americans with Disabilities Act, we could be required to expend funds to modify our restaurants to better provideservice to, or make reasonable accommodation for the employment of disabled persons. We continue to monitor our facilities for compliancewith the Americans with Disabilities Act in order to conform to its requirements. We believe future expenditures for such compliance wouldnot have a material adverse effect on our operations.

 

As a franchisor, we will be soliciting prospectsfor franchises and are subject to federal and state laws pertaining to franchising. These laws require that certain information be providedto franchise prospects at certain times and regulate what can be said and done during the offering process. Some states require the franchiseoffering circular to be registered and renewed on an annual basis.

 

Trademarks and Patents

 

We have applied for and received a registeredtrademark of our logo in Italy, No. 0001 528191. This trademark expires in September 2029. We have also obtained the registered trademarkof our logo in the United States (the United States Patent and Trademark Office) Serial No. 87138230. This trademark expires in August2026. Both trademarks are subject to automatic renewal upon payment of renewal fees.

 

Property

 

Our principal place of business is located at80 SW 8^th St. Suite 2000, Miami, Florida, 33130, which is an executive virtual office. This location consists of approximately1,000 square feet of office and conference room space. The relevant lease expired March 1, 2014, but we have reverted to a month-to-monthtenancy. We pay a monthly rent of $223. We do not anticipate that we will need to expand the office facility for the next 12 months.

 

As of the date of this Prospectus, the Companyhad three operating company-owned 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 $3,274 per month.
	·	Kisses From Italy-Palm Aire based in Pompano Beach, Florida leases approximately 2,300 square feet of space at a cost of $4,051.83 per month.
	·	Italian location - Strada Provinciale 70 #100, Ceglie del Campo, 70129, Bari, Italia -The lease has a six year term, starting in June 2019, at a rate of approximately $1,570 per month.

 

Legal Proceedings

 

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 adverseto our Company or has a material interest adverse to us.

  

 

 

 

 

IndustryOverview

 

The National Restaurant Association projects thatrestaurant industry sales will reach $789.0 billion in 2021, a 19.7 percent gain over the industry’s estimated sales of $659.0 billionin 2020.

 

The global fast food and quick service restaurantmarket reached a value of $260 billion in 2020. Looking forward, the market is expected to grow at a CAGR of 5.1% during 2021-2026. Themajority of this large market comprises on-premises restaurants and drive-thrus, with the remaining consisting of off-premises dining(take out) and cafeterias and buffets. In 2019, there were an estimated 194,395 franchised quick service restaurants in theUnited States.

 

The fast food marketand QSR (Quick Service Restaurant) is mainly driven by the rise in the pace of life of the urban population and their requirement forinexpensive and faster options for their meals. It is also driven by the population that expects meals delivered to their doorstep. However,rising health awareness among consumers may impede the growth of the fast food industry in the foreseeable future. Even so, the rise intrend of online ordering and app-based companies offering delivery services has opened more opportunities. Moreover, easily accessible,healthy fast food may provide options to the health conscious populace, bolstering the fast food market growth in upcoming years. 

  

Accordingto the 2021 Franchise Business Outlook, franchise establishments are projected to grow by approximately 3.5 percent to approximately 780,188establishments in 2021, after decreasing by approximately 2.6 percent in 2020, while employment is projected to increase by approximately10.2 percent to approximately 8.2 million workers in 2021, after decreasing by approximately 11.2 percent in 2020. The gross domesticproduct of the sector is forecast to increase by approximately 7.0 percent to approximately $477.4 billion in 2021. Franchise businessoutput is also projected to increase by approximately 16.4 percent to approximately $780.0 billion in 2021. The forecast follows a yearof decline in 2020 due to the Covid-19 pandemic.

 

 

 

 

 

 

 

 

MANAGEMENT

 

Executive Officers, Directorsand Key Personnel

 

The following table sets forth information regarding our executiveofficers and directors:

 

Name		Age		Position
Michele Di Turi		42		Co-Chief Executive Officer, President, and Chairman of the Board
Claudio Ferri		42		Co-Chief Executive Officer, Chief Investment Officer, and a director
Leonardo Fraccalvieri		34		Chief Operating Officer and Director

 

The above-listed officers and directors will serveuntil the next annual meeting of the shareholders or until their death, resignation, retirement, removal, or disqualification, or untiltheir successors have been duly elected and qualified. Vacancies in the existing Board of Directors are filled by majority vote of theremaining Directors. Officers serve at the will of the Board of Directors.

 

Michele Di Turi has servedas our Co-Chief Executive Officer, President and a director since our inception in March 2013. In addition, Mr. Di Turi has been ChiefOperating Officer and a Director of Sunshine Biopharma, Inc., a publicly held biotech company since October 15, 2009. Since November 2008,Mr. Di Turi has also been President of Sunshine Bio Investments, Inc., a privately held Canadian corporation engaged in the sale of non-regulatedbiotechnology and medical products. Prior thereto, from February 2003 through November 2008, Mr. Di Turi was employed by Mazda President,Inc., Montreal, Canada, as a sales representative and director of customer service. This experience led to Mr. Di Turi’s appointmentto the Board.

 

Claudio Ferri has served asour Co-Chief Executive Officer, Chief Investment Officer and a director since our inception in March 2013. From May 2001 through September2013, Mr. Ferri was employed by State Street Global Advisors, Montreal, Canada as Vice President, Senior Portfolio Manager and Traderwhere his responsibilities included the management of Canadian government bonds and provincial/agency investment strategies and tradingfor active and enhanced fixed income portfolios. Mr. Ferri received a Bachelor of Commerce degree from Concordia University in 2001 witha major in finance. This experience led to Mr. Ferri’s appointment to the Board.

 

Leonardo Fraccalvieri has servedas our Chief Operating Officer and a director since our inception in March 2013. From April 2013 through January 2014, he served as theBusiness Development Manager at Italy-America Chamber of Commerce, West LA, CA, where he was responsible for management of project developmentand evaluation of Italian companies seeking to expand in the U.S. From June 2012 through December 2013, Mr. Fraccalvieri was a businessanalyst at 10EQS Management Consulting where he was responsible for market strategy. From May 2009 through June 2011, he was a BusinessDevelopment specialist at BusinessviaItaly, where he worked with companies seeking to expand their business internationally to find newcommercial partners abroad, as well as providing new business opportunities for foreign nationals. Mr. Fraccalvieri attended Universita’Commerciale Luigi Bocconi Milano and received an undergraduate degree in Economics of International Market and New Technologies in Milanand a graduate degree from 2 Universita’ Commerciale Luigi Bocconi Milano in Milan where he received a Masters’ degree inInternational Management and Business Administration, specializing in Management Consulting and Strategy. This experience led to Mr. Fraccalvieri’sappointment to the Board.

 

Board Committees

 

The Company has no nominating, audit, or compensationcommittees. The entire Board participates in the nomination and audit oversight processes and considers executive and director compensation.Given the size of the Company and its stage of development, the entire Board is involved in such decision-making processes. Thus, thereis a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation,nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of ourexecutive officers or directors.

 

 

 

 

 

Family Relationships

 

There are no family relationships between any of our officers and directors.

 

Involvement in Certain LegalProceedings

 

Our directors and executive officers have not been involved in anyof the following events during the past ten years:

 

·	Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
·	Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·	Being subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities, or banking activities or to be associated with any person practicing in banking or securities activities;
·	Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·	Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended, or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·	Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.

 

Director Independence

 

Our Board is currently composed of three members.Our Common Stock is not currently listed for trading on a national securities exchange and, as such, we are not subject to any directorindependence standards. No member of our Board of Directors is considered an independent director. We evaluated independence in accordancewith the rules of The New York Stock Exchange, Inc., which generally provides that a director is not independent if: (i) the directoris, or in the past three years has been, an employee of ours; (ii) a member of the director’s immediate family is, or in the pastthree years has been, an executive officer of ours; (iii) the director or a member of the director’s immediate family has receivedmore than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executiveemployee); (iv) the director or a member of the director’s immediate family is, or in the past three years has been, employed ina professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (v) the directoror a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a companywhere one of our executive officers serves on the compensation committee; or (vi) the director or a member of the director’s immediatefamily is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-monthperiod during the past three years, exceeds the greater of $1,000,000 or 2% of that other company’s consolidated gross revenues.

   

Code of Ethics

 

Our board of directors has not adopted a code of ethics but plans todo so in the near future.

 

 

 

 

 

EXECUTIVE COMPENSATION

 

The following table sets forth information concerningall cash and non-cash compensation awarded to, earned by, or paid to our Chief Executive Officer and the other executive officer withcompensation exceeding $100,000 during fiscal 2020 (each a "Named Executive Officer").

 

 

SUMMARY COMPENSATION TABLE

 

Name and principal position		Year			Salary ($)			Bonus($)			Stock Awards ($) (e)			Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Michele Di Turi,		2020			17,361			-0-			360,000 (b)			-0-		-0-		-0-		-0-		377,361
Co-CEO and President, and Chairman		2019			48,633			-0-			1,133,037(a)			-0-		-0-		-0-		-0-		1,181,670
Claudio Ferri,		2020			-0-			-0-			360,000 (c)			-0-		-0-		-0-		-0-		360,000
Co-CEO and CIO		2019			-0-			-0-			804,005 (d)			-0-		-0-		-0-		-0-		804,005

________________________

	(a)	Represents a bonus award of 16,911,000 shares for services performed
	(b)	Represents a stock award of 3,600,000 for services performed
	(c)	Represents a bonus award of 12,000,080 shares for services performed
	(d)	Represents a stock award of 3,600,000 for services performed
	(e)	The value of these shares was calculated by multiplying the number of shares times the closing price of the Company’s stock on the date the shares were awarded.

 

Compensationof Directors

 

During the year ended December 31, 2020, no compensationhas been paid to our directors in consideration for their services rendered in their capacities as directors. 

 

StockPlan

 

We have not adopted a stock plan but may do soin the future.

 

EmploymentAgreements

 

None of our executive officers are party to anyemployment agreement with us.

 

 

 

 

 

 

 

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain informationregarding the ownership of Common Stock as of the date of this prospectus by (i) each person known to us to own more than 5% of our outstandingCommon Stock as of the date of this prospectus, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of ourdirectors and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the indicated person has solevoting and investment power. The information provided is based upon 183,913,582 Common Stock issued and outstanding as of the date ofthis prospectus.

 

Class of Shares		Name and Address		# of Shares		% of Class
Common		Michele Di Turi(1) 80 SW 8th St. Suite 2000 Miami, Florida 33130		65,600,000		35.7%
Common		Claudio Ferri(1)(2) 80 SW 8th St. Suite 2000 Miami, Florida 33130		42,600,000		23.2%
Common		Leonardo Fraccalvieri(1) 80 SW 8th St. Suite 2000 Miami, Florida 33130		1,000,000		0.5%
Common		All Officers and Directors as a Group (3 persons)				59.4%
5% Holders
Common		Denis Senecal Holdings (3)		21,671,153		11.8%

 

(1)	Officer and director of our Company.
(2)	Includes 410,000 shares of common stock held in the name of his wife.
(3)	Denis Senecal has voting and dispositive authority over these shares

 

 

 

 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Related Party Transactions

 

During 2020, the Company issued 3,600,000 sharesto each of its co-executive officers, which were valued at $360,000 each.

  

Director Independence

 

None of our current directors are deemed “independent”pursuant to SEC rules. We anticipate appointing independent directors in the foreseeable future.

 

 

DESCRIPTION OF SECURITIES

 

CommonStock

 

There are 200,000,000 shares of Common Stock,$0.001 par value, authorized, with 183,913,582 shares issued and outstanding and 25,000,000 shares of Preferred Stock, par value $0.010per share, authorized. As of the date of this Prospectus, there were 139,610 shares Series C Preferredoutstanding, respectively, which were purchased at a price of $1.00 per share. The holders of Common Stock are entitled to onevote for each share held on all matters submitted to a vote of shareholders. Holders of Common Stock are entitled to receive ratably suchdividends, if any, as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividendrights of outstanding Preferred Stock, which may be authorized and issued in the future. Upon a liquidation, dissolution or winding upof our Company the holders of Common Stock are entitled to receive ratably the net assets available after the payment of all debts andother liabilities, and subject further only to the prior rights of any outstanding Preferred Stock which may be authorized and issuedin the future. The holders of Common Stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares ofCommon Stock are, and the shares offered herein will be, when issued and paid for, fully paid and non-assessable. Cumulative voting inthe election of directors is not permitted and the holders of a majority of the number of outstanding shares will be in a position tocontrol the election of directors at a general shareholder meeting and may elect all of the directors standing for election. We have nopresent intention to pay cash dividends to the holders of Common Stock.

 

We do not currently have a sufficient number ofauthorized shares of Common Stock to cover all of the shares issuable pursuant to that certain StandbyEquity Commitment Agreement dated November 22, 2021, by and between the Selling Stockholders and us. As a result, we will seekwritten consent by a majority of our stockholders in lieu of a meeting to amend to our articles of incorporation to implement an increasein the number of authorized shares of our Common Stock (the “Charter Amendment”) for this purpose, and complete the CharterAmendment prior to effectiveness of this Registration Statement.

 

PreferredStock

 

OnDecember 19, 2019, the Company filed a Certificate of Designation with the State of Florida to set up three categories of preferredstock: Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (the “Certificate ofDesignation”). The Certificate of Designation designated 1,500,000 shares of the Company’s authorizedpreferred stock as Series A Preferred Stock (“Series A Stock”), 5,000,000 shares as Series B Preferred Stock(“Series B Stock”) and 1,000,000 shares as Series C Preferred Stock (“Series C Stock”).

 

A summaryof the material provisions of the Certificate of Designation governing the Series A Stock, the Series B Stock and the Series C Stock isas follows:

 

 

 

 

 

SeriesA Stock

 

The SeriesA Stock is not convertible. Each share of Series A Stock shall entitle the holder to three hundred (300) votes for each share of SeriesA Stock. Any amendment to the Certificate of Designation requires the consent of the holders of at least two-thirds of the shares of SeriesA Stock then outstanding. The holders of Series A Stock are not entitled to dividends until and unless determined by the Board of Directorsof the Company.

 

LiquidationPreference

 

No distributionshall be made to holders of shares of capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-upof the Company. The Series A Stock ranks pari passu with the Series C Stock.

 

As of thedate of this Prospectus, there are no shares of Series A Stock outstanding.

 

SeriesB Stock

 

The SeriesB Stock is convertible at any time by the holder into the number of shares of common stock of the Company based on two times the pricepaid by the holder paid for the shares. The Board has the authorization to establish a minimum price for the price the Series B Stock(so that if the market price of the common stock of the Company drops below the issuance price, the conversion rate will then be basedon the minimum price established by the Board and not the price paid for the shares). The holders of the Series B Stock shall not be entitledto voting rights except as otherwise provided for in the law. The holders of Series B Stock are not entitled to dividends until and unlessdetermined by the Board.

 

LiquidationPreference

 

The holdersof Series B Stock shall not be entitled to any distributions upon a liquidation of the Company.

 

Restrictionsof Transferability

 

The sharesof the Series B Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner withoutthe prior written consent of the Board and applicable securities laws.

 

As of thedate of this Prospectus, there are no shares of Series A Stock outstanding.

 

SeriesC Stock

 

The SeriesC Stock is convertible at any time by the holder into the number of shares of common stock of the Company on the basis of three timesthe price paid for the shares divided by the floor price of $0.10 established by the Board of Directors. The holders of the Series C Stockshall not be entitled to voting rights except as otherwise provided for in the law. The holders of Series C Stock are not entitled todividends until and unless determined by the Board.

 

 

 

 

 

LiquidationPreference

 

Upon anyliquidation of the Company, the holders of Series C Stock shall be entitled to the amount paid for the shares of Series C Stock priorto the holders of shares ranking junior to the Series C Stock. Upon the holders of the Series C Stock and any series of stock rankingpari passu with the Series C Stock having received distributions to which they are entitled, the remaining assets of the Company shallbe distributed to the other holders pro rata in proportion to the shares held by each holder.

 

Restrictionsof Transferability

 

The sharesof the Series C Preferred Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in anymanner without the prior written consent of the Board and applicable securities laws.

 

As of thedate of this Prospectus, there were 139,610 shares Series C Preferred outstanding, respectively, which were purchased at a price of $1.00per share.

 

TransferAgent and Registrar

 

We have retained ClearTrust Stock Transfer, Inc.,16540 Pointe Village Drive, Suite 205, Lutz, FL 33558, phone (813) 235-4490 as the transfer agent for our Common Stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES ELIGIBLE FOR FUTURE SALE

 

Market sales of shares of our Common Stock afterthis Offering and from time to time, and the availability of shares for future sale, may reduce the market price of our Common Stock.Sales of substantial amounts of our Common Stock, or the perception that these sales could occur, could adversely affect prevailing marketprices for our Common Stock and could impair our future ability to obtain capital, especially through an offering of equity securities.After the effective date of the registration statement of which this Prospectus is a part, all of the shares registered in this Offeringwill be freely tradable without restrictions or further registration under the Securities Act of 1933, unless the shares are purchasedby our affiliates, as that term is defined in Rule 144 under the Securities Act. The balance of shares which are not being registeredwill be eligible for sale pursuant to exemptions from registration. However, these shares not being registered are held by our managementand other affiliates who are limited to selling only 1% of our issued and outstanding shares every 90 days.

 

Our Common Stock is considered a “pennystock” and will continue to be considered a penny stock so long as it trades below $5.00 per share and, as such, trading in ourCommon Stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers whorecommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practicerequirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’swritten consent prior to the transaction.

 

SEC regulations also require additional disclosurein connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, ofa disclosure schedule explaining the penny stock market and its associated risks. In addition, broker-dealers must disclose commissionspayable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additionalburdens imposed upon broker-dealers by such requirements may discourage broker-dealers from recommending transactions in our securities,which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities. In addition,few broker or dealers are likely to undertake these compliance activities. Other risks associated with trading in penny stocks could alsobe price fluctuations and the lack of a liquid market. See “RISK FACTORS.”

 

Rule144

 

In general, under Rule 144, a person who has beneficiallyowned restricted shares for at least six months would be entitled to sell those securities provided that (1) such person is not deemedto have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (2) we have been subject tothe Exchange Act periodic reporting requirements for at least 90 days before the sale and are current in filing our periodic reports.Persons who have beneficially owned restricted shares of common stock for at least six months but who are our affiliates at the time of,or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitledto sell within any three-month period only a number of securities that does not exceed 1% of the number of shares of common stock outstanding.Such sales by affiliates must also comply with the manner of sale and notice provisions of Rule 144 and to the availability of currentpublic information about us.

 

 

 

  

 

 

 

 

LEGAL MATTERS

 

The validity of the Common Stock offered herebywill be passed upon by The Crone Law Group, P.C.

 

 

EXPERTS

 

The financial statements of Kisses From ItalyInc. as of and for the years ended December 31, 2020 and 2019 included herein have been audited by BF Borgers CPA PC, independent registeredpublic accountants, as indicated in their reports with respect thereto, and are in reliance upon the authority of said firm as expertsin accounting and auditing.

 

 

DISCLOSURE OF COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

In the opinion of the Securities and ExchangeCommission, indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Actand is, therefore, unenforceable. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinionof the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is thereforeunenforceable.

 

 

ADDITIONAL INFORMATION

 

We have filed with the SEC this registration statementon Form S-1 under the Securities Act with respect to the shares of Common Stock being offered by this Prospectus. This Prospectus, whichconstitutes a part of this registration statement, does not contain all of the information in this registration statement and its exhibits.For further information with respect to us and the Common Stock offered by this Prospectus, you should refer to this registration statementand the exhibits filed as part of that document. Statements contained in this Prospectus as to the contents of any contract or any otherdocument referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filedas an exhibit to this registration statement. Each of these statements is qualified in all respects by this reference.

 

We are subject to the informational requirementsof the Exchange Act and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can readour SEC filings, including this registration statement, over the Internet at the SEC’s website at http://www.sec.gov. You may alsoread and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. Youmay also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E.,Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.You may also request a copy of these filings, at no cost, by writing or telephoning us at: Kisses From Italy Inc., 80 SW 8^th St.,Suite 2000, Miami, Florida 33130, telephone: 305-423-7129.

  

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINEDIN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERINGTO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATIONCONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS,OR OF ANY SALE OF OUR COMMON STOCK.

 

 

 

 

 

 

 

 

KISSES FROM ITALY INC.

Financial Statements

 

Table of Contents

 

 

 

 

		Page
For the Quarterly Period ended September 30, 2021
Consolidated Balance Sheets as of September 31, 2021 (unaudited) and December 31, 2020		F-2
Interim Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020		F-3
Unaudited Consolidated Statements of Changes in Stockholders' Equity		F-4
Interim Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020		F-6
Notes to Interim Consolidated Financial Statements		F-7
For the Years Ended December 31, 2020 and 2019
Report of Independent Registered Public Accounting Firm		F-16
Balance Sheet as of December 31, 2020 and 2019		F-17
Statement of Operations for the years ended December 31, 2020 and 2019		F-18
Statement of Changes in Stockholders’ Deficit for the years ended December 31, 2020 and 2019		F-19
Statement of Cash Flows for the years ended December 31, 2020 and 2019		F-21
Notes to Financial Statements		F-22

 

 

 

 

 

Kisses From Italy Inc.

Consolidated Balance Sheets

(Unaudited)

 

		September 30,				December 31,
		2021				2020
ASSETS
Current assets:
Cash and cash equivalents		$	13,347			$	37,336
Accounts receivable			6,137				5,761
Other receivable			50,778				4,839
Inventory			5,866				4,051
Total current assets			76,128				51,987
Property and equipment, net			6,320				8,480
Other Assets			2,745				2,635
Total assets		$	85,193			$	63,102
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	54,903			$	64,762
Accrued liabilities			130,780				148,519
Total current liabilities			185,683				213,281
Notes payable			12,171				12,171
Convertible Notes			10,000				10,000
Total liabilities			207,854				235,452
Commitments and contingencies			–				–
Stockholders' Equity:
Preferred stock, Series A $0.001 par value. 1,500,000 shares authorized; zero 0 shares issued and outstanding			–				–
Preferred stock, Series B $0.001 par value. 5,000,000 shares authorized; zero 0 shares issued and outstanding			–				–
Preferred stock, Series C, $0.001 par value 1,000,000 shares authorized; 139,610 shares and 50,000 shares issued and outstanding as of September 30, 2021 and December 31 2020, respectively			140				80
Common stock, $0.001 par value, 200,000,000 shares authorized; and 169,683,651 and 154,832,335 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively			169,683				154,832
Additional paid-in capital			12,469,105				8,612,683
Retained earnings deficit			(12,748,823	)			(8,916,893	)
Total Kisses From Italy Stockholders' Equity (Deficit)			(109,895	)			(149,298	)
Non-controlling interest			(12,766	)			(23,052	)
Total stockholders' equity			(122,661	)			(172,350	)
Total liabilities and equity		$	85,193			$	63,102

 

 

 

 

Kisses From Italy Inc.

Consolidated Statements of Operations

(Unaudited)

 

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		September 30,				September 30,				September 30,				September 30,
		2021				2020				2021				2020
Food sales		$	85,727			$	44,331			$	328,479			$	163,413
Franchise sales			–				–				–				291,585
Total Revenue			85,727				44,331				328,479				454,998
Cost of goods sold			43,644				29,164				155,953				80,649
Gross margin			42,083				15,167				172,526				374,349
Operating expenses:
Depreciation and amortization			527				12,992				4,070				38,977
Executive compensation			–				4,950								17,631
Stock based compensation			–				720,000				3,231,573				2,738,240
Payroll and other expenses			42,593				29,576				76,792				88,126
Rent			46,219				49,269				99,646				107,872
Consulting and professional fees			23,278				85,648				116,903				155,392
General and administrative			44,549				38,419				117,439				95,124
Total operating expenses			157,166				940,854				3,646,423				3,241,362
Income (loss) from operations			(115,083	)			(925,687	)			(3,473,897	)			(2,867,013	)
Other income (expense)
Interest income (expense), net			(95,545	)			(34,943	)			(347,747	)			(497,367	)
Total other income (expense)			(95,545	)			(34,943	)			(347,747	)			(497,367	)
Income (loss) before income taxes			(210,628	)			(960,630	)			(3,821,644	)			(3,364,380	)
Provision for income taxes (benefit)			–				–				–				–
Net loss			(210,628	)			(960,630	)			(3,821,644	)			(3,364,380	)
Less: net gain(loss) attributable to non-controlling interests			(5,874	)			(6,365	)			10,286				(6,068	)
Net loss attributable to Kisses From Italy, Inc.		$	(204,754	)		$	(954,265	)		$	(3,831,930	)		$	(3,358,312	)
Basic and diluted earnings (loss) per common share		$	(0.00	)		$	(0.01	)		$	(0.02	)		$	(0.02	)
Weighted-average number of common shares outstanding: Basic and diluted			168,615,951				150,776,792				164,399,707				135,992,240

 

The accompanying notes are an integral part ofthe consolidated financial statements.

 

 

 

 

Kisses from Italy Inc.

Consolidated Statements of Changesin Stockholders' Equity

September 30, 2021 and September 30, 2020

(Unaudited)

 

		Preferred Stock						Preferred Stock						Preferred Stock												Additional				Non-								Total
		Series A						Series B						Series C						Common Stock						Paid-in				controlling				Retained				Stockholders'
		Shares		Value				Shares		Value				Shares		Value				Shares		Value				Capital				Interest				Earnings				Equity
Balance, December 31, 2019		–		$	–			–		$	–			50,000		$	50			126,550,535		$	126,550			$	4,945,109			$	6,068			$	(5,207,491	)		$	(129,714	)
Net income (loss)		–			–				–		–																								(499,905	)			(499,905	)
Non-controlling interest, net income (loss)																															2,004								2,004
Issuance of Series C Preferred Stock														66,000			66										66,424												66,490
Beneficial conversion feature of convertible notes																											351,920												55,669
Stock issued for services																				541,800			542				35,759
Balance, March 31, 2020		–		$	–			–		$	–			116,000		$	116			127,092,335		$	127,092			$	5,399,212			$	8,072			$	(5,707,396	)		$	(172,905	)
Net income (loss)		–			–			–			–																								(1,904,142	)			(1,904,142	)
Non-controlling income loss																															(1,707	)							(1,707	)
																																							–
Beneficial conversion feature of Series C Preferred Stock																											106,300												106,300
																																							–
Issuance of Series C Preferred Stock														32,600			33										32,567												32,600
																																							–
Conversion of Series C Preferred Stock to Common Stock														(118,990	)		(119	)		2,480,000			2,480				(2,361	)											–
																																							–
Stock issued for services																				14,630,000			14,630				1,967,370												1,982,000
Balance, June 30, 2020		–		$	–			–		$	–			29,610		$	30			144,202,335		$	144,202			$	7,503,088			$	6,365			$	(7,611,538	)		$	42,147
Net income (loss)		–			–			–			–																								(954,265	)			(954,265	)
Non-controlling income loss																															(6,365	)							(6,365	)
Beneficial conversion feature of Series C Preferred Stock																											33,425												33,425
Issuance of Series C Preferred Stock														37,000			37										36,740												36,777
Conversion of Series C Preferred Stock to Common Stock														(7,000	)		(7	)		210,000			210																203
Stock issued for services																				7,700,000			7,700				762,300												770,000
Balance, September 30, 2020		–		$	–			–		$	–			59,610		$	60			152,112,335		$	152,112			$	8,335,553			$	–			$	(8,565,803	)		$	(78,078	)

 

The accompanying notes are an integral part ofthe consolidated financial statements.

 

 

 

Kisses from Italy Inc.

Consolidated Statements of Changesin Stockholders' Equity

September 30, 2021 and September 30, 2020 (continued)

(Unaudited)

 

		Preferred Stock						Preferred Stock						Preferred Stock												Additional				Non-								Total
		Series A						Series B						Series C						Common Stock						Paid-in				controlling				Retained				Stockholders'
		Shares		Value				Shares		Value				Shares		Value				Shares		Value				Capital				Interest				Earnings				Equity
Balance, December 31, 2020		–		$	–			–		$	–			79,610		$	80			154,832,335		$	154,832			$	8,612,683			$	(23,052	)		$	(8,916,893	)		$	(172,350	)
Net income (loss)		–			–			–			–			–			–						–				–				–				(421,862	)			(421,862	)
Non-controlling interest, net income (loss)																															1,183				–				1,183
Issuance of common stock for services																				1,500,000			1,500				298,500				–				–				300,000
Issuance of common stock in private placement																				1,450,000			1,450				143,550				–				–				145,000
Balance, March 31, 2021		–		$	–			–		$	–			79,610		$	80			157,782,335		$	157,782			$	9,054,733			$	(21,869	)		$	(9,338,754	)		$	(148,029	)
Net income (loss)		–			–			–			–												–				–				–				(3,205,314	)			(3,205,314	)
Non-controlling interest, net income (loss)																															14,977								14,977
Issuance of common stock for services																				10,100,000			10,100				1,681,650												1,691,750
Issuance of stock options for services																											1,239,823												1,239,823
Issuance of common stock in private placement																				300,000			300				29,700												30,000
Issuance of Series C Preferred Stock														90,000			90										339,570												339,660
Conversion of Series C Preferred to Common stock														(10,000	)		(10	)		300,000			300				(290	)											–
Balance, June 30, 2021		–		$	–			–		$	–			159,610		$	160			168,482,335		$	168,482			$	12,345,186			$	(6,892	)		$	(12,544,069	)		$	(37,133	)
Net income (loss)		–			–			–			–			–			–			–			–				–				–				(204,754	)			(204,754	)
Non-controlling interest, net income (loss)																															(5,874	)							(5,874	)
Issuance of Series C Preferred Stock														30,000			30										125,070												125,100
Conversion of Series C Preferred to Common stock														(50,000	)		(50	)		1,201,316			1,201				(1,151	)											–
Balance, September 30, 2021		–		$	–			–		$	–			139,610		$	140			169,683,651		$	169,683			$	12,469,105			$	(12,766	)		$	(12,748,823	)		$	(122,661	)

 

 

The accompanying notes are an integral part ofthe consolidated financial statements.

 

 

 

 

Kisses From Italy Inc.

Consolidated Statements of CashFlows

(Unaudited)

 

		Nine Months				Nine Months
		Ended				Ended
		September 30,				September 30,
		2021				2020
Cash flows from operating activities of continuing operations:
Net income (loss)		$	(3,831,930	)		$	(3,358,312	)
Net income (loss) attributable to non-controlling interest			10,286				(6,068	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			4,070				38,977
Amortization of debt discount							491,645
Stock-based compensation for services			3,231,573				2,788,301
Beneficial conversion feature of Preferred C Stock			344,760				–
Changes in operating assets and liabilities:
Other assets			(109	)			29
Accounts receivable			(376	)
Account receivable-other			(45,939	)			(200	)
Inventory			(1,815	)			(89	)
Accounts payable			(9,859	)			(18,856	)
Accrued liabilities			(17,739	)			(4,506	)
Net cash provided by (used in) operating activities			(317,079	)			(69,079	)
Cash flows from investing activities:
Purchase of fixed assets			(1,910	)			–
Net cash provided by (used in) investing activities			(1,910	)			–
Cash flows from financing activities:
Proceeds/payments from short term borrowings-net			–				(6,000	)
Proceeds from notes payable			–				12,171
Proceeds from the sale of common stock			175,000				–
Proceeds from the sale of preferred stock			120,000				136,070
Net cash provided by (used in) financing activities			295,000				142,241
Impact of foreign exchange			–				(165	)
Net increase (decrease) in cash and cash equivalents			(23,989	)			73,162
Cash and cash equivalents at beginning of period			37,336				26,841
Cash and cash equivalents at end of period		$	13,347			$	99,838
Supplemental disclosure of cash flow information:
Cash paid for interest			–				–
Cash paid for income taxes			–				–

 

The accompanying notes are an integral part ofthe consolidated financial statements.

 

 

 

 

Kisses From Italy Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended September30, 2021 and 2020

 

NOTE 1 – ORGANIZATION AND DESCRIPTIONOF 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 restaurantbusiness of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Companycommenced operations in May 2015 by opening its first location in Fort Lauderdale, Florida. Three additional restaurants, which are locatedin various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations,which are in leased facilities, were fully operational by April 2016. In December 2017, the Company vacated one of its restaurants dueto a hurricane and has not re-opened that location. During the three months ended June 30, 2021, the Company consolidated its two Wyndhamstores into one location to become more efficient. The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy,in October 2019. Such location will serve as the distribution center for products for European locations. The Bari location was closedin the fourth quarter of 2020 and currently remains closed as of the date of this Report due to Covid-19.

 

On May 28, 2021 the Company opened its first franchisein Chino, California. Due to the onset of Covid-19 the Company has temporarily waived any franchise fees so that the franchisee couldwell establish the operations at that location.

 

The Company’s accounting year-end is December31.

 

COVID-19

 

On March 11, 2020, the World Health Organizationdeclared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having anegative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states andmany countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S’s response to the pandemicare significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic mayhave, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extentof the effects on the economy, the markets we serve, our business, or our operations.

 

All of the Company’s three corporate-ownedrestaurants which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, havefully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than othersites due to CDC recommendations. 

 

Except for our Bari location, our US locationsare now open and are operating at near pre-Covid revenue levels. There can be no assurances that we will be allowed to remain open atfull capacity or that we can maintain current sales levels.

 

 

 

F-7

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

  

Management’s Representation of InterimFinancial Statements

 

The accompanying unaudited consolidated financialstatements 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 accountingprinciples 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. These consolidated financialstatements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial positionand results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative ofresults for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financialstatements at and as of December 31, 2020, filed as part of the Company’s Annual Report on Form 10-K with the SEC on April 15, 2021.

 

Basis of Presentation and Principles ofConsolidation

 

The consolidated financial statements of the Companyhave 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. The consolidated financials includethe accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9^th LLC, Kisses from Italy-FranchisingLLC, and Kisses from Italy Bari, Italy and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

 

All intercompany accounts and transactions areeliminated in consolidation.

 

Going Concern

 

The accompanying unaudited consolidated financialstatements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets andthe satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements.On a consolidated basis, the Company has incurred significant operating losses since inception.

 

Because the Company does not expect that existingoperational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’sability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternativesources of financing. Historically, the Company has raised capital through private placements of equity and convertible debt as interimmeasures to finance working capital needs and may continue its efforts to raise additional capital through the sale of common stock orother securities and obtain short-term loans. The Company will be required to continue to do so until its consolidated operations becomeprofitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intendsto continue this practice where feasible.

 

Use of Estimates

 

The preparation of financial statements in conformitywith US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod. The most significant estimates relate to revenue recognition, valuation of accounts receivable and the allowance for doubtfulaccounts, inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financialinstruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and variousother 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 arenot readily apparent from other sources. Actual results could differ from these estimates.  

 

 

 

 

F-8

 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivables are recorded at the net valueof face amount less any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimateof the amount of probable credit losses in its existing accounts receivable. The Company reviews the allowance for doubtful accountson a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowancewhen placed for collection. Recoveries of receivables previously written off are recorded when received. Interest is not charged on pastdue accounts. These receivables are related to the sale of our private label branded products sold in retail and grocery stores in Canada.

 

As of September 30, 2021, and December 31, 2020,our trade receivable amounted to $6,137 and $5,761, respectively, with an allowance for doubtful accounts of $-0- for both periods.

 

Other Receivable

 

Other receivables are comprised of two components,a receivable from the government for Employee Retention Credits (“ERC”) and Value Added Tax at the Company’s Bari locationin Italy.

 

The purpose of the ERC is to encourage employersto keep employees on the payroll, even if they are not working during the covered period due to the effects of the coronavirus outbreak.The updated ERC provides a refundable credit of up to $5,000 for each full-time equivalent employee a company retained from March 13,2020, to Dec. 31, 2020, and up to $14,000 for each retained employee from Jan. 1, 2021, to June 30, 2021. The Company qualifies as anemployer if it was ordered to fully or partially shut down or if the Company’s gross receipts fell below 50% for the same quarterin 2019 (for 2020) and below 80% (for 2021). As of September 30, 2021 and December 31, 2020 the Company had ERC credits receivable of$45,939 and $-0- respectively.

 

Valued Added Tax (“VAT”)

 

The Valued Added Tax (“VAT”)VAT is a broadly-based consumption tax which is assessed to the value that is added to goods and services. The Value Added Tax (“VAT”),applies to nearly all goods and services that are bought and sold within the European Union. In Italy where the Company operates, theVAT tax ranges between 4 and 10% for food products and alcohol. As of September 30, 2021 and December 31, 2020 the Company had a VAT netreceivable from its Bari location amounting to $4,839.

 

Foreign Currency Translation

 

The functional and reporting currency of the Company’sBari location in Italy is the Euro. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occurin foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balancesheet date. Average monthly rates are used to translate revenues and expenses. To date, this difference has been immaterial for the Barilocation.

  

Transactions denominated in currencies other thanthe functional currency, such as the Company’s current retails sales in Canada for Kisses From Italy branded products, are translatedinto the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreigncurrency transactions are included in the determination of net income for the respective periods.

 

Assets and liabilities of the Company’soperations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates.Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historicalrate when the transaction occurred.

 

Since the Company began the branded retail productsoperations initiative in Canada in late 2020, the difference in the exchange rate and the average monthly rate did not have a materialimpact on the Company’s financial statements.

 

 

 

F-9

 

 

Revenue Recognition

 

The Company recognizes revenue under the guidelinesof ASC 606. Sales, as presented in the Company’s consolidated statement of earnings, represent franchise revenue; and food and beverageproduct sold which is presented net of discounts, coupons, employee meals and complimentary meals. Revenue is recognized using the fivestep approach required under the guidelines of ASC 606.

 

Non-controlling interest

 

Non-controlling interest represents third-partyownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of ourmajority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’sinterest shown as non-controlling interest.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid temporarycash investments with an original maturity of three months or less to be cash equivalents. On September 30, 2021 and December 31, 2020,the Company cash equivalents totaled $13,347 and $37,336, respectively.

 

Property and equipment

 

Depreciation is computed by the straight-linemethod 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 anyresulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:

Estimated useful lives of property
Computers, software, and office equipment	1 – 6 years
Machinery and equipment	3 – 5 years
Leasehold improvements	Lesser of lease term or estimateduseful life

  

Income taxes

 

The Company accounts for income taxes under FASBASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognizedfor the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilitiesand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferredtax 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,“Accountingfor Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statementrecognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a taxposition must be more-likely-than-not to be sustained upon examination by taxing authorities.

 

 

 

F-10

 

 

The amount recognized is measured as the largestamount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validityof its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that mightcause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.

 

On Dec. 18, 2019, the Financial Accounting StandardsBoard (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. Theamendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU isbeing issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certainareas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. TheCompany adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements.

 

Stock-based Compensation

 

The Company accounts for stock-based compensationusing the fair method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosureabout Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognizedover the period during which an employee is required to provide service in exchange for the award- the requisite service period (usuallythe vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

 

Leases

 

The Company currently follows the guidance inASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether theyrepresent operating or capital leases at the inception of the lease.

 

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 assetsand liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amendedguidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoptionpermitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the newlease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, theFASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby thenew lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the sameeffective date and transition requirements as the new lease standard On November 15, 2019, the FASB has issued ASU 2019-10, which amendsthe effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives,and lease standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companiesthe Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

ASC 842 will be effective for the Company beginningon December 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will havean impact on our financial statements.

 

Canadian Government and Provincial Sales Tax (“G.S.T.”and “P.S.T.”)

 

The Company does not collect any Canadian G.S.T.(Government Sales Tax) and P.S.T. (Provincial Sales Tax) as the Company acts as product distributor and not as a final sales retailer.

 

 

 

F-11

 

 

Inventory

 

The inventory is comprised of alcoholic beveragesat our new Bari location in Italy which opened in 2019 and inventory for retail sales held in Canada. Our US locations do not have liquorlicenses. The balance of inventory on September 30, 2021 and December 31, 2020 was $5,866 and $4,051, respectively.

 

Net Loss per Share

 

Net loss per common share is computed by dividingnet 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 incomeby the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations aredetermined 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 assetsand liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amendedguidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoptionpermitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the newlease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, theFASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby thenew lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the sameeffective date and transition requirements as the new lease standard. On November 15, 2019, the FASB has issued ASU 2019-10, which amendsthe effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and leasesstandards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companies theCompany eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

While we continue to evaluate the impact of thenew standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

 

NOTE 3 – GOING CONCERN AND LIQUIDITY

 

As of September 30, 2021 the Company had cashon hand of $13,347 a working capital deficiency of $109,555 and an accumulated deficit of $12,748,823

 

Management has concluded that these financialstatements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilitiesand commitments in the normal course of business.

 

It is the Company’s current intention toraise debt and/or equity financing to fund ongoing operating expenses. The Company believes it will be successful in raising sufficientcapital to operate for the next 12 months, however, there is no assurance that financing, whether debt or equity, will be available tothe Company, satisfactorily completed or on terms favorable to the Company. Any issuance of equity securities, if accomplished, couldcause substantial dilution to existing stockholders and any debt financing may contain covenants limiting certain corporate actions. Anyfailure by the Company to successfully raise additional financing would have a material adverse effect on its business, including thepossible inability to continue operations.

 

 

 

F-12

 

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

As of September 30, 2021 and December 31, 2020the Company had $6,320 and $8,480 in property and equipment, all located at its Bari location in Italy. As of March 31, 2021 all propertyand equipment and leaseholds at its US locations had been fully depreciated. 

 

NOTE 5 – ACCRUED AND OTHER LIABILITIES

 

The following table sets forth the componentsof the Company’s accrued liabilities on September 30, 2021 and December 31, 2020.

Schedule of accrued and other liabilities
		September 30, 2021				December 31, 2020
Sales tax payable		$	1,245			$	3,804
Accrued interest payable			3,604				2,067
Payroll tax liabilities			125,931				142,648
Total accrued liabilities		$	130,780			$	148,519

 

The Company is in arrears on its payroll tax paymentsas of September 30 2021. Included in the “payroll tax liabilities” as of September 30, 2021 is approximately $41,630 in interestand penalties.

 

NOTE 6 – PROMISSORY NOTES PAYABLE

 

As of September 30, 2021 and December 31, 2020we had two unsecured 8% notes payable amounting to $12,171 that mature in June 2023.

 

NOTE 7 – CONVERTIBLE NOTES

 

As of September 30, 2021 and December 31, 2020,the outstanding principal balance of convertible notes was $10,000.

 

NOTE 8 – STOCKHOLDERS EQUITY

 

Common Stock

 

The Company has authorized 200,000,000 sharesof Common Stock. On September 30, 2021 and December 31, 2020, there were 169,683,651 and 154,832,335 shares of common stock issued andoutstanding, respectively, with a $0.001 par value.

 

 

 

F-13

 

 

During the nine months ended September 30, 2021,the Company issued the following shares:

 

	·	1,500,000 shares of common stock to an investor relations firm valued at $300,000
	·	10,000,000 shares to its executive officers valued at $1,675,000
	·	100,000 shares to a service provider valued at $16,750
	·	1,750,000 shares of common stock were sold to accredited investors yielding the company $175,000 in proceeds
	·	1,501,306 shares in common stock were issued upon the conversion of Series C Preferred Stock

 

Preferred Stock

 

On December 19, 2019, the Company filed a Certificateof Designation with the State of Florida to set up three categories of preferred stock: Series A Preferred Stock, Series B Preferred Stockand Series C Preferred Stock (the “Certificate of Designation”). The Certificate of Designation designated 1,500,000 sharesof the Company’s authorized preferred stock as Series A Preferred Stock (“Series A Stock”), 5,000,000 shares as SeriesB Preferred Stock (“Series B Stock”) and 1,000,000 shares as Series C Preferred Stock (“Series C Stock”).

 

A summary of the material provisions of the Certificateof Designation governing the Series A Stock, the Series B Stock and the Series C Stock is as follows:

 

Series A Stock

 

The Series A Stock is not convertible. Each shareof Series A Stock shall entitle the holder to three hundred (300) votes for each share of Series A Stock. Any amendment to the Certificateof Designation requires the consent of the holders of at least two-thirds of the shares of Series A Stock then outstanding. The holdersof Series A Stock are not entitled to dividends until and unless determined by the Board of Directors of the Company.

 

Liquidation Preference

 

No distribution shall be made to holders of sharesof capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up of the Company. The SeriesA Stock ranks pari passu with the Series C Stock.

 

There were no shares of Series A Stock outstandingas of September 30, 2021 and December 31, 2020.

 

Series B Stock

 

The Series B Stock is convertible at any timeby the holder into the number of shares of common stock of the Company based on two times the price paid by the holder paid for the shares.The Board has the authorization to establish a minimum price for the price the Series B Stock (so that if the market price of the commonstock of the Company drops below the issuance price, the conversion rate will then be based on the minimum price established by the Boardand not the price paid for the shares). The holders of the Series B Stock shall not be entitled to voting rights except as otherwise providedfor in the law. The holders of Series B Stock are not entitled to dividends until and unless determined by the Board.

 

Liquidation Preference

 

The holders of Series B Stock shall not be entitledto any distributions upon a liquidation of the Company.

 

 

 

F-14

 

 

Restrictions of Transferability

 

The shares of the Series B Stock shall not, directly,or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Boardand applicable securities laws.

 

There were no shares of Series B Stock outstandingas of September 30, 2021.

 

Series C Stock

 

The Series C Stock is convertible at any timeby the holder into the number of shares of common stock of the Company on the basis of three times the price paid for the shares dividedby the floor price of $0.10 established by the Board of Directors. The holders of the Series C Stock shall not be entitled to voting rightsexcept as otherwise provided for in the law. The holders of Series C Stock are not entitled to dividends until and unless determined bythe Board.

 

Liquidation Preference

 

Upon any liquidation of the Company, the holdersof Series C Stock shall be entitled to the amount paid for the shares of Series C Stock prior to the holders of shares ranking juniorto the Series C Stock. Upon the holders of the Series C Stock and any series of stock ranking pari passu with the Series C Stock havingreceived distributions to which they are entitled, the remaining assets of the Company shall be distributed to the other holders pro ratain proportion to the shares held by each holder.

 

Restrictions of Transferability

 

The shares of the Series C Preferred Stock shallnot, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consentof the Board and applicable securities laws.

 

As of September 30, 2021 and December 31, 2020there were 139,610 shares and 79,610 shares of Series C Preferred outstanding, respectively, which were purchased at a price of $1.00 pershare.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

As of September 30, 2021, the Company had threeoperating restaurants. The Company leases these spaces based upon the following schedules:

 

·

Kisses From Italy 9thLLC based in Fort Lauderdale, Florida leases approximately 990square feet and has paid $3,273 per month since 2018, pending completion of the required renovationsto the exterior and interior of the property necessitated due to hurricane damage that occurred to the location in 2018. The landlordhas been very slow in making these changes. It was agreed upon that when work was completed, and approved by the City of Fort Lauderdale,the rent would be increased to the market rate at that time. Beginning on May 1 , 2021, the rent increased to $5,857.50 per month andwas renewed by the Company for an additional five-year term with standard annual escalator costs.

 

	·	Kisses From Italy-Palm Aire basedin Pompano Beach, Florida leases approximately 2,300square feet for $3,933.00 per month. The Company has a one-year automatic renewal provision for this lease on May 1st of eachyear under the same terms.
	·	Kisses From Italy – basedin Bari, Italy, leases approximately 2,200 square feet of space for 1,400 euros per month under the terms of a six-year lease which endson May 5, 2024 and has an optional automatic renewal provision for six years.

 

 

 

 

 

 

 

Reportof Independent Registered Public Accounting Firm

 

  

To the shareholders and the board of directorsof Kisses From Italy, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidatedbalance sheets of Kisses From Italy, Inc. as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity(deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements").In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principlesgenerally accepted in the United States.

 

Basis for Opinion

 

These financial statements are the responsibilityof the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. Weare a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with thestandards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engagedto perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understandingof internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assessthe risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respondto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Substantial Doubt about the Company’sAbility to Continue as a Going Concern

 

The accompanying financial statements have beenprepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company hassuffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experiencenegative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments thatmight result from the outcome of this uncertainty.

 

/S/ BF Borgers CPA PC

 

We have served as the Company's auditor since2018

 

Lakewood, CO 

April 15, 2021

 

 

 

 

 

 

 

Kisses From Italy Inc.

ConsolidatedBalance Sheets

 

		December 31,				December 31,
		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	37,336			$	26,841
Accounts receivable			5,761				–
Other receivable			4,839				4,442
Inventory			4,051				1,987
Total current assets			51,987				33,270
Property and equipment, net			8,480				59,114
Other Assets			2,635				2,664
Total assets		$	63,102			$	95,048
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	64,762			$	65,486
Accrued liabilities			148,519				143,276
Loans payable			–				6,000
Total current liabilities			213,281				214,762
Notes payable			12,171
Convertible Notes			10,000				10,000
Total liabilities			235,452				224,762
Commitments and contingencies			–				–
Stockholders' Equity:
Preferred stock, Series A $0.001 par value. 1,500,000 shares authorized; zero shares issued and outstanding			–				–
Preferred stock, Series B $0.001 par value. 5,000,000 shares authorized; zero shares issued and outstanding			–				–
Preferred stock, Series C, $0.001 par value 1,000,000 shares authorized; 59,610 shares and 50,000 shares issued and outstanding as of December 31, 2020 and December 31 2019, respectively			80				50
Common stock, $0.001 par value, 200,000,000 shares authorized; 154,832,335 and 126,550,335 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively			154,832				126,550
Additional paid-in capital			8,612,683				4,945,109
Retained earnings deficit			(8,916,893	)			(5,207,491	)
Total Kisses From Italy Stockholders' Equity (Deficit)			(149,298	)			(135,782	)
Non-controlling interest			(23,052	)			6,068
Total stockholders' equity			(172,350	)			(129,714	)
Total liabilities and equity		$	63,102			$	95,048

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

Kisses From Italy Inc.

ConsolidatedStatements of Operations

 

		Year				Year
		Ended				Ended
		December 31,				December 31,
		2020				2019
Food sales		$	222,453			$	461,298
Franchise sales			291,585				–
Total Revenue			514,038				461,298
Cost of goods sold			114,101				214,357
Gross margin			399,937				246,941
Operating expenses:
Depreciation and amortization			51,970				43,303
Executive compensation			17,631				48,633
Stock based compensation -related party			720,000				1,937,042
Stock based compensation			2,258,201				372,755
Payroll and other expenses			123,079				234,778
Rent			125,644				121,881
Consulting and professional fees			189,826				102,832
General and administrative			154,495				150,307
Total operating expenses			3,640,846				3,011,531
Income (loss) from operations			(3,240,909	)			(2,764,590	)
Other income (expense)
Interest income (expense), net			(497,613	)			(339,362	)
Total other income (expense)			(497,613	)			(339,362	)
Income (loss) before income taxes			(3,738,522	)			(3,103,952	)
Provision for income taxes (benefit)			–				–
Net loss			(3,738,522	)			(3,103,952	)
Less: net gain(loss) attributable to non-controlling interests			(29,120	)			(21,092	)
Net loss attributable to Kisses From Italy, Inc.		$	(3,709,402	)		$	(3,082,860	)
Basic and diluted earnings (loss) per common share		$	(0.03	)		$	(0.03	)
Weighted-average number of common shares outstanding:
Basic and diluted			140,515,422				92,838,606

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

Kisses from Italy

Consolidated Statements of Changes in Stockholders' Equity

December 31, 2020 and December 31, 2019

 

		Preferred Stock						Preferred Stock						Preferred Stock												Additional			Non-						Total
		Series A						Series B						Series C						Common Stock						Paid-in			controlling			Retained			Stockholders'
		Shares			Value			Shares			Value			Shares			Value			Shares			Value			Capital			Interest			Earnings			Equity
December 31, 2018			–		$	–			–		$	–			–		$	–			81,780,170		$	81,780		$	1,638,253		$	27,160		$	(2,124,631	)	$	(377,438	)
Net income (loss)																																	(3,082,860	)		(3,082,860	)
Non-controlling interest, net income (loss)																														(21,092	)					(21,092	)
Issuance of Series C Preferred Stock															50,000			50									224,950									225,000
Beneficial conversion feature of convertible notes																											55,669									55,669
Issuance of shares to management and consultants																					34,476,080			34,476			2,275,421									2,309,897
Retirement of convertible debt and accrued interest with common stock																								10,294			750,816									761,110
December 31, 2019			–		$	–			–		$	–			50,000		$	50			34,476,080		$	126,550		$	4,945,109		$	6,068		$	(5,207,491	)	$	(129,714	)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kisses from Italy

ConsolidatedStatements of Changes in Stockholders' Equity (continued)

December 31, 2020 and December 31, 2019

 

		Preferred Stock						Preferred Stock						Preferred Stock												Additional			Non-						Total
		Series A						Series B						Series C						Common Stock						Paid-in			controlling			Retained			Stockholders'
		Shares			Value			Shares			Value			Shares			Value			Shares			Value			Capital			Interest			Earnings			Equity
Balance, December 31, 2019			–		$	–			–		$	–			50,000		$	50			126,550,535		$	126,550		$	4,945,109		$	6,068		$	(5,207,491	)	$	(129,714	)
Net income (loss)																																	(3,709,402	)		(3,709,402	)
Non-controlling interest, net income (loss)																														(29,120	)					(29,120	)
Issuance of Series C Preferred stock															155,600			156									155,691									155,847
Conversion of Series C Preferred Stock to common stock															(125,990	)		(126	)		2,690,000			2,690			(2,361	)								203
Beneficial conversion feature of Series C Preferred stock																											491,645									491,645
Issuance of common stock in a private placement																					200,000			200			19,790									19,990
Stock issued for services																					25,391,800			25,392			3,002,809									3,028,201
Balance, December 31, 2020			–		$	–			–		$	–			79,610		$	80			154,832,335		$	154,832		$	8,612,683		$	(23,052	)	$	(8,916,893	)	$	(172,350	)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

Kisses From Italy Inc.

Consolidated Statementsof Cash Flows

 

		Year				Year
		Ended				Ended
		December 31,				December 31,
		2020				2019
Cash flows from operating activities of continuing operations:		$	(3,709,402	)		$	(3,082,860	)
Net income			(29,120	)			(21,092	)
Net income loss attributable to non-controlling interest
Common stock issued for services
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			51,970				43,303
Amortization of debt discount			491,645				160,583
Stock-based compensation for services			3,028,201				2,309,897
Interest expense on preferred stock issuance			–				175,000
Changes in operating assets and liabilities:
Other assets			29				(1,572	)
Account receivable			(5,761	)
Other receivable			(2,064	)			(4,442	)
Inventory			–				(1,987	)
Accounts payable			(724	)			15,112
Accrued liabilities			5,243				(14,813	)
Net cash provided by (used in) operating activities			(169,984	)			(422,871	)
Cash flows from investing activities:
Purchase of fixed assets			–				(12,069	)
Net cash provided by (used in) financing activities			–				(12,069	)
Cash flows from financing activities:
Proceeds/payments from short term borrowings-net			(6,000	)			357
Proceeds from notes payable, net			12,171
Proceeds from the sale of common stock			19,990
Proceeds from the sale of convertible notes			–				388,547
Proceeds from the sale of preferred stock			155,600				50,000
Net cash provided by (used in) financing activities			181,761				438,904
Impact of foreign exchange			(1,283	)			–
Net increase (decrease) in cash and cash equivalents			10,495				3,964
Cash and cash equivalents at beginning of period			26,841				22,877
Cash and cash equivalents at end of period		$	37,336			$	26,841
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.

 

 

 

 

Kisses From Italy, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020 and 2019

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTIONOF BUSINESS

 

Kisses From Italy Inc. (the “Company”)was incorporated in Florida on March 7, 2013. Kisses From Italy is a restaurant chain operator,Franchisor, and product distributor with locations in North America and Europe. The Company’s main focus is to develop afast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchiseand territory sales program. The Company commenced operations in May 2015 by opening its first location in Ft. Lauderdale, Florida. Threeadditional restaurants, which were located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened withinthe following ten months. All locations, which were in leased facilities, were fully operational by April 2016. In December 2017, theCompany vacated one of its restaurants due to the hurricane and did not re-open that location in 2019.

 

In May of 2019, we began the initial steps ofdeveloping our first European restaurant location, which is located at Strada Provinciale 70 #100, Ceglie del Campo, 70129, Bari, Italia.Our European location began its operation on October 24, 2019. Our European location will also act as our distribution center for Europeanproducts destined for our current locations and future corporate-owned and franchised locations. The Bari location was closed in thefourth quarter of 2021 and currently remains closed as of the date of this Report due to Covid-19.

 

The Company’s accounting year end is December31.

 

NOTE 2 – SUMMARY OF SIGNIFICANTACCOUNTING POLICIES

  

Basis of Presentation and Principles ofConsolidation

 

The consolidated financial statements of the Companyhave 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. The consolidated financials includethe accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9^th LLC, Kisses from Italy-FranchisingLLC; and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

 

All intercompany accounts and transactions areeliminated in consolidation.

 

Going Concern

 

The accompanying consolidated financial statementshave been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfactionof liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidatedbasis, the Company has incurred significant operating losses since inception. For the year ended December 31, 2020 we had an operatingloss of $3,709,402. As of December 31, 2020 we had a working capital deficit of $161,294 and an accumulated deficit of $8,916,893.

 

Because the Company does not expect that existingoperational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’sability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternativesources of financing. Historically, the Company has raised capital through private placements, as an interim measure to finance workingcapital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-termloans. The Company will be required to continue to so until its consolidated operations become profitable. Also, the Company has, in thepast, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.

 

Use of Estimates

 

The preparation of financial statements in conformitywith US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod. The most significant estimates relate to revenue recognition, valuation of accounts receivable and the allowance for doubtfulaccounts, inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financialinstruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and variousother 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 arenot readily apparent from other sources. Actual results could differ from these estimates.

 

 

 

 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the net valueof face amount less any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s bestestimate of the amount of probable credit losses in our existing accounts receivable. The Company reviews the allowance for doubtfulaccounts on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are chargedagainst the allowance when placed for collection. Recoveries of receivables previously written off are recorded when received. Interestis not charged on past due accounts.

 

As of December 31, 2020 and 2019 , our trade receivableamounted to $5,761 and $-0-, respectively, with an allowance for doubtful accounts of $-0- for both periods.

 

Foreign Currency Translation

 

The functional and reporting currency of the company’sBari location in Italy is the Euro. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occurin foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balancesheet date. Average monthly rates are used to translate revenues and expenses.

  

Transactions denominated in currencies other thanthe functional currency, such as the Company’s current retails sales in Canada for Kisses From Italy branded products, are translatedinto the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreigncurrency transactions are included in the determination of net income for the respective periods.

 

Assets and liabilities of the Company’soperations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates.Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at thehistorical rate when the transaction occurred.

 

For the approximate two month period ended December31, 2020 when the Company began the branded retail products operations initiative in Canada, the difference in the exchange rate and theaverage monthly rate was not material.

 

Revenue Recognition

 

Sales, as presented in the Company’s consolidatedstatement of earnings, represents food and beverage product sold and is presented net of discounts, coupons, employee meals and complimentarymeals. Revenue from restaurant sales is recognized when food and beverage products are sold.

 

On January 1, 2018, the Company adopted AccountingStandards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modifiedretrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginningafter January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordancewith the Company’s historic accounting under ASC 605. As of and for the years ended December 31, 2020 and 2019, respectively,the consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

 

Non-controlling interest

 

Non-controlling interest represents third-partyownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of ourmajority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’sinterest shown as non-controlling interest.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid temporarycash investments with an original maturity of three months or less to be cash equivalents. On December 31, 2020 and December 31, 2019,the Company cash equivalents totaled $37,336 and $26,841 respectively.

 

Property and equipment

 

Property and equipment are stated at cost or fairvalue. During 2018 the Company closed one of its locations and removed all property and detachable leaseholds. The Company believes thatthis equipment and leaseholds which are in excellent condition can be used at existing and new locations and that the undepreciated bookvalue is equivalent to its fair market value, thus no impairment was recorded. Depreciation is computed by the straight-line method andis charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. Thecarrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resultinggain 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 lease term or estimated useful life

  

Income taxes

 

The Company accounts for income taxes under FASBASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognizedfor the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilitiesand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferredtax 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, “Accountingfor Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statementrecognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a taxposition must be more-likely-than-not to be sustained upon examination by taxing authorities.

 

The amount recognized is measured as the largestamount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validityof its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that mightcause 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 compensationusing the fair value method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosureabout Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognizedover the period during which an employee is required to provide service in exchange for the award- the requisite service period (usuallythe vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

 

Leases

 

The Company currently follows the guidance inASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether theyrepresent operating or capital leases at the inception of the lease.

 

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 assetsand liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amendedguidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoptionpermitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the newlease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, theFASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby thenew lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the sameeffective date and transition requirements as the new lease standard On November 15, 2019, the FASB has issued ASU 2019-10, which amendsthe effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives,and leases standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companiesthe Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

ASC 842 will be effective for the Company beginningon December 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will havenot have any impact on our financial statements.

 

 

 

 

Valued Added Tax (“VAT”)

 

The VAT is a broadly-based consumption tax whichis assessed to the value that is added to goods and services. The Value Added Tax (“VAT”), applies to nearly all goods andservices that are bought and sold within the European Union. In Italy where the Company operates, the VAT tax ranges between 4 and 10%for food products and alcohol. As of December 31, 2020, the Company had a VAT net receivable from is new Bari location which opened in2019, amounting to $4,839 compared to 4,442 for the period ended December 31, 2019.

 

Canadian Government and Provincial Sales Tax (“G.S.T.”and “P.S.T.”)

 

The Company does not collect any Canadina G.S.T.(Government Sales Tax) and P.S.T. (Provincial Sales Tax) as the company acts as product distributor and not as a final sales retailer.

 

Inventory

 

The inventory is comprised of alcoholic beveragesat our new Bari location in Italy which opened in 2020, and inventory for retail sales held in Canada. Our US locations do not have liquorlicenses. The balance of inventory on December 31, 2020 and 2019 was $4,051 and $1,987 respectively.

 

Net Loss per Share

 

Net loss per common share is computed by dividingnet 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 incomeby the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations aredetermined 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 assetsand liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amendedguidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoptionpermitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the newlease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, theFASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby thenew lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the sameeffective date and transition requirements as the new lease standard. On November 15, 2019, the FASB has issued ASU 2019-10, which amendsthe effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives,and leases standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companiesthe Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

While we continue to evaluate the impact of thenew standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

 

 

 

 

NOTE 3 – PROPERTY AND EQUIPMENT

 

The following table sets forth the componentsof the Company’s property and equipment on December 31, 2020, and December 31, 2019:

 

		December 31, 2020												December 31, 2019
		Cost				Accumulated Depreciation				Net Book Value				Cost				Accumulated Depreciation				Net Book Value
Capital assets subject to depreciation:
Furniture and equipment		$	66,365			$	(57,885	)		$	8,480			$	64,781			$	(45,587	)		$	19,194
Leasehold improvements			175,514.				(175,514	)			–				175,916				(135,996	)			39,920
Total fixed assets		$	241,879			$	(233,399	)		$	8,480			$	240,697			$	(181,583	)		$	59,114

 

For the years ended December 31, 2020 and December31, 2019, the Company recorded depreciation and amortization of $51,970 and $43,303 respectively.

 

NOTE 4 – ACCRUED AND OTHER LIABILITIES

 

The following table sets forth the componentsof the Company’s accrued liabilities on December 31, 2020 and December 31, 2019.

 

		December 31, 2020				December 31, 2019
Sales tax payable		$	3,804			$	7,630
Accrued interest payable			2,067				2,940
Payroll tax liabilities			142,648				132,706
Total accrued liabilities		$	148,519			$	143,276

 

The Company is in arrears on its payroll tax paymentsas of December 31, 2020. Included in the “payroll tax liabilities” as of December 31, 2020, is approximately $148,519 in interestand penalties.

 

NOTE 5 – LOANS AND NOTES PAYABLE

 

As of December 31, 2020, and December 31 2019,loan payable balances were $-0- and $6,000 respectively. We currently have no available lines of credit.

 

As of December 31, 2020 we had two unsecured 8%notes payable amounting to $12,171 that mature in June 2023. We had no notes outstanding as of December 31, 2019.

 

NOTE 6 – CONVERTIBLE NOTES

 

As of December 31, 2020 and December 31, 2019,the balance of convertible notes was $10,000 and $10,000 respectively.

 

During the year ended December, 2019, convertiblenoteholders holding $656,195 of convertible notes along with accrued interest of $30,074 converted their notes into 10,294,285 sharesof Common Stock.

 

 

 

 

NOTE 7 – STOCKHOLDERS EQUITY

 

Capital Stock

 

The Company has authorized 200,000,000shares of Common Stock authorized. On December 31, 2020 and December 31, 2019, there were 154,832,335 and 126,550,335 shares ofCommon Stock issued and outstanding, with a $0.001 par value.

 

Common Stock Issued in Private Placements

 

During the year ended December 31, 2020, the companyaccepted one subscription from an accredited investor for $19,900 and issued 200,000 shares of common stock.

 

During the year ended December 31, 2019, theCompany did not accept any subscription agreements to purchase its Common Stock.

 

Common Stock Issued in Exchange for Services

 

During the year ended December 31, 2020, the Companyissued 25,391,800 shares of its Common Stock to its management and consultants for services. These shares were values at $3,028,201.

 

During the year ended December 31, 2019, the Companyissued 34,476,080 shares of its Common Stock to its management and consultants for services. These shares were values at $2,309,897.

 

Preferred stock converted to common stock

 

During the year ended December 31, 2020, theCompany issued 2,690,000 shares of common stock upon the conversion of 125,990 shares of Series C Stock described below. There were noconversions of preferred stock to common stock in the year ended December 31, 2019.

 

Preferred Stock

 

On December 19, 2019, the Company filed a Certificateof Designation with the state of Florida to set up three categories of preferred stock: Series A Preferred Stock, Series B Preferred Stockand Series C Preferred Stock (the “Certificate of Designation”). The Certificate of Designation designated 1,500,000 sharesof the Company’s authorized preferred stock as Series A Preferred Stock (“Series A Stock”), 5,000,000 shares as SeriesB Preferred Stock (“Series B Stock”) and 1,000,000 shares as Series C Preferred Stock (“Series C Stock”).

 

A summary of the material provisions of the Certificateof Designation governing the Series A Stock, the Series B Stock and the Series C Stock is as follows:

 

Series A Stock

 

The Series A Stock is not convertible. Each shareof Series A Stock shall entitle the holder to three hundred (300) votes for each share of Series A Stock. Any amendment to the Certificateof Designation requires the consent of the holders of at least two-thirds of the shares of Series A Stock then outstanding. The holdersof Series A Stock are not entitled to dividends until and unless determined by the Board of Directors of the Company.

 

 

 

 

Liquidation Preference

 

No distribution shall be made to holders of sharesof capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up of the Company. The SeriesA Stock ranks pari passu with the Series C Stock.

 

The were no shares of Series A Stock outstandingas of December 31, 2020.

 

Series B Stock

 

The Series B Stock is convertible at any timeby the holder into the number of shares of common stock of the Company based on two times the price paid by the holder paid for the shares.The Board has the authorization to establish a minimum price for the price the Series B Stock (so that if the market price of the commonstock of the Company drops below the issuance price, the conversion rate will then be based on the minimum price established by the Boardand not the price paid for the shares). The holders of the Series B Stock shall not be entitled to voting rights except as otherwise providedfor in the law. The holders of Series B Stock are not entitled to dividends until and unless determined by the Board.

 

Liquidation Preference

 

The holders of Series B Stock shall not be entitledto any distributions upon a liquidation of the Company.

 

Restrictions of Transferability

 

The shares of the Series B Stock shall not, directly,or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Boardand applicable securities laws.

 

There were no shares of Series B Stock outstandingas of December 31, 2020.

 

Series C Stock

 

The Series C Stock is convertible at any timeby the holder into the number of shares of common stock of the Company on the basis of three times the price paid for the shares. TheBoard has established a minimum conversion price of $0.10 per share. The holders of the Series C Stock shall not be entitled to votingrights except as otherwise provided for in the law. The holders of Series C Stock are not entitled to dividends until and unless determinedby the Board.

 

Liquidation Preference

 

Upon any liquidation of the Company, the holdersof Series C Stock shall be entitled to the amount paid for the shares of Series C Stock prior to the holders of shares ranking juniorto the Series C Stock. Upon the holders of the Series C Stock and any series of stock ranking pari passu with the Series C Stock havingreceived distributions to which they are entitled, the remaining assets of the Company shall be distributed to the other holders pro ratain proportion to the shares held by each holder.

 

Restrictions of Transferability

 

The shares of the Series C Preferred Stock shallnot, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consentof the Board and applicable securities laws.

 

As of December 31, 2020 and 2019 there were 79,610shares and 50,000 shares of Series C Preferred outstanding, respectively, which were purchased at a price of $1.00 per share.

  

 

 

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

As of December 31, 2020 and 2019, the Companyhad four 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. This amount for the months of September and August 2018 ($5,000) has been recorded as “rent expense” on the Company’s financial statement The lease ends on June 30, 2021.

 

·

Kisses From Italy-Palm Aire based in Pompano Beach, Florida leases approximately 2,300 square feet of space at a cost of $4,051.83 per month. The lease ends on May 1, 2021. The Company has a one-year automatic renewal provision for this lease.

 

	·	Kisses From Italy -Sea Gardens based in Pompano Beach, Florida leases approximately 600 square feet of space at a cost of $595.40 per month. The lease ends on August 1, 2021. The Company has a one-year automatic renewal provision for this lease but is not obligated to exercise this renewal provision.
	·	Italian location - Strada Provinciale 70 #100, Ceglie del Campo, 70129, Bari, Italia -The Lease was signed for a six year term in June 2019, at a rate of approximately $1,570 per month.

 

The Company also rents professional and furnishedspace on a month to month basis in Miami, Florida at a cost of $251 per month, which has been designated the Company’s principalplace of business.

 

NOTE 9 – SUBSEQUENT EVENTS

 

For the period from January 1, 2021 through thedate of this Report, the Company received $145,000 in proceeds from the sale of 1,450,000 common shares to three different accreditedinvestors. Additionally, the Company issued 1,500,000 for services to an investor relations firm.

 

 

 

 

 

 

 

 

PROSPECTUS

 

 

 

 

 

__________________, 201__

 

 

 

 

 

 

 

 

Until ____________, 20__, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

 

 

 

 

 

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

The expenses to be paid by the Registrant areas follows. All amounts, other than the SEC registration fee, are estimates.

 

		Amount to be Paid
SEC registration fee		$	563.15
Legal fees and expenses			30,000.00
Accounting fees and expenses			5,400.00
Total		$	35,963.15

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Under the Florida Business Corporation Act andour Articles of Incorporation, our directors and officers will have no personal liability to us or our shareholders for monetary damagesincurred as the result of the breach or alleged breach by a director or officer of his “duty of care.” This provision doesnot apply to the directors’: (i) acts or omissions that involve intentional misconduct, fraud or a knowing and culpable violationof law, or (ii) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolvedirectors of personal liability for negligence in the performance of his duties, including gross negligence.

 

The effect of this provision in our Articles ofIncorporation is to eliminate the rights of our Company and our shareholders (through shareholder’s derivative suits on behalf ofour Company) to recover monetary damages against a director for breach of his fiduciary duty of care as a director (including breachesresulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) and (ii) above. This provisiondoes not limit nor eliminate the rights of our Company or any shareholder to seek non-monetary relief such as an injunction or rescissionin the event of a breach of a director’s duty of care. Section 145 of the Florida General Corporation Law provides corporationsthe right to indemnify their directors, officers, employees and agents in accordance with applicable law.

 

Insofar as indemnification for liabilities arisingunder the Securities Act of 1933, as amended, may be permitted to directors, officers, or persons controlling the Company pursuant tothe foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission, such indemnificationis against public policy as expressed in the Securities Act of 1933, as amended, and is therefore unenforceable.

 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

 

On November 29, 2021,we entered into a Standby Equity Commitment Agreement (the “Standby Equity Commitment Agreement”), dated November 22, 2021,with MacRab LLC, a Florida limited liability company (the “MacRab”), pursuant to which we have the right to sell to MacRabup to $7,500,000 in shares of Common Stock, subject to certain limitations. MacRab was also issued a five-year warrant (the“Warrant”) to purchase 750,000 shares of Common Stock (the “Warrant Shares”) with standard anti-dilution provisionsand cashless exercise.

 

Under the terms and subjectto the conditions of the Standby Equity Commitment Agreement, MacRab is obligated to purchase up to $7,500,000 in shares of Common Stock,subject to certain limitations, from time to time over the 24-month period commencing on November 22, 2021. The number ofshares of Common Stock shall be calculated using an initial purchase price of ninety percent (90%) of the volume weighted average priceon the trading day immediately prior to the put date associated with the put notice delivered by us to MacRab. The price per share ofCommon Stock shall be ninety percent (90%) of the average of the two lowest volume weighted average prices of the Common Stock for sixtrading days following the clearing date associated with the put notice delivered by us to MacRab. The minimum amount of each put shallbe $10,000 and the maximum shall be the lower of 200% of the average daily trading volume and $250,000.

 

 

 

 

The Company’s salesof shares of Common Stock to MacRab under the Standby Equity Commitment Agreement are limited to no more than the number ofshares that would result in the beneficial ownership by MacRab and its affiliates, at any single point in time, of more than 4.99% ofthe then outstanding shares of the Common Stock.

 

We have agreed with MacRabthat we will not enter into any other credit equity line agreements without the prior consent of MacRab.

   

J.H. Darbie acted asplacement agent in connection with the execution and delivery of the agreements with the Investor.

 

The issuance and saleof the Common Stock and the Warrant by us to MacRab under the Standby Equity Commitment Agreement was made without registration underthe Securities Act of 1933, as amended (the “Act”), or the securities laws of the applicable state, in reliance on the exemptionsprovided by Section 4(2) of the Act and Regulation D promulgated thereunder, and in reliance on similar exemptions under applicable statelaw, based on the offering of such securities to one investor, the lack of any general solicitation or advertising in connection withsuch issuance, the representations of MacRab to the Company that, among others, it was an accredited investor (as that term is definedin Rule 501(a) of Regulation D), and that it was purchasing the shares for its own account and without a view to distribute them.

 

During the nine monthsended September 30, 2021, the Company issued the following shares:

 

·

1,500,000 shares of common stock to an investor relations firm valued at $300,000;

 

·

10,000,000 shares of common stock to its executive officers valued at $1,675,000;

 

·

100,000 shares of common stock to a service provider valued at $16,750;

 

·

1,750,000 shares of common stock were sold to accredited investors yielding the company $175,000 in proceeds for working capital purposes; and

 

·

1,501,316 shares in common stock were issued upon the conversion of Series C Preferred Stock.

 

On July 13, 2020, the Company issued an aggregateof 7,200,000 shares to executive officers of the Company as compensation for their services.

 

On July 22, 2020, the Company issued 500,000 sharesof its common stock as payment for legal fees.

 

On August 21, 2020, the Company sold 14,563 sharesof its Series C preferred stock to an accredited investor in a private offering for $14,563,

 

On September 25, 2020, the Company sold 15,327shares of its Series C preferred stock to an accredited investor in a private offering for $15,327.

 

On September 25, 2020, the Company sold 7,000shares of its Series C preferred stock to an accredited investor in a private offering for $7,000.

 

These transactions wereexempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D as promulgated by the Securities and Exchange Commissionunder of the Securities Act, as transactions by an issuer not involving any public offering. None of the securities were sold throughan underwriter and, accordingly, there were no underwriting discounts or commissions involved.

 

 

 

 

 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) Exhibits

 

Exhibit No.		Description
3.1		Articles of Incorporation filed with the Florida Department of State on March 7, 2013 (incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
3.2		Articles of Amendment to Articles of Incorporation filed with the Florida Department of State on May 11, 2018 (incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
3.3		Bylaws of Registrant (incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
3.4		Articles of Amendment to Articles of Incorporation Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (incorporated by reference to Form 8-K filed on December 26, 2019)
4.1		Warrant dated as of November 22, 2021, issued by Kisses from Italy Inc. to MacRab LLC (incorporated by reference to Form 8-K filed on November 30, 2021)
5.1		Opinion of The Crone Law Group P.C.*
10.1		Assignment of Lease Agreement between Registrant and Paradigm Shift Holdings, Inc. and Palm Vacation Group for Palm Aire Location (incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
10.2		Assignment of Lease Agreement between Registrant and Paradigm Holdings, Inc. and Sea Garden Beach and Tennis Resort, Inc. for Sea Garden Location(incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
10.3		Online Virtual Office Arrangement between Registrant and Regis Management Group, LLC commencing July 1, 2018 (incorporated by reference to Form S-1 Registration Statement filed on May 15, 2018)
10.4		Form of 8% Convertible Debenture (incorporated by reference to Amendment to Form S-1/A Registration Statement filed on July 11, 2018)
10.5		Form of Convertible Debenture, 2018-9 Offering (incorporated by reference to Form 10-K filed April 16, 2019)
10.6		Articles of Amendment to Articles of Incorporation Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (incorporated by reference to Form 8-K filed on December 26, 2019)
10.7		Development Agreement (incorporated by reference to Form 8-K filed June 23, 2020)
10.8		Distribution Financing -Lead Generation Agreement (incorporated by reference to Form 8-K filed June 23, 2020)
10.9		Registration Rights Agreement(incorporated by reference to Form 8-K filed June 23, 2020)
10.10		Investor Relations Consulting Agreement with HIR Holdings, LLC (incorporated by reference to Form 10-Q filed November 13, 2020)
10.11		Corporate Communication Consulting Agreement with Impact IR (incorporated by reference to Form 10-Q filed November 13, 2020)

 

 

 

 

10.12		Consulting Agreement, dated April 22, 2021, effective as of April 16, 2021, by and between Fransmart, LLC, a Delaware limited liability company, and Kisses from Italy-Franchising, LLC (Information hasbeen excluded from Exhibit 10.12 because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.)(incorporated by reference to Form 8-K filed April 28, 2021)
10.13		Standby Equity Commitment Agreement, dated as of November 22, 2021, between Kisses from Italy Inc. and MacRab LLC (incorporated by reference to Form 8-K filed on November 30, 2021)
10.14		Registration Rights Agreement, dated as of November 22, 2021, between Kisses from Italy Inc. and MacRab LLC(incorporated by reference to Form 8-K filed on November 30, 2021)
21.1		List of Subsidiaries (incorporated by reference to Form 10-K filed April 16, 2018)
23.1		Consent of The Crone Law Group P.C. (included in Exhibit 5.1)*
23.2		Consent of B F Borgers CPA PC
24.1		Power of Attorney (included on signature page hereof).
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* To be filed by amendment

 

 

 

 

ITEM 17. UNDERTAKINGS

 

(a)	The undersigned registrant hereby undertakes:

 

	(1)	To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
		(i)	To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
		(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
		(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
	(2)	That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
	(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
	(4)	That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

 

 

 

		(5)	That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
			(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
			(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
			(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
			(iv)	Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
	(b)	That, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
	(c)	The undersigned registrant hereby undertakes:
		(1)	That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
		(2)	That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the SecuritiesAct, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned in the city of Miami, Floridaon January 21, 2022.

 

	KISSES FROM ITALY INC.
	By Michele Di Turi, Michele Di Turi, Co-Chief Executive Officer
	By: Claudio Ferri
	Claudio Ferri, Co-Chief Financial Officer

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that eachperson whose signature appears below hereby constitutes and appoints Michele Di Turi, Chief Executive Officer, as his true and lawfulattorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead in any and allcapacities, in connection with this Registration Statement, including to sign in the name and on behalf of the undersigned, this RegistrationStatement and any and all amendments thereto, including post-effective amendments and registrations filed pursuant to Rule 462 under theU.S. Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securitiesand Exchange Commission, granting unto such attorney-in-fact and agents full power and authority to do and perform each and every actand thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do inperson, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be doneby virtue hereof.

 

Pursuant to the requirements of the SecuritiesAct of 1933, as amended, this registration statement on Form S-1 has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ Michele Di Turi Michele Di Turi		Co-Chief Executive Officer and Director (Principal Executive Officer)		January 21, 2022
/s/ Claudio Ferri Claudio Ferri		Co-Chief Executive Officer, Chief Investment Officer, and Director (Principal Financial and Accounting Officer)		January 21, 2022
/s/ Leonardo Fraccalvieri Leonardo Fraccalvieri		Director		January 21, 2022