The following discussion should be read in conjunction with our unaudited
consolidated financial statements and notes thereto included herein. In
connection with, and because we desire to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward-looking statements in the following discussion
and elsewhere in this report and any other statement made by, or on our behalf,
whether or not in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results, or other
developments. Forward-looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties, and contingencies, many of which are beyond our
control and many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by, or on our behalf. We disclaim any
obligation to update forward-looking statements.
On May 11, 2022, the Company entered into a Securities Purchase Agreement (the
"Fourth Man Purchase Agreement") with Fourth Man, LLC, a Nevada limited
liability company ("Fourth Man"), pursuant to which the Company issued to Fourth
Man a promissory note in the principal amount of $150,000.00 (the "Fourth Man
Note"). The Company received $135,000 gross proceeds from Fourth Man due to the
original issue discount on the Fourth Man Note. In connection with the execution
and delivery of the Fourth Man Purchase Agreement and the issuance of the Fourth
Man Note, the Company issued to Fourth Man 607,000 commitment shares and a
warrant to purchase an additional 1,500,000 shares of common stock of the
Company.
Overview
Kisses From Italy Inc. (together with its subsidiaries), hereinafter referred to
as "us," "our," "we," or the "Company") was incorporated in the State of Florida
on March 7, 2013, with a focus on developing a fast, casual food dining chain
restaurant business.
The Company operates through its wholly-owned subsidiaries, Kisses From Italy
9th LLC, Kisses From Italy-Franchising LLC, Kisses From Italy, Inc. (Canada) (a
company incorporated under the laws of Canada and registered in Quebec on
December 23, 2020), and Kisses From Italy Italia SRLS (a limited liability
company incorporated in Italy), and its 70% owned subsidiary, Kisses-Palm Sea
Royal LLC.
We commenced operations by opening our initial corporate-owned restaurant in
Fort Lauderdale, Florida in May 2015. By April 2016, we opened three additional
restaurants located in various Wyndham 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 hotel locations. In
December 2017, 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 first half of 2021, we consolidated the remaining two Wyndham stores into
one location.
While our Fort Lauderdale location was reopened in early November 2017, we were
only able to reopen two of the hotel locations in Pompano Beach in late January
2018. We also elected not to reopen our fourth location, as the damages were too
excessive. If we can raise additional capital, of which there is no assurance,
we intend to own and operate up to 10 restaurants and utilize them as a showcase
in the marketing of our proposed franchise operations.
In May 2017, we completed our National Franchise License which permits us to
sell franchises in all of the states in the United States except for New York,
Virginia, and Maryland, which licenses we hope to obtain if sufficient demand
exists in the future.
We opened our first European location in Ceglie del Campo, Bari, Italy, in
October 2019. The Bari location closed in April 2020 due to the Covid-19
pandemic, briefly re-opened and has not re-opened as of the date of this Report.
Such location was intended to serve as the distribution center for products for
European locations, as well as to be used as a training facility for European
franchises. However, this initiative has been severely curtailed due to the
onset and lingering impact of Covid -19 in Europe.
17
Our two corporate-owned restaurants, one located in Fort Lauderdale, Florida,
and one within the Wyndham location in Pompano Beach, Florida, have fully
re-opened without limitation or any social distancing requirement.
In September 2019, the Company's common stock was approved for trading by FINRA
and in October 2019 was approved for uplisting by the OTC Markets Group to the
OTCQB under the symbol "KITL".
In June of 2020, the Company entered into a multi-unit development agreement
(the "Development Agreement") pursuant to which it granted development rights to
Demasar Management, Inc. ("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 restaurants by June 17, 2025. On November 20, 2021, we opened a
franchise location under the Development Agreement in Montreal, Quebec, Canada.
In September of 2020, we entered retail food and grocery stores with Kisses From
Italy branded products in Canada. The product launch began in November of 2020
and Kisses From Italy branded products were in nine retail stores by the end of
2020. Currently, Kisses From Italy branded products are in 40 stores across
Ontario and Quebec, Canada.
In April of 2021, we entered into a Consulting Agreement, as amended (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 June of 2021, the Company's first franchise location opened in Chino,
California. In November of 2021, the Company opened its second franchise
location in Montreal, Canada.
Recent Developments
On April 11, 2022, the Company entered into a securities purchase agreement,
dated as of April 6, 2022, (the "Talos Purchase Agreement") with Talos Victory
Fund, LLC, a Delaware limited liability company ("Talos"), pursuant to which the
Company issued to Talos a promissory note in the principal amount of $165,000.00
(the "Talos Note"). The Company received $148,500 gross proceeds from Talos due
to the original issue discount on the Talos Note. In connection with the
execution and delivery of the Talos Purchase Agreement and the issuance of the
Talos Note, the Company issued to Talos 500,000 commitment shares and a warrant
to purchase an additional 1,650,000 shares of common stock of the Company.
On April 13, 2022, the Company entered into a securities purchase agreement,
dated as of April 11, 2022, (the "Blue Lake Purchase Agreement") with Blue Lake
Partners, LLC, a Delaware limited liability company ("Blue Lake"), pursuant to
which the Company issued to Blue Lake a promissory note in the principal amount
of $165,000.00 (the "Blue Lake Note"). The Company received $148,500 gross
proceeds from Blue Lake due to the original issue discount on the Blue Lake
Note. In connection with the execution and delivery of the Blue Lake Purchase
Agreement and the issuance of the Blue Lake Note, the Company issued to Blue
Lake 500,000 commitment shares and a warrant to purchase an additional 1,650,000
shares of common stock of the Company.
On May 11, 2022, the Company entered into a Securities Purchase Agreement (the
"Fourth Man Purchase Agreement") with Fourth Man, LLC, a Nevada limited
liability company ("Fourth Man"), pursuant to which the Company issued to Fourth
Man a promissory note in the principal amount of $150,000.00 (the "Fourth Man
Note"). The Company received $135,000 gross proceeds from Fourth Man due to the
original issue discount on the Fourth Man Note. In connection with the execution
and delivery of the Fourth Man Purchase Agreement and the issuance of the Fourth
Man Note, the Company issued to Fourth Man 607,000 commitment shares and a
warrant to purchase an additional 1,500,000 shares of common stock of the
Company.
Covid-19 Pandemic
On March 11, 2020, the World Health Organization declared the Covid-19 outbreak
to be a global pandemic. In addition to the devastating effects on human life,
the pandemic is having a negative ripple effect on the global economy, leading
to disruptions and volatility in the global financial markets. Most US states
and many countries have issued policies intended to stop or slow the further
spread of the disease.
18
Covid-19 and the U.S's response to the pandemic are significantly affecting the
economy. There are no comparable events that provide guidance as to the effect
the Covid-19 pandemic may have, and, as a result, the ultimate effect of the
pandemic is highly uncertain and subject to change. We do not yet know the full
extent of the effects on the economy, the markets we serve, our business, or our
operations.
The Company's two corporate-owned restaurants in Fort Lauderdale, Florida and
the Wyndham location in Pompano Beach, Florida, have fully re-opened. The
Company's Bari location in Italy remains closed.
Going forward there can be no assurance that our restaurants will be allowed to
remain open or if open, at full capacity, or that we can achieve historic sales
levels.
Results of Operations
Comparison of Results of Operations for the three months ended March 31, 2022,
and March 31, 2021
Revenue and Cost of Sales
Total revenues for the three months ended March 31, 2022 were $97,287 compared
to $114,679 during the three months ended March 31, 2021. Revenues for the three
months ended March 31, 2022 were comprised of $91,838 in food sales and $5,989
in retail sales, compared to food sales of $104,894 in food sales and $9,785 in
sales of branded products to retail locations in Canada during the three months
ended March 31, 2021. The decrease in revenue is primarily attributable to the
consolidation of its two Wyndham stores into one location in June 2021 to become
more efficient. The Company intends to open a new location summer to replace the
closed Wyndham location. Same store sales were up 30.7%
Cost of goods sold during the three months ended March 31, 2022, was $45,176
compared to $52,668 during the three months ended March 31, 2021. This is
attributable to lower sales volumes.
Operating expenses
Operating expenses were $203,450 for the three months ended March 31, 2022,
compared to $480,593 during the three months ended March 31, 2021. Non-cash
stock-based compensation was $5,170 and $300,000, for the periods ended March
31, 2022 and March 31, 2021, respectively. Excluding the stock-based
compensation in both periods, operating expenses were $203,450 for the three
months ended March 31, 2022 compared to $180,593 for the three months ended
March 31, 2021. This increase is primarily attributable to a one-time
expenditure of $18,000 in franchise operations.
Other income and expense
Other expenses comprised of interest expense was $2,293 for the three months
ended March 31, 2022 compared to $2,096 during the three months ended March 31,
2021
Net Loss
As a result of the foregoing during the three months ended March 31, 2022, we
incurred a net loss of $153,094 and a net loss of $2,889 attributable to
non-controlling interests, compared to a net loss of $421,862 and a net profit
of $1,183 attributable to non-controlling interests for the three months ended
March 31, 2021. The decrease in the net loss during the three months ended March
31, 2022 is primarily attributable to a decrease of $294,830 in stock based
compensation in 2022 compared to 2021.
19
Liquidity and Capital Resources
On March 31, 2022, we had $25,095 in cash and cash equivalents.
Net cash used in operating activities was $119,390 during the three months ended
March 31, 2022, compared to net cash used of $125,979 during the three months
ended March 31, 2021. The slight decrease in net cash used in operating
activities is primarily attributable to changes in operating assets and
liabilities in the 2022 period.
Net cash provided by financing activities was $5,000 for the three months ended
March 31, 2022, compared to $145,000 during the three months ended March 31,
2021. The decrease in net cash provided by financing activities is primarily
attributable to proceeds of $5,000 from the sale of Preferred C stock in the
2022 period, compared to the sale of common stock in a private offering for
proceeds of $145,000 in the three months ended March 31, 2021.
We estimate that we will need approximately $1,000,000 to fully effectuate our
business development plans, including opening additional company-owned
restaurants and continuing to develop and enhance the marketing of our franchise
concept. Subject to the continued impact of Covid-19, we currently believe that
we can open at least two additional restaurants for approximately $300,000.
There can be no assurances that additional financing, either through equity or
debt, will be available on a timely basis, on favorable terms or at all. While
we have had discussions with potential investors and investment bankers, we have
no agreement with any third party to provide additional financing. Our inability
to obtain additional financing may have a significant negative impact on our
continued development and results of our operations.
Covid-19 has also caused significant disruptions to the global financial
markets, which impacts our ability to raise additional capital. If the Company
is unable to obtain adequate capital due to the continued spread of Covid-19,
the Company may be required to reduce the scope, delay, or eliminate some or all
of its planned operations.
Going Concern
Our consolidated financial statements were prepared assuming that we will
continue as a going concern and do not include adjustments for the
recoverability and the realization of assets and the satisfaction of liabilities
in the normal course of business for the twelve months following the date of
these financial statements that may be necessary should we be unable to continue
in operation. . In addition, the Company continues to experience negative 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 raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Subsequent to March 31, 2022, we raised $480,000 in gross proceeds as described
in Subsequent Events, Note 10.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
20
Critical Accounting Estimates
Management's discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. Our critical accounting policies are defined as those
policies that we believe are the most important to the portrayal of our
financial condition and results of operations and that require management's most
difficult, subjective, or complex judgments, often as a result of the need to
make estimates about the effects of matters that are inherently uncertain. See
notes to our financial statements, Note 2 - Summary Of Significant Accounting
Policies.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently,
none of which are expected to have a material effect on the Company's
operations, financial position, or cash flows.
© Edgar Online, source Glimpses