Kisses From Italy Inc. - Annual Report: 2020 (Form 10-K)

Table of Contents

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 10-K

__________________

☑  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________________ TO ________________________.

Commission File Number 000-52898

Kisses From Italy, Inc.

(Exact name of registrant as specified in its charter)

80 SW 8^th ST.

Suite 2000

Miami, Florida 33130

(Address of principal executive offices)

305 423-7129

(Issuer’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

(Title of each class)

Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐   No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐   No ☑

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter on June 30, 2020, was $3,521,612.

As of April 12, 2021 the Registrant had 157,782,335 shares of Common Stock issued and outstanding.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The statements regarding Kisses from Italy, Inc. contained in this Report that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.

All forward-looking statements speak only as of the date of this Report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements or other information contained herein. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements in this Report are reasonable, we cannot assure you that these plans, intentions, or expectations will be achieved.

PART I

ITEM 1.    BUSINESS

Overview

Kisses From Italy, Inc. (hereinafter referred to as “us,” “our,” “we,” the “Company” or “Kisses”) was incorporated in the State of Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business. We commenced operations by opening our initial corporately 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. The Hurricane also impacted travel to Florida during this time. 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. In September 2017, we completed the sales of two franchise locations in Florida. We anticipate commencement of the building and development of these locations by mid-2021.

On October 24, 2019, we opened our first restaurant in Italy, at Strada Provinciale 70 #100, Via Vittorio Veneto 100 Ceglie del Campo, Bari, Italia which we intend to also use as a training facility for franchises in Europe. The Bari location was closed in the fourth quarter of 2020 and currently remains closed as of the date of this Report due to Covid-19.

Management recently began scouting various locations in regions of Italy and believes that the regions of Rome and Puglia may offer opportunities for additional corporate-owned and franchise expansion. However, there are no agreements in place as of the date of this Report to open any new facilities, either Company-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

In September 2019, the Company's common stock was approved for trading by FINRA and in mid-October 2019 was approved for up-listing by the OTC Markets Group to the OTCQB under the symbol “KITL”.

In January of 2020, the Company completed its first franchise agreement for a restaurant in the State of California. As a result of the COVID-19 pandemic, the opening of this restaurant has been delayed and is currently expected to begin operating in by the end by June 30, 2021.

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. to open and operate up to 100 restaurants in Canada.

In September of 2020, we decided to enter 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. Kisses From Italy branded products were in 20 stores across Ontario and Quebec in Canada by March 31, 2021.

Covid-19 pandemic

On March 11, 2020, the World Health Organization (“WHO”) 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 U.S. states and 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 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. The onset of Covid-19 had a material adverse impact on our operations in 2020.

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 suppliers within the regions in order to provide a truly authentic experience to our customers. Our vision is to leverage the success of our flagship store and our initial hotel locations in the South Florida market and to expand into other regions on a local, state, national, and global level. The main focus is doing so through our continued corporate-owned store expansion, along with the development and sales of additional locations through the advancement of our franchise and territorial rights program.

Our Menu

Our menu includes grilled paninis including an Italian style Panini, sausage, beef, sliced pork, or chicken topped with quality natural “sott'olio” (grilled and marinated vegetable) products at prices ranging from $5.95 to $7.95. We also offer deli paninis including fresh cheese Panini, prosciutto, salami, capocollo, bresaola, and turkey panini’s ranging in price from $5.95 to $7.95. All our panini’s include lettuce, tomato, and one choice of cheese and three choices of marinated vegetables, or three choices of grilled vegetables.

We also offer desserts including a Nutella sandwich, a variety of fresh Danish, cannoli, Italian biscotti, sfogliatelle or a corneti, ranging in price from $1.50 to $2.50. Our breakfast menu is served all day We also have a full 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).

We also offer desserts including a Nutella sandwich, a variety of fresh Danish, cannoli, Italian biscotti, sfogliatelle or a corneti, ranging in price from $1.50 to $2.50. We will provide an egg sandwich for breakfast only.

We will also have a full 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 and rustic taste from the provinces of Italy through a fresh Panini with an espresso, latte, or cold slush espresso to go. We intend to offer products that will cater to all diets including gluten-free diets and emphasize fresh products with no preservatives.

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

Quick Service Restaurants

Between May 2015 and May 2016, we opened four (4) restaurants in Southern Florida. Each of our restaurants is owned by a wholly-owned limited liability company. Our initial restaurant is located at 3146 NE 9^th Street in Fort Lauderdale, Florida. This location is across the street from an Atlantic Ocean public beach and consists of approximately 1,000 square feet of a retail restaurant with seating for up to 25 guests. Subsequently, we opened three additional similar restaurants, all in Southern Florida.

Except for the Fort Lauderdale location, all of our restaurant locations arose out of a relationship we established with Wyndham Vacation Ownership, Inc., which operates timeshare apartment complexes. Of our three restaurants, two are located in Wyndham timeshare resort properties where they are the only restaurants on site. Our lease agreements provide for our restaurants to provide room service that can be charged to the customer’s room, as well as an opportunity to provide food and beverage service to various sales, orientations, marketing, and owner events held by Wyndham regularly on these properties. Wyndham remits payments for these services bi-weekly and charges us with a 5% administrative fee for processing costs.

Our menu includes grilled paninis including an Italian style Panini, sausage, beef, sliced pork, or chicken topped with quality natural “sott'olio” (grilled and marinated vegetable) products at prices ranging from $5.95 to $7.95. We also offer deli paninis including fresh cheese Panini, prosciutto, salami, capocollo, bresaola, and turkey panini’s ranging in price from $5.95 to $7.95. All our panini’s include lettuce, tomato, and one choice of cheese and three choices of marinated vegetables, or three choices of grilled vegetables.

We also offer desserts including a Nutella sandwich, a variety of fresh Danish, cannoli, Italian biscotti, sfogliatelle or a corneti, ranging in price from $1.50 to $2.50. Our breakfast menu is served all day We also have a full 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).

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 of our developing a more extensive relationship with Wyndham or another similar company. There are no assurances this will occur.

Our flagship location, at 3146 NE 9^TH in Fort Lauderdale, suffered the greatest impact from the Hurricane Irma in 2017 of all of our locations. The commercial building where our restaurant was located sustained severe damage. We have remained the sole tenant on the property since September 2017. Property repair from the Hurricane did not commence until the second half of 2018.This has greatly reduced the foot traffic to the surrounding area thereby affecting our exposure to any potential walk-by customers. As repairs to the building finally commenced in mid-2018, we were asked by the building landlord to close for the entire month of July 2018. We complied and received a rent abatement for a period of four months. The impact from these on-going repairs continued well in 2019 with no clear of estimated time as to when the repairs will be completed. While no assurances can be provided we are confident that once the repairs are complete the area will return to its once sought out status.

Each location is managed by one senior employee/manager and individually assessed based on foot traffic, seasonality, and other demographic factors. We abide by the standards and rules set forth by the State of Florida Department of Health. Michele Di Turi, our CEO has the Certified Food Manager accreditation and have 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 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 we intend to add at later dates if sufficient demand exists. On June 23, 2017 we completed the sale of our initial two Florida franchises at a price of $15,000 per location. These locations are set to be developed at a later date. We anticipate commencement of the building and development by the end of 2021.

In January of 2020, the Company completed its first franchise agreement for a restaurant in the State of California. As a result of the COVID-19 pandemic, the opening of this restaurant has been delayed and is currently expected to begin operating in the second quarter of 2021.

In June of 2020, the Company entered into the Development Agreement pursuant to which it granted development rights to Demasar to open and operate up to 100 restaurants in Canada. Demasar will be taking the lead for franchise expansion and assisting in the Canadian brand building for the Kisses From Italy brand.

Each of our franchise restaurants are required to conform to a standard of interior design, featuring a distinctive and comfortable Italian décor. Our prior approval is required for each specific location of a proposed franchise restaurant, which includes a requirement that the same be in a clearly identifiable commercial location built out in accordance with our standards. Franchisees are also required to satisfactorily complete training and purchase certain equipment and supplies from us and other approved suppliers. We also require the purchase of a point-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 approximately 90% to 95% of their supplies and food inventory either directly from us, or from approved suppliers. We attempt to negotiate system-wide volume discounts and/or rebates for our franchisees from approved suppliers and if successful, pass such discounts and/or rebates on to franchisees based on the volume of their purchases from the suppliers providing the discounts.

Our franchise agreement with franchisees also requires our franchisee to pay royalties of 9% of gross sales, which are defined to be total actual charges for all products (food and non-food) and services, such as catering and delivery, sold to customers, exclusive of taxes, every week. We retain 6% of this royalty and the remaining 3% goes towards a marketing fund. The marketing fund is broken down in two parts, 2% for local marketing and 1% for national marketing. We anticipate that until national coverage is warranted, local and/or regional marketing campaigns will be implemented.

We also require that our franchisee enter into a collateral assignment and assumption of lease through which we are granted a security interest in all of the furniture, removable trade fixtures, 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 franchise agreement. 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 may be entitled to possession of the restaurant and all of our rights, title, and interest in and to the lease. We also enter into a conditional assignment of telephone numbers and listings that assigns us telephone numbers and directory listings upon termination or expiration of a franchise relationship.

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

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

We are required to perform the following services:

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

If a franchisee fails to perform services and we 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 the right to terminate the agreement after notice of a 30-day cure period.

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

Franchise Marketing

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

We seek individuals or groups with the skills and financial strength to operate multi-unit franchise organizations within specific geographic territories.  We anticipate that a franchise territory will consist of areas that are either cities or counties depending on population. We seek to identify people with considerable experience in the management of food service venues who also have sufficient start-up capital to open several of our restaurants. We have entered into discussions with several possible franchise owners, however. we currently have no franchise agreements.

We will consider the skills and investment capital that each potential multiple franchise owner presents to determine the size and nature of the territory and the minimum number of our restaurants 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 population and other factors including per capita income and then set the minimum number of restaurants at half the amount. Franchisees will not be restricted from opening additional restaurants beyond the minimum for their territory. We have not yet generated revenue from the sourcing of franchises and there are no assurances we will ever generate revenues from this business concept.

Commissary System

We plan to develop centralized commissary facilities that will serve all of the restaurants that we own in a given region. We believe that a commissary that serves a region of restaurants will improve efficiency and consistency for the restaurant concept. We also believe that a commissary system will allow our restaurants to be approximately 500 square feet smaller than they would otherwise be. We plan to build commissaries in areas with lower rent. In this manner, we plan to save the difference between the 500 fewer square feet that retail rental space would cost and the commissary’s costs 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 then delivered to local restaurants daily. We believe central food preparation of sauces and base ingredients will maintain the consistency of our restaurants’ products and possibly reduce labor costs.

Restaurant Advertising

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

As we open restaurants in new markets we plan to duplicate the advertising effort we employed in Fort Lauderdale and to spend initially approximately 2% to 3% of monthly revenue for local advertising on a per company-owned restaurant basis. Since we plan to build multiple restaurants simultaneously within a specific geographic region, we believe our advertising cost as a percentage of revenue will decrease as we increase the number of restaurants within a region. There are no assurances we will successfully open multiple restaurants in the future.

Employees

We currently employ 8 full-time persons, plus our officers. We do not have any part-time employees. Employees include 4 chefs, 3 baristas and an inventory manager. Our employees work at will and are not represented by a collective bargaining unit. We believe our relationship with our employees is excellent in most cases. We require all our employees and consultants to sign a confidentiality and non-disclosure agreement. Our success relies on our ability to hire additional employees, particularly on the local sales side. We believe there are numerous quality people to choose from throughout our area of targeted expansion.

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

Competition

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

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

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

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

Government Regulations

We are subject to various federal, state, and local 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 laws governing employment and pay practices, overtime, tip credits, and working conditions. The bulk of our employees are paid on an hourly basis at rates related to the federal and state minimum wages.

We are also subject to federal and state child labor laws which, among other things, prohibit the use of certain “hazardous equipment” by employees 18 years of age or younger. Under the Americans with Disabilities Act, we could be required to expend funds to modify our restaurants to better provide service to, or make reasonable accommodation for the employment of disabled persons. We continue to monitor our facilities for compliance with the Americans with Disabilities Act in order to conform to its requirements. We believe future expenditures for such compliance would not have a material adverse effect on our operations.

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

Trademarks and Patents

We have applied for and received a registered trademark of our logo in Italy, No. 0001 528191. This trademark expires in September 2029. We have also obtained the registered trademark of our logo in the United States (the United States Patent and Trademark Office) Serial No. 87138230. This trademark expires in August 2026. Both trademarks are subject to automatic renewal if the Company pays the renewal fees.

ITEM 1A. RISK FACTORS

We are a smaller reporting company and not required to include this disclosure in this Report.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

Our principal place of business is located at 80 SW 8^th St. Suite 2000, Miami, Florida, 33130, which is an executive virtual office. This location consists of approximately 1,000 square feet of office and conference room space. The relevant lease expired March 1, 2014, but we have reverted to a month to month tenancy. 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 December 31, 2020 and 2019, the Company had four operating store locations. The Company leases these spaces based upon the following schedules:

ITEM 3.    LEGAL PROCEEDINGS

There are no pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the OTCQB over-the-counter market under the symbol “KITL.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. On April 12, 2021 the closing price on the OTCQB of our common stock was $0.165.

Holders

As of April 12, 2021, we had 107 holders of record of our common stock.

Dividend Policy

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

ITEM 6.    SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this Report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

OVERVIEW

We are a Florida corporation incorporated on March 7, 2013, focused on developing a fast, casual food dining chain restaurant business. We commenced operations by opening our initial corporately owned location in Fort Lauderdale, Florida, in May 2015. We opened three additional locations by April 2016, all in Southern Florida, through a working relationship with Wyndham Hotels. In September 2017, Hurricane Irma caused significant damage to the area. As a result, we closed all of our stores for renovation following the storm. We reopened two of these locations but elected not to reopen our 4^th location. See “Business - Restaurant Development” below. If we are able to raise additional capital, of which there is no assurance, our intention is to own and operate up to 10 of our restaurants and utilize them as a showcase in the marketing of our proposed franchise operations.

In May 2017, we completed our National Franchise License and now have the ability to sell franchises in all of the states in the US except for New York, Virginia, and Maryland which we intend to add at later dates if sufficient demand exists. In June 2017, we completed the sales of two franchise locations in Florida. We anticipate commencement of the building and development of these locations by mid to the end of 2021, however, due to the COVID -19 pandemic there can be no assurances.

In May of 2019, we began the initial steps of developing 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 European products destined for our current locations and future corporate-owned and franchised locations. The Bari location was closed in the fourth quarter of 2021 and currently remains closed as of the date of this Report due to Covid-19.

In January of 2020, Kisses From Italy signed its first Franchise Agreement for the state of California. Due to the onset of COVID the opening was delayed and is set to op in the second quarter of 2021.

In June of 2020, the Company signed a Multi-Unit Development deal for 100 locations in Canada with Demasar Management, who will be taking the lead for franchise expansion and assisting in the Canadian brand building for the Kisses From Italy brand.

In September of 2020, we decided to enter 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. At the end of Q1 2021 Kisses From Italy branded products are in over 20 stores across Ontario and Quebec in Canada.

Results of Operations

Comparison of Results of Operations for the years ended December 31, 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 food sales 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 revenues from 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 as Covid mandated capacity restrictions of all of our locations.

During 2020, we entered into a Development Agreement in 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 amount of 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 December 31, 2020 were $291,585 compared to no franchise sales during the year ended December 31, 2019.

During the fourth quarter of 2020 we began offering our 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 revenues were included in food sales on our Statements of Operations for the period ended December 31, 2020.

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

Operating expenses

Operating expense increased to $3,640,846 during the year ended December 31, 2020, compared to $3,011,531 during the year ended December 31, 2019. The increase is primarily attributable to 3,028,201 in stock-based compensation expense in the year ended December 31, 2020, compared to stock-based compensation of 2,309,797 in the year ended December 31, 2019. Excluding the stock-based compensation, operating expenses were $612,645 for the year ended December 31, 2020 compared to $701,734 or the year ended December 31, 2019, representing a decrease of $89,089. This decrease is primarily attributable to 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 has begun 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 ended December 31, 2020, compared to $339,362 during the year ended December 31, 2019. The increase in other expenses is attributable to increased interest expense due to the issuance of Series C preferred stock with a beneficial conversion features that was charged to interest expense during the year ended December 31, 2020.

Net Loss

During the year ended December 31, 2020, we incurred a 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 and a net loss of $21,092 attributable to non-controlling interests for the year ended December 31, 2019. The increase in the net loss during the year ended December 31, 2020 is primarily attributable to an increase in operating expenses of $629,315 and an increase in interest expense of $158,251 offset by an increase of $152,996 in gross profit margin.

Liquidity and Capital Resources

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

Net cash used in operating activities was $169,984 during the year ended December 31, 2020, compared to $422,871 during the year ended December 31, 2019. This decrease in the cash used in 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 $1,136 for the purchase of equipment in the year ended December 31, 2020 compared to cash used in operating activities of $12,069 during the same 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 December 31, 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 ended December 31, 2020 of $155,600 compared to no proceeds in the year ended December 31, 2019.

GOING CONCERN

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

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, among others, raise substantial doubt about the Company's ability to continue as a going concern, 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.

Historically we have raised cash from the proceeds from the private placement of our shares, and through the sale of convertible debentures. We have no agreement with any investment banking or other financing source to provide us with funding. We can provide no assurance that additional funding will be available on a timely basis, on terms acceptable to us, or at all. While we have had discussions with potential investors and investment bankers, we have no agreement with any third party to provide us this additional financing and there can be no assurances that we will obtain this financing, either debt or equity or both, on favorable terms, or at all. Our inability to receive financing will have 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 general economic conditions, we do not believe that inflation had a material effect on our results of operations during the year ended December 31, 2020.

Critical Accounting 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 consolidated financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

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 Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

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

On November 15, 2019, the FASB has issued ASU 2019-10, 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.

ASC 842 will be effective for us beginning on December 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

Recent Accounting 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 extended transition 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 Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. As of and for the year ended December 31, 2018, our consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.

On November 15, 2019, the FASB has issued ASU 2019-10, 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 evaluate the impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Financial Statements, the notes thereto, and the Report of Independent Public Accountants thereon commencing at page F-1 of this Report, which Financial Statements, notes and report are incorporated herein by reference.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance 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 December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

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

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

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to 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 evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

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

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative 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 that might result from the outcome of this uncertainty.

/S/ BF Borgers CPA PC

We have served as the Company's auditor since 2018

Lakewood, CO 

April 15, 2021

Kisses From Italy Inc.

Consolidated Balance Sheets

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

Kisses From Italy Inc.

Consolidated Statements of Operations

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

Kisses from Italy

Consolidated Statements of Changes in Stockholders' Equity (continued)

December 31, 2020 and December 31, 2019

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

Kisses From Italy Inc.

Consolidated Statements of Cash Flows

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 DESCRIPTION OF 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 a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Ft. Lauderdale, Florida. Three additional restaurants, which were located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which were in leased facilities, were fully operational by April 2016. In December 2017, the Company 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 of developing 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 European products destined for our current locations and future corporate-owned and franchised locations. The Bari location was closed in the fourth 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 December 31.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The consolidated financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. The consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9^th LLC, Kisses from Italy-Franchising LLC; and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

All intercompany accounts and transactions are eliminated in consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception. For the year ended December 31, 2020 we had an operating loss 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 existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital through private placements, as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to so until its consolidated operations become profitable. Also, the Company has, in the past, 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 conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and the allowance for doubtful accounts, inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Accounts Receivable and Allowance for Doubtful Accounts

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

As of December 31, 2020 and 2019 , our trade receivable amounted 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’s Bari location in Italy is the Euro. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses.

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

Assets and liabilities of the Company’s operations 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 historical rate when the transaction occurred.

For the approximate two month period ended December 31, 2020 when the Company began the branded retail products operations initiative in Canada, the difference in the exchange rate and the average monthly rate was not material.

Revenue Recognition

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

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with 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-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest.

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. 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 fair value. During 2018 the Company closed one of its locations and removed all property and detachable leaseholds. The Company believes that this equipment and leaseholds which are in excellent condition can be used at existing and new locations and that the undepreciated book value is equivalent to its fair market value, thus no impairment was recorded. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:

Income taxes

The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

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

Stock-based Compensation

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

Leases

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard On November 15, 2019, the FASB has issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and leases standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companies the Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

ASC 842 will be effective for the Company beginning on December 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

Valued Added Tax (“VAT”)

The 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, 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 in 2019, 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 beverages at our new Bari location in Italy which opened in 2020, and inventory for retail sales held in Canada. Our US locations do not have liquor licenses. 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 dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share." Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard. On November 15, 2019, the FASB has issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and leases standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companies the Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

While we continue to evaluate the impact of the new 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 components of the Company’s property and equipment on December 31, 2020, and December 31, 2019:

For the years ended December 31, 2020 and December 31, 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 components of the Company’s accrued liabilities on December 31, 2020 and December 31, 2019.

The Company is in arrears on its payroll tax payments as of December 31, 2020. Included in the “payroll tax liabilities” as of December 31, 2020, is approximately $148,519 in interest and 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, convertible noteholders holding $656,195 of convertible notes along with accrued interest of $30,074 converted their notes into 10,294,285 shares of Common Stock.

NOTE 7 – STOCKHOLDERS EQUITY

Capital Stock

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

Common Stock Issued in Private Placements

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

During the year ended December 31, 2019, the Company 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 Company issued 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 Company issued 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, the Company issued 2,690,000 shares of common stock upon the conversion of 125,990 shares of Series C Stock described below. There were no conversions of preferred stock to common stock in the year ended December 31, 2019.

Preferred Stock

On December 19, 2019, the Company filed a Certificate of Designation with the state of Florida to set up three categories of preferred stock: Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (the “Certificate of Designation”). The Certificate of Designation designated 1,500,000 shares of the Company’s authorized preferred 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 summary of the material provisions of the Certificate of 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 share of Series A Stock shall entitle the holder to three hundred (300) votes for each share of Series A Stock. Any amendment to the Certificate of Designation requires the consent of the holders of at least two-thirds of the shares of Series A Stock then outstanding. The holders of 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 shares of capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up of the Company. The Series A Stock ranks pari passu with the Series C Stock.

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

Series B Stock

The Series B 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 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 common stock of the Company drops below the issuance price, the conversion rate will then be based on 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 entitled to voting rights except as otherwise provided for 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 entitled to 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 Board and applicable securities laws.

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

Series C Stock

The Series C 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 times the price paid for the shares. The Board has established a minimum conversion price of $0.10 per share. The holders of the Series C Stock shall not be entitled to voting rights except as otherwise provided for in the law. The holders of Series C Stock are not entitled to dividends until and unless determined by the Board.

Liquidation Preference

Upon any liquidation of the Company, the holders of Series C Stock shall be entitled to the amount paid for the shares of Series C Stock prior to the holders of shares ranking junior to 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 having received distributions to which they are entitled, the remaining assets of the Company shall be distributed to the other holders pro rata in proportion to the shares held by each holder.

Restrictions of Transferability

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

As of December 31, 2020 and 2019 there were 79,610 shares 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 Company had four operating store locations. The Company leases these spaces based upon the following schedules:

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

NOTE 9 – SUBSEQUENT EVENTS

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

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure Controls and Procedures – Our management, with the participation of our principal executive officer and principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of December 31, 2020.

We believe that our financial statements presented in this annual report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations – Our management, including our our principal executive officer and principal financial officer , does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013.

Based on its assessment, management has concluded that as of December 31, 2020, our disclosure controls and procedures and internal control over financial reporting were effective.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth information regarding our executive officers and directors:

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

Resumes

Michele Di Turi has been our Co-Chief Executive Officer, President and a director since our inception in March 2013. In addition, Mr. Di Turi has been Chief Operating 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-regulated biotechnology and medical products. Prior thereto, from February 2003 through November 2008, Mr. Di Turie 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 appointment to the Board.

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

Leonardo Fraccalvieri has been our Chief Operating Officer and a director since our inception in March 2013. Previously, from April 2013 through January 2014, he was Business Development Manager at Italy America Chamber of Commerce, West LA, CA, where he was responsible for management of project development and evaluation of Italian companies looking to expand in the US. From June 2012 through December 2013, Mr. Fraccalvieri was a business analyst at 10EQS Management Consulting where he was responsible for market strategy definition. From May 2009 through June 2011, he was a Business Development specialist at BusinessviaItaly, where he worked with companies looking to expand their business internationally to find new commercial 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 Milan and a graduate degree from 2 Universita’ Commerciale Luigi Bocconi Milano in Milan where he received a Masters’ degree in International Management and Business Administration, majoring in Management Consulting and Strategy. This experience led to Mr. Fraccalvieri’s appointment to the Board.

Board Committees

The Company has no nominating, audit, or compensation committees. 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, there is 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 our executive officers or directors.

Family Relationships

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

Involvement in Certain Legal Proceedings

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

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 director independence standards. No member of our Board of Directors is considered an independent director. We evaluated independence in accordance with the rules of The New York Stock Exchange, Inc., which generally provides that a director is not independent if: (i) the director is, 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 past three years has been, an executive officer of ours; (iii) the director or a member of the director’s immediate family has received more 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-executive employee); (iv) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (v) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (vi) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or 2% of that other company’s consolidated gross revenues.

Once we achieve trading status, of which there can be no assurance, we will insure that our committees, as well as our Board of Directors, complies with all the requirements of a public company under the auspices of the OTC Marketplace.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors and persons beneficially owning more than 10% percent of our equity securities ("Reporting Persons") to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on our review of copies of such reports and representations from the Reporting Persons, we believe that during the year ended December 31, 2020, the Reporting Persons timely filed all such reports, except that Michele Di Turi and Claudio Ferri each failed to timely file a Form 4 reporting the issuance of 3,600,000 shares by the Company, and Denis Senecal failed to file a Form 3 reporting his status as a 10% shareholder and his beneficial ownership of 17,976,215 shares.

Code of Ethics

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

ITEM 11.  EXECUTIVE COMPENSATION

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

SUMMARY COMPENSATION TABLE

Compensation of Directors

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

Stock Plan

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

Employment Agreements

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the ownership of Common Stock voting with the Common Stock as of the date of this Report by (i) each person known to us to own more than 5% of our outstanding Common Stock as of the date of this Report, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. The information provided is based upon 157,782,335 Common Shares issued and outstanding as of the date of this Report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Related Party Transactions

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

During 2019, the Company issued 16,911,000 shares to Mr. Dituri valued at $1,133,037 and 12,000,080 shares to Mr. Ferri valued at $804,005.

Director Independence

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

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Fees Paid to Independent Registered Public Accounting Firms

The following table presents fees for professional audit services rendered by B F Borgers CPA PC, our independent auditors, during our fiscal years ended December 31, 2020 and 2019:

Audit Fees. Consist of amounts billed for professional services rendered for our annual financial statements our Annual Report on Forms 10-K for our fiscal years ended December 31, 2020 and 2019, respectively, and for reviews of our interim financial statements included in our Quarterly Reports on Form 10-Q.

Tax Fees. Consists of amounts billed for professional services rendered for tax return preparation, tax planning, and tax advice.

All Other Fees. Consists of amounts billed for services other than Audit Fees.

We do not have an audit committee and as a result, our entire Board of Directors performs the duties of an audit committee. Our Board of Directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are included herewith:

Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the exhibit and the identity of the Report where the exhibit was filed.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunder duly authorized.

In accordance with the Exchange Act, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 15, 2021.

s/ Michel Di Turi

Michel Di Turi, Director

s/ Claudio Ferri

Claudio Ferri, Director

s/ Leonardo Fraccalvieri

Leonardo Fraccalvieri, Director