TWO HANDS CORPORATION Two Hands Corporation (the "Company") was incorporated in the state ofDelaware onApril 3, 2009 and onJuly 26, 2016 , changed its name fromInnovative Product Opportunities Inc. toTwo Hands Corporation . TheTwo Hands co-parenting application launched onJuly 2018 and theTwo Hands Gone application launched InFebruary 2019 . The Company ceased work on these applications in 2021. The gocart.city online consumer grocery delivery application was released in earlyJune 2020 and Cuore Food Services commenced sale of dry goods and produce to other businesses inJuly 2020 . InJuly 2021 , the Company made the strategic decision to focus exclusively on the grocery market through three on-demand branches of its grocery businesses: gocart.city, Grocery Originals, and Cuore Food Services. All three of such branches of the Company's business share industry standard warehouse storage space and inventory. The Company's inventory is updated continuously and consists of produce, meats, pantry items, bakery & pastry goods, gluten-free goods, and organic items, acquired from various different suppliers inCanada and internationally, with whom the Company and its principals have cultivated long-term relationships. The Company received approval from the Canadian Securities Exchange (the "CSE") to list its common shares (the "Common Shares") on the CSE. Trading of the Common Shares in the capital of the Company commenced onAugust 5, 2022 , under the symbol "TWOH". gocart.city gocart.city is the Company's online delivery marketplace, allowing consumers to shop online and have their groceries delivered. The gocart.city online platform stores all inventory in the Company's warehouse located at its head office inMississauga . The aim of gocart.city is to deliver fresh and high-quality food products directly to retail consumers throughoutSouthern Ontario . The Company recently engaged local renowned chef,Grace DiFede , to curate a new line of meal kits and bundles to sell on the gocart.city platform alongside the Company's other grocery essentials. The gocart.city platform is available online and through applications for handheld devices supporting iOS or Android. The features and functions of gocart.city include customers having the ability to search for products by category and name, customers saving items in their cart and being able to share their cart with others, and being able to opt-in to digital weekly alerts that provide information on promotions and discounts on certain products. gocart.city also includes standard payment options for customers, such as PayPal, American Express andVisa . The Company also employs a social media manager to oversee and increase engagement with customers by using platforms such as Facebook, Twitter, Instagram and Google. The ads that are posted on these platforms are generic branding related to the Company, as well as the promotion of particular sale items. Moreover, the Company has an agreement with SRAX, Inc. to boost such
engagement. Grocery Originals Grocery Originals is the Company's brick-and-mortar grocery store located inMississauga Ontario at the site of the Company's warehouse. Grocery Originals was originally intended for curbside pickup but has expanded into a full service store, that includes a deli, cold storage, a stone pizza oven, and offering a wide variety of fresh and specialty meals curated byGrace Di Fede .
Cuore Food Services
Cuore Food Services is the Company's wholesale food distribution branch. Cuore Food Services uses inventory from the Company's warehouse as well as inventory it acquires on an ad hoc basis, and focuses on bulk delivery of goods to food service business such as restaurants, hotels, event planning/hosting businesses. Orders distributed through Cuore Food Services can be made over the phone or online through a different front-end of the gocart.city platform. 21 The operations of the business are carried on byTwo Hands Canada Corporation , a wholly-owned subsidiary of the Company, incorporated under the laws ofCanada onFebruary 7, 2014 .
Management's Plan of Operation
The Company is focused exclusively on the grocery market through three on-demand branches of its grocery businesses: gocart.city, Grocery Originals, and Cuore Food Services. The performance of the Company's business during the COVID-19 pandemic illustrates the flexibility of its model as the Company was able to meet heightened demand with an assortment of products that met customer preferences. The Company is still early-on in its development but sees a highly scalable business with lower corporate fixed costs, providing protection in the event of an economic downturn. Products and Services
The Company plans to continue to expand it reach to additional customers and
geographies across
Mobile Application
V2 of the gocart.city mobile application will be a subsequent release. The Company plans to further expand the features of the mobile application. Following the completion of V2 of the mobile application, the Company will consider user behaviour and plans to expand the functionality and features of the mobile application on an on-going basis going forward.
Operations and Logistics
The company plans to expand storage and warehousing, expand warehouse staff, add more delivery trucks and expand the delivery area.
Sales and Marketing
The Company plans on utilizing and leveraging its agreement with SRAX, Inc. to market its grocery delivery application and services and expand its footprint in theOntario region and beyond as its customer base grows.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventories, impairment of long-term assets, stock-based compensation, income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies, among others, may be impacted significantly by judgment, assumptions and estimates used in the preparation of the Financial Statements:
GOING CONCERN The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the nine months endedSeptember 30, 2022 , the Company incurred a net loss of$18,760,538 and used cash in operating activities of$612,822 , and onSeptember 30, 2022 , had stockholders' deficit of$1,821,696 . These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern for a period one year from the date that the financial statements are issued. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in this situation. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. OnApril 14, 2022 , the Company entered into a binding Grid Promissory Note and Credit Facility Agreement (the "Line of Credit") withThe Cellular Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal in increments of at least CAD$50,000 upon five business days' notice. The funds due for repayment onMay 1, 2024 , and the principal bears interest at 8% per annum, payable monthly. As at the date of this Form 10-Q, CAD$100,000 have been borrowed by the Company pursuant to the Line of Credit. There can be no assurances that we will be able to receive further commitments, loans or advances from them or other persons in the future. 22 STOCK-BASED COMPENSATION The Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered. REVENUE RECOGNITION In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We recognize revenue for the sale of our products upon delivery
to a customer.
RECENT ACCOUNTING PRONOUNCEMENTS
InAugust 2020 , the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning afterDecember 15, 2023 , which means it will be effective for our fiscal year beginningJanuary 1, 2014 . Early adoption is permitted but no earlier than fiscal years beginning afterDecember 15, 2020 , including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED
Sales, Cost of goods sold, Gross profit:
Three months ended September 30, Change
2022 2021
$ $ $ %
Sales 172,783 241,417 (68,634 ) (28 )
Cost of goods sold 159,124 201,609 (42,485 ) (21 )
Gross profit 13,659 39,808 (26,149 ) (66 )
Gross profit % 7.9 % 16.5 %
Breakdown of sales by branch:
Three months ended September 30 , Change
2022 2021
$ $ $ %gocart.city - online delivery 9,686 28,990 (19,306 ) (67 ) Grocery Originals and Cuore Food Service - retail and wholesale distribution 163,097 212,427 (49,330 ) (23 ) Total sales 172,783 241,417 (68,636 ) (28 ) 23 The gocart.city grocery delivery application was released in earlyJune 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses inJuly 2020 . Our gross profit is less than expected due to the expiry and write-off of inventory during the three months endedSeptember 30, 2022 . We have carefully reviewed our inventory and do not expect further significant write-offs for expired inventory during 2022. We expect our gross profit to increase to 15% byDecember 31, 2022 as we reduce coupons to obtain new customers. Operating expenses: Three months ended September 30, Change 2022 $ 2021$ $ % Salaries and benefits 57,921 238,500 (180,579 ) (76 ) Occupancy expense 18,612 7,028 11,584 165 Advertising and travel 12,103 28,705 (16,602 ) (58 ) Auto expenses 9,415 914 8,501 930 Consulting 107,932 381,339 (273,407 ) (72 )
Depreciation and Amortization 713 411 302 73 Bad debt 8,621 - 8,621 - Office and general expenses 23,671 6,243
17,428 279
Professional fees 55,075 30,119 24,956 83
Freight and delivery 10,389 - 10,389 -
Total operating expenses 304,452 693,259 (388,807 ) (56 )
Our total operating expenses for the three months endedSeptember 30, 2022 was$304,452 , compared to$693,259 for the three months endedSeptember 30, 2021 , respectively. The decrease in total operating expense is primarily due to a decrease in stock-based compensation paid to officers, directors and consultants. Total operating expense includes stock-based compensation for the three months endedSeptember 30, 2022 and 2021 which comprises of 0 and 0 shares of common stock issued valued at$0 and$0 , respectively for consulting services. Total operating expense also includes stock-based compensation for the three months endedSeptember 30, 2022 and 2021 which comprises of 0 and 30,000 shares of common stock issued valued at$0 , and$74,500 , respectively, for salaries and compensation for our officers and directors. Salaries and benefits for the three months endedSeptember 30, 2021 , also includes stock issued to officers and directors with a fair value of$184,500 and accrued but unpaid salary to Nadav Elituv, our Chief Executive Officer,
of$54,000 .
Advertising and travel includes expenses for online advertising, website, meals and entertainment.
For the three months endedSeptember 30, 2022 , consulting comprises primarily stock-based compensation expense (i)$0 for the expenditure of advertising credits with SRAX, Inc. (ii)$22,295 for consulting fees and (iii)$0 paid to contractors to manage our grocery business. For the three months endedSeptember 30, 2021 , consulting comprises primarily stock-based compensation expense (i)$301,010 for the expenditure of advertising credits with SRAX, Inc. and (ii)$66,164 for consulting fees. Professional fees comprise of audit, legal, filing fees and contract accountant. The increase in professional fees is primarily due our listing application with the Canadian Securities Exchange. Other income (expense): Three months ended September 30, Change 2022 2021 $ $ $ % Amortization of debt discount and interest expense (33,287 ) (130,594 ) 97,307 (75 ) Loss on settlement of debt (735,300 ) (7,360,278 ) 6,624,978 (90 ) Change in fair value of derivative liabilities - 93,626 (93,626 ) (100 ) Total operating expenses (768,587 ) (7,397,246 ) 6,628,659 (90 ) 24 Amortization of debt discount and interest expense for the three months endedSeptember 30, 2022 was$33,287 , compared to$130,594 for the three months endedSeptember 30, 2021 . Amortization of debt discount and interest expense relates to the issuance of non-redeemable convertible notes, convertible notes and promissory notes. During the three months endedSeptember 30, 2022 and 2021, the Company elected to convert$300 and$245,998 of principal and interest of a non-redeemable convertible note into 3,000,000 and 2,459,980 shares of common stock of the Company resulting in a loss on settlement of debt of$735,300 and$7,320,192 , respectively. During the three months endedSeptember 30, 2022 and 2021, the holders of the convertible notes elected to convert principal and interest of$0 and$159,120 into 0 and 83,195 shares of the common stock with a fair value of$0 and$228,323 resulting in a loss on settlement of debt of$0 and$40,086 , respectively. During the three months endedSeptember 30, 2022 and 2021, the gain (loss) due to the change in fair value of derivative liabilities was$0 and$93,626 , respectively. Net loss for the period: Three months ended September 30, Change 2022 2021 $ $ $ % Net loss attributed to Two Hands Corporation (1,059,380 ) (8,050,697 ) 6,991,317 (87 ) Our net loss for three months endedSeptember 30, 2022 was$1,059,380 , compared to$8,050,697 for the three months endedSeptember 30, 2021 , respectively. Our losses during the three months endedSeptember 30, 2022 and 2021 are primarily due to costs associated with professional fees, our transfer agent, investor relations, stock-based compensation paid to officers, directors and consultants and loss on settlement of debt. COMPARISON OF RESULTS FOR THE NINE MONTHS ENDEDSEPTEMBER 30, 2022 AND 2021
Sales, Cost of goods sold, Gross profit:
Nine months ended September 30, Change
2022 2021
$ $ $ %
Sales 562,513 605,498 (42,985 ) (7 )
Cost of goods sold 534,618 527,385 7,233 1
Gross profit 27,895 78,113 (50,218 ) (64 )
Gross profit % 5 % 12.9 %
Breakdown of sales by branch:
Nine months ended September 30 , Change
2022 2021
$ $ $ %gocart.city - online delivery 130,990 132,617 (1,627 ) (1 ) Grocery Originals and Cuore Food Service - retail and wholesale distribution 431,523 472,881 (41,358 ) (9 ) Total sales 562,513 605,498 (42,985 ) (7 ) The gocart.city grocery delivery application was released in earlyJune 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses inJuly 2020 . Our gross profit is less than expected due to the expiry and write-off of inventory during the nine months endedSeptember 30, 2022 . We have carefully reviewed our inventory and do not expect further significant write-offs for expired inventory during 2022. We expect our gross profit to increase to 15% byDecember 31, 2022 as we reduce coupons to obtain new customers. 25 Operating expenses: Nine months ended September 30, Change 2022 2021 $ $ $ % Salaries and benefits 13,692,392 350,450 13,341,942 3807 Occupancy expense 72,567 21,221 51,346 242 Advertising and travel 78,390 49,611 28,779 58 Auto expenses 33,171 9,767 23,404 240 Consulting 814,220 1,299,676 (485,456 ) (37 )
Depreciation and Amortization 4,418 1,281
3,137 245
Design - 14,734 (14,734 ) (100 )
Bad debt 17,949 - 17,949 -Office and general expenses 119,882 163,443
(43,561 ) (27 )
Professional fees 195,596 86,821 108,775 125
Freight and delivery 57,043 - 57,043 -
Total operating expenses 15,085,628 1,997,004 13,088,624 655
Our total operating expenses for the nine months ended September 30, 2022 was
$15,085,628 , compared to $1,997,004 for the nine months ended September 30,
2021 , respectively. The increase in total operating expense is primarily due to
an increase in stock-based compensation paid to officers, directors and
consultants.
Total operating expense includes stock-based compensation for the nine months
ended
Total operating expense also includes stock-based compensation for the nine
months ended
Salaries and benefits for the nine months endedSeptember 30, 2022 , comprise primarily of stock issued to Nadav Elituv, our Chief Executive Officer with
a fair value of$13,504,200 .
Salaries and benefits for the nine months ended
Advertising and travel includes expenses for online advertising, website, meals and entertainment.
For the nine months endedSeptember 30, 2022 , consulting comprises primarily stock-based compensation expense (i)$415,866 for the expenditure of advertising credits with SRAX, Inc. (ii)$156,666 for consulting fees and (iii)$241,688 paid to contractors to manage our grocery business. For the nine months endedSeptember 30, 2021 , consulting comprises primarily stock-based compensation expense (i)$777,933 for the expenditure of advertising credits with SRAX, Inc. (ii)$196,336 for consulting fees and (iii)$291,000 paid to contractors to manage our grocery business. Professional fees comprise of audit, legal, filing fees and contract accountant. The increase in professional fees is primarily due to legal fees related to the prospectus datedApril 21, 2022 filed withOntario Securities Commission and British Columbia Securities Commission and our listing application with the Canadian Securities Exchange. Other income (expense): Nine months ended September 30, Change 2022 2021 $ $ $ % Amortization of debt discount and interest expense (96,055 ) (261,560 ) 165,505 (63 ) Loss on settlement of debt (3,606,750 ) (10,817,203 ) 7,210,453 (67 ) Initial derivative expense - (126,322 ) 126,322 (100 ) Change in fair value of derivative liabilities - 194,750 (194,750 ) (100 ) Total operating expenses (3,702,805 ) (11,010,335 )
7,307,530 (66 ) 26 Amortization of debt discount and interest expense for the nine months endedSeptember 30, 2022 was$96,055 , compared to$261,560 for the nine months endedSeptember 30, 2021 . Amortization of debt discount and interest expense relates to the issuance of non-redeemable convertible notes, convertible notes and promissory notes. During the nine months endedSeptember 30, 2022 and 2021, the Company elected to convert$103,140 and$416,347 of principal and interest of a non-redeemable convertible note into 22,410,000 and 3,552,025 shares of common stock with a fair value of$3,709,890 and$11,150,424 of the Company resulting in a loss on settlement of debt of$3,606,750 and$10,734,075 , respectively. During the nine months endedSeptember 30, 2022 and 2021, the holders of the convertible notes also elected to convert 0 shares and 146,868 shares of the Company with a fair value of$0 and$446,450 resulting in a loss on settlement of debt of$0 and$83,127 , respectively.
Initial derivative expense of
During the nine months endedSeptember 30, 2022 and 2021, the gain (loss) due to the change in fair value of derivative liabilities was$0 and$194,750 , respectively. Net loss for the period: Nine months ended September 30, Change 2022 2021 $ $ $ % Net loss attributed to Two Hands Corporation (18,760,538 ) (12,929,226 ) (5,831,312 ) 45 Our net loss for nine months endedSeptember 30, 2022 was$18,760,538 , compared to$12,929,226 for the nine months endedSeptember 30, 2021 , respectively. Our losses during the nine months endedSeptember 30, 2022 and 2021 are primarily due to costs associated with professional fees, our transfer agent, investor relations, stock-based compensation paid to officers, directors and consultants and loss on settlement of debt.
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of selected quarterly information that has been derived from the financial statements of the Company. This summary should be read in conjunction with the consolidated financial statements of the Company.
Quarter Ended September 30, 2022 June 30,
2022
June 30, 2021 March 31, 2021 December 31, 2020 Sales $ 172,782$ 190,691 $ 199,039 $ 324,748 $ 241,417$ 174,774 $ 189,157 $ 96,194 Gross profit (loss) $ 13,659$ (6,278 ) $ 20,514 $ 19,117 $ 39,808$ 19,808 $ 18,547 $ 16,320 Operating expenses $ (304,452 ) $
14,021,263 )
$ 768,587 ) $
(2,320,020 )
$ (1,059,380 ) $
(16,347,561 )
(0.01 ) $ (0.18 ) $ (0.20 ) $ (0.63 ) $ (2.68 ) $ (1.26 ) $ (2.99 ) $ (2.64 )
27
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended
Cash flows used in operating activities
Nine months ended September 30, Change
2022 2021
$ $ $ %
Net cash used in operating activities (612,822 ) (300,033 ) (312,789 ) 104
Our net cash used in operating activities for the nine months ended September
30, 2022 and 2021 is $612,822 and $300,033 , respectively. Our net loss for the
nine months ended September 30, 2022 of $18,760,538 was the main contributing
factor for our negative cash flow. We were able to mostly offset the cash used
in operating activities by using our stock to pay for expenses such as
amortization of prepaid expense of $576,745 , stock-based compensation of
$13,504,200 , amortization of debt discount of $96,055 and loss on debt
settlement of $3,606,750 .
Cash flows used in investing activities
Nine months ended September 30, Change
2022 2021
$ $ $ %
Net cash used in investing activities (9,784 ) (1,945 ) (7,839 ) 403
Our net cash (used in) provided by investing activities for the nine months
ended
Cash flows from financing activities
Nine months ended September 30, Change
2022 2021
$ $ $ %
Net cash from financing activities 118,791 1,070,808 (952,017 ) (89 )
Our net cash provided by financing activities for the nine months ended
September 30, 2022 is $118,791 and $1,070,808 , respectively. Cash from financing
activities in 2022 is primarily due to net advances from related party. Cash
from financing activities in 2021 is primarily due to the issuance of
convertible notes, non-redeemable notes, promissory notes and Series B Stock.
As of September 30, 2022 , we had cash of $20,846 , working capital of $1,971,926
and total liabilities of $1,650,292 . We believe our current cash balance is
sufficient to fund our operations during the next 12 months because on April 14,
2022 , the Company entered into a binding Grid Promissory Note and Credit
Facility Agreement (the "Line of Credit") with The Cellular Connection Ltd.
Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD
$750,000 in principal in increments of at least CAD $50,000 upon five business
days' notice. The funds due for repayment on May 1, 2024 , and the principal
bears interest at 8% per annum, payable monthly. As at the date of this Form
10-Q, CAD $100,000 have been borrowed by the Company pursuant to the Line of
Credit the Company does not expect significant cash outlays for advertising in
the next year as there are $2,436,811 in advertising credits with SRAX, Inc.
included in prepaid expense and we expect to reduce the cash expended on
contractors in the next year as we plan to pay them in shares of the Company.
SRAX Inc. provides online advertising services to the Company. SRAX, Inc. during
the three months September 30, 2022 had operational issues which prevented the
Company from using its prepaid advertising credits. These prepaid advertising
credits have a carrying value of $2,436,811 at September 30, 2022 . The Company
believes that it is probable that SRAX, Inc. will resolve its operational issues
during the quarter ended December 31, 2022 and resume providing advertising
services to the Company. It is possible this assessment could change at December
31, 2022 , which may cause the Company to write-off part or all this prepaid
asset. If SRAX, Inc. does not resume advertising services to the Company, the
Company expects the 80,000 shares of Series C Convertible Preferred Stock issued
on June 30, 2022 to SRAX, Inc. with a carrying value of $2,288,000 will be
returned to the Company for cancellation.
28
Our working capital as of September 30, 2022 and December 31, 2021 is as
follows:
September 30, 2022 December 31, 2021
Current assets $ 2,734,453 $ 1,608,848
Current liabilities 762,527 552,998
Working capital $ 1,971,926 $ 1,055,850 The Company is continuing to focus improving cash flows from operations by reducing incentives to customers, by making purchases from different suppliers, accelerating the collection of accounts receivable, managing accounts payable balances and by paying our officers, directors, consultants and staff with
our stock.
The Company's financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months endedSeptember 30, 2022 , the Company incurred a net loss of$18,760,538 and used cash in operating activities of$612,822 and onSeptember 30, 2022 , had stockholders' deficit of$1,821,696 . These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern within one year of the date that the financial statements are issued. The Company's independent registered public accounting firm, in their report on the Company's financial statements for the year endedDecember 31, 2021 , expressed substantial doubt about the Company's ability to continue as a going concern. The Company's financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue
as a going concern. Over the next 12 months we expect to expend approximately$268,000 in cash to implement our business plan. Cash Required to Implement of Business Plan Operations and Logistics $ 20,000 General and Administration 248,000 Total Estimated Cash Expenditures $ 268,000 We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. We believe we have sufficient cash to pay for our business plan and to pay for our other overhead costs for the next twelve months because onApril 14, 2022 , the Company entered into a binding Line of Credit withThe Cellular Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal. If required, we expect to be able to secure additional capital through advances from our Chief Executive Officer, note holders, shareholders and others in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees, however, we do not have any written or oral agreements with any other third parties which require them to fund our operations. Although there can be no assurances that we will be able to obtain such funds in the future, the Company has been able to secure financing to continue operations since its inception onApril 3, 2009 . We are currently quoted on OTC Pink. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets. If we need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely. The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we will seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders. We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. OnApril 14, 2022 , the Company entered into a binding Line of Credit withThe Cellular Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal. We believe our current cash balance and the Line of Credit is sufficient to fund our operations during the next 12 months The loans from our Chief Executive Officer, note holders, shareholders and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter and has been quoted on the Over-The Counter Bulletin Board sinceFebruary 17, 2011 . The stock currently trades under the symbol "TWOH.OB." 29 Commitments for future capital expenditures atSeptember 30, 2022 is as follows: Payments Due by Period Less than 1 Total year 1 - 3 years 4 - 5 years After 5 years
Contractual obligations $ $ $ $ $ Accounts payable and accrued liabilities 685,944 685,944 - - - Debt 425,490 46,783 73,006 305,701 - Deferred revenue 21,774 21,774 - - - Non-redeemable convertible notes 492,023 - - 492,023 - Financial lease Obligations - - -
- -
Operating leases(1) 25,061 8,026 17,035 - -
Purchase obligations - - - - -
Total contractual
obligations 1,650,292 762,527 90,041 797,724 -
Notes:
(1) Leases for retail space, equipment and warehousing is currently month to
month. Deliveries are currently outsourced.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. OnApril 14, 2022 , the Company entered into a binding Line of Credit withThe Cellular Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal. We believe our current cash balance and the Line of Credit is sufficient to fund our operations during the next 12 months The loans from our Chief Executive Officer, note holders, shareholders and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter and has been quoted on the Over-The Counter Bulletin Board sinceFebruary 17, 2011 . The stock currently trades under the symbol "TWOH.OB." RELATED PARTY TRANSACTIONS
Nine months ended
Due toRelated Party
As ofSeptember 30, 2022 andDecember 31, 2021 , advances and accrued salary of$40,715 and$39,985 , respectively, were due to Nadav Elituv, the Company's Chief Executive Officer. The balance is non-interest bearing, unsecured and have no specified terms of repayment. During the nine months endedSeptember 30, 2022 , the Company issued advances due to related party for$133,156 of expenses paid on behalf of the Company and advances due to related party were repaid by the Company with$92,325 in cash. In addition, the Company accrued salary of$146,916 due to Nadav Elituv for the nine months endedSeptember 30, 2022 and issued a promissory note for$77,308 to settle due to related party. During the nine months endedSeptember 30, 2021 , the Company issued advances due to related party for$90,680 of expenses paid on behalf of the Company and advances due to related party were repaid by the Company with$83,747 in cash. In addition, the Company accrued salary of$129,600 due to Nadav Elituv for the nine months endedSeptember 30, 2021 , issued 60,000 shares of Series A Convertible Preferred Stock with a fair value of$207,500 to settled salary due and issued a promissory note for$19,572 to settle due to related party.
During the nine months ended
30
Promissory Note -
As ofSeptember 30, 2022 , promissory note - related party of$81,173 (principal$77,308 and interest of$3,865 ) and$0 , respectively, were outstanding. The promissory notes - related party bear interest of 10% per annum, are unsecured, mature onDecember 31, 2025 and are due to 2130555Ontario Limited , a Company controlled by Nadav Elituv, the Company's Chief Executive Officer. During the nine months endedSeptember 30, 2021 , the Company issued promissory notes - related party of$19,572 for$3,400 to settle accrued liabilities and$16,172 of expenses paid on behalf of the Company. Our policy with regard to transactions with related persons or entities is that such transactions must be on terms no less favorable than could be obtained
from non-related persons.
The above related party transactions are not necessarily indicative of the amounts that would have been incurred had a comparable transaction been entered into with an independent party. The terms of these transactions were more favorable than would have been attained if the transactions were negotiated
at arm's length. PROPOSED TRANSACTIONS
The Company is not anticipating any transactions.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
Refer to Note 2 in the condensed consolidated financial statements for the nine months endedSeptember 30, 2022 and Note 2 in the condensed consolidated financial statement for the nine months endedSeptember 30, 2022 for information on accounting policies. FINANCIAL INSTRUMENTS
The main risks of the Company's financial instrument are exposed to are credit risk, market risk, foreign exchange risk, and liquidity risk.
Credit risk The Company's credit risk is primarily attributable to trade receivables. Trade receivables comprise of amounts due from other businesses from the sale of groceries and dry goods. The Company mitigates credit risk through approvals, limits and monitoring. The amounts disclosed in the consolidated balance sheet are net of allowances for expected credit losses, estimated by the Company's management based on past experience and specific circumstances of the customer. The Company manages credit risk for cash by placing deposits at major Canadian financial institutions. Market risk Market risk is the risk that changes in market prices and interest rates will affect the Company's net earnings or the value of financial instruments. These risks are generally outside the control of the Company. The objective of the Company is to mitigate market risk exposures within acceptable limits, while maximizing returns. The Company's market risk consists of risks from changes in foreign exchange rates, interest rates and market prices that affect its financial liabilities, financial assets and future transactions. Refer to Note 2 in the condensed consolidated financial statements for the nine monthsSeptember 30, 2022 and Note 2 in the condensed consolidated financial statements. Foreign Exchange risk Our revenue is derived from operations inCanada . Our consolidated financial statements are presented inU.S. dollars and our liabilities other than trade payable are primarily due inU.S. dollars. The revenue we earn in Canadian dollars is adversely impacted by the increase in the value of theU.S. dollar relative to the Canadian dollar. 31 Liquidity risk
Liquidity risk relates to the risk the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The financial liabilities on our consolidated balance sheets consist of accounts payable and accrued liabilities, due to related party, notes payable, convertible notes, net, derivative liabilities, promissory notes, promissory notes - related party and non-redeemable convertible notes, Management monitors cash flow requirements and future cash flow forecasts to ensure it has access to funds through its existing cash and from operations to meet operational and financial obligations. The Company believes it has sufficient liquidity to meet its cash requirements for the next twelve months. OUTSTANDING SHARE DATA
As of
Common stock: 132,402,624 shares
Series A Convertible Preferred Stock: 25,000
Series B Convertible Preferred Stock: 11,000
Series C Convertible Preferred Stock: 90,000
Series E Convertible Preferred Stock: 169,675
OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
© Edgar Online, source
