Kisses From Italy Inc. 10-Q

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO 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) Florida 46-2388377 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.) 80 SW 8th Street Suite 2000 Miami , Florida 33130 (Address of principal executive offices) (305) 423-7129 (Registrant’s telephone number, including area code) ____________________________________________________________ Former name, former address, and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: None Title of each class Trading Symbol(s) Name of each exchange on which registered Not applicable Not applicable Not applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 Rule 405 of 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒ Smaller reporting company ☒ Emerging growth company ☒ 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of November 10, 2021, there were 169,683,651 shares of the registrant's common stock outstanding. TABLE OF CONTENTS Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements 1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Item 4. Controls and Procedures 20 PART II OTHER INFORMATION Item 1. Legal Proceedings 21 Item 1A. Risk Factors 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3. Defaults Upon Senior Securities 21 Item 4. Mine Safety Disclosures 21 Item 5. Other Information 22 Item 6. Exhibits 22 Signatures 23 i CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example: · adverse economic conditions; · the Company’s ability to raise capital to fund a portion of its operations; · industry competition; · the inability to attract and retain qualified senior management; · other risks and uncertainties related to the restaurant industry and our business strategy; and the impact of the Covid-19 pandemic on our operations; and · the impact of the Covid-19 pandemic on our operations. 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. ii PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Kisses From Italy Inc. Consolidated Balance Sheets (Unaudited) September 30, December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 13,347 $ 37,336 Accounts receivable 6,137 5,761 Other receivable 50,778 4,839 Inventory 5,866 4,051 Total current assets 76,128 51,987 Property and equipment, net 6,320 8,480 Other Assets 2,745 2,635 Total assets $ 85,193 $ 63,102 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 54,903 $ 64,762 Accrued liabilities 130,780 148,519 Total current liabilities 185,683 213,281 Notes payable 12,171 12,171 Convertible Notes 10,000 10,000 Total liabilities 207,854 235,452 Commitments and contingencies – – Stockholders' Equity: Preferred stock, Series A $ 0.001 par value. 1,500,000 shares authorized; zero 0 shares issued and outstanding – – Preferred stock, Series B $ 0.001 par value. 5,000,000 shares authorized; zero 0 shares issued and outstanding – – Preferred stock, Series C, $ 0.001 par value 1,000,000 shares authorized; 139,610 shares and 50,000 shares issued and outstanding as of September 30, 2021 and December 31 2020, respectively 140 80 Common stock, $ 0.001 par value, 200,000,000 shares authorized; and 169,683,651 and 154,832,335 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively 169,683 154,832 Additional paid-in capital 12,469,105 8,612,683 Retained earnings deficit ( 12,748,823 ) ( 8,916,893 ) Total Kisses From Italy Stockholders' Equity (Deficit) ( 109,895 ) ( 149,298 ) Non-controlling interest ( 12,766 ) ( 23,052 ) Total stockholders' equity ( 122,661 ) ( 172,350 ) Total liabilities and equity $ 85,193 $ 63,102 1 Kisses From Italy Inc. Consolidated Statements of Operations (Unaudited) Three months Three months Nine months Nine months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Food sales $ 85,727 $ 44,331 $ 328,479 $ 163,413 Franchise sales – – – 291,585 Total Revenue 85,727 44,331 328,479 454,998 Cost of goods sold 43,644 29,164 155,953 80,649 Gross margin 42,083 15,167 172,526 374,349 Operating expenses: Depreciation and amortization 527 12,992 4,070 38,977 Executive compensation – 4,950 17,631 Stock based compensation – 720,000 3,231,573 2,738,240 Payroll and other expenses 42,593 29,576 76,792 88,126 Rent 46,219 49,269 99,646 107,872 Consulting and professional fees 23,278 85,648 116,903 155,392 General and administrative 44,549 38,419 117,439 95,124 Total operating expenses 157,166 940,854 3,646,423 3,241,362 Income (loss) from operations ( 115,083 ) ( 925,687 ) ( 3,473,897 ) ( 2,867,013 ) Other income (expense) Interest income (expense), net ( 95,545 ) ( 34,943 ) ( 347,747 ) ( 497,367 ) Total other income (expense) ( 95,545 ) ( 34,943 ) ( 347,747 ) ( 497,367 ) Income (loss) before income taxes ( 210,628 ) ( 960,630 ) ( 3,821,644 ) ( 3,364,380 ) Provision for income taxes (benefit) – – – – Net loss ( 210,628 ) ( 960,630 ) ( 3,821,644 ) ( 3,364,380 ) Less: net gain(loss) attributable to non-controlling interests ( 5,874 ) ( 6,365 ) 10,286 ( 6,068 ) Net loss attributable to Kisses From Italy, Inc. $ ( 204,754 ) $ ( 954,265 ) $ ( 3,831,930 ) $ ( 3,358,312 ) Basic and diluted earnings (loss) per common share $ ( 0.00 ) $ ( 0.01 ) $ ( 0.02 ) $ ( 0.02 ) Weighted-average number of common shares outstanding: Basic and diluted 168,615,951 150,776,792 164,399,707 135,992,240 The accompanying notes are an integral part of the consolidated financial statements. 2 Kisses from Italy Inc. Consolidated Statements of Changes in Stockholders' Equity September 30, 2021 and September 30, 2020 (Unaudited) Preferred Stock Preferred Stock Preferred Stock Additional Non- Total Series A Series B Series C Common Stock Paid-in controlling Retained Stockholders' Shares Value Shares Value Shares Value Shares Value Capital Interest Earnings Equity Balance, December 31, 2019 – $ – – $ – 50,000 $ 50 126,550,535 $ 126,550 $ 4,945,109 $ 6,068 $ ( 5,207,491 ) $ ( 129,714 ) Net income (loss) – – – – ( 499,905 ) ( 499,905 ) Non-controlling interest, net income (loss) 2,004 2,004 Issuance of Series C Preferred Stock 66,000 66 66,424 66,490 Beneficial conversion feature of convertible notes 351,920 55,669 Stock issued for services 541,800 542 35,759 Balance, March 31, 2020 – $ – – $ – 116,000 $ 116 127,092,335 $ 127,092 $ 5,399,212 $ 8,072 $ ( 5,707,396 ) $ ( 172,905 ) Net income (loss) – – – – ( 1,904,142 ) ( 1,904,142 ) Non-controlling income loss ( 1,707 ) ( 1,707 ) – Beneficial conversion feature of Series C Preferred Stock 106,300 106,300 – Issuance of Series C Preferred Stock 32,600 33 32,567 32,600 – Conversion of Series C Preferred Stock to Common Stock ( 118,990 ) ( 119 ) 2,480,000 2,480 ( 2,361 ) – – Stock issued for services 14,630,000 14,630 1,967,370 1,982,000 Balance, June 30, 2020 – $ – – $ – 29,610 $ 30 144,202,335 $ 144,202 $ 7,503,088 $ 6,365 $ ( 7,611,538 ) $ 42,147 Net income (loss) – – – – ( 954,265 ) ( 954,265 ) Non-controlling income loss ( 6,365 ) ( 6,365 ) Beneficial conversion feature of Series C Preferred Stock 33,425 33,425 Issuance of Series C Preferred Stock 37,000 37 36,740 36,777 Conversion of Series C Preferred Stock to Common Stock ( 7,000 ) ( 7 ) 210,000 210 203 Stock issued for services 7,700,000 7,700 762,300 770,000 Balance, September 30, 2020 – $ – – $ – 59,610 $ 60 152,112,335 $ 152,112 $ 8,335,553 $ – $ ( 8,565,803 ) $ ( 78,078 ) The accompanying notes are an integral part of the consolidated financial statements. 3 Kisses from Italy Inc. Consolidated Statements of Changes in Stockholders' Equity September 30, 2021 and September 30, 2020 (continued) (Unaudited) Preferred Stock Preferred Stock Preferred Stock Additional Non- Total Series A Series B Series C Common Stock Paid-in controlling Retained Stockholders' Shares Value Shares Value Shares Value Shares Value Capital Interest Earnings Equity Balance, December 31, 2020 – $ – – $ – 79,610 $ 80 154,832,335 $ 154,832 $ 8,612,683 $ ( 23,052 ) $ ( 8,916,893 ) $ ( 172,350 ) Net income (loss) – – – – – – ( 421,862 ) ( 421,862 ) Non-controlling interest, net income (loss) 1,183 1,183 Issuance of common stock for services 1,500,000 1,500 298,500 300,000 Issuance of common stock in private placement 1,450,000 1,450 143,550 145,000 Balance, March 31, 2021 – $ – – $ – 79,610 $ 80 157,782,335 $ 157,782 $ 9,054,733 $ ( 21,869 ) $ ( 9,338,754 ) $ ( 148,029 ) Net income (loss) – – – – ( 3,205,314 ) ( 3,205,314 ) Non-controlling interest, net income (loss) 14,977 14,977 Issuance of common stock for services 10,100,000 10,100 1,681,650 1,691,750 Issuance of stock options for services 1,239,823 1,239,823 Issuance of common stock in private placement 300,000 300 29,700 30,000 Issuance of Series C Preferred Stock 90,000 90 339,570 339,660 Conversion of Series C Preferred to Common stock ( 10,000 ) ( 10 ) 300,000 300 ( 290 ) – Balance, June 30, 2021 – $ – – $ – 159,610 $ 160 168,482,335 $ 168,482 $ 12,345,186 $ ( 6,892 ) $ ( 12,544,069 ) $ ( 37,133 ) Net income (loss) – – – – ( 204,754 ) ( 204,754 ) Non-controlling interest, net income (loss) ( 5,874 ) ( 5,874 ) Issuance of Series C Preferred Stock 30,000 30 125,070 125,100 Conversion of Series C Preferred to Common stock ( 50,000 ) ( 50 ) 1,201,316 1,201 ( 1,151 ) – Balance, September 30, 2021 – $ – – $ – 139,610 $ 140 169,683,651 $ 169,683 $ 12,469,105 $ ( 12,766 ) $ ( 12,748,823 ) $ ( 122,661 ) The accompanying notes are an integral part of the consolidated financial statements. 4 Kisses From Italy Inc. Consolidated Statements of Cash Flows (Unaudited) Nine Months Nine Months Ended Ended September 30, September 30, 2021 2020 Cash flows from operating activities of continuing operations: Net income (loss) $ ( 3,831,930 ) $ ( 3,358,312 ) Net income (loss) attributable to non-controlling interest 10,286 ( 6,068 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 4,070 38,977 Amortization of debt discount 491,645 Stock-based compensation for services 3,231,573 2,788,301 Beneficial conversion feature of Preferred C Stock 344,760 – Changes in operating assets and liabilities: Other assets ( 109 ) 29 Accounts receivable ( 376 ) Account receivable-other ( 45,939 ) ( 200 ) Inventory ( 1,815 ) ( 89 ) Accounts payable ( 9,859 ) ( 18,856 ) Accrued liabilities ( 17,739 ) ( 4,506 ) Net cash provided by (used in) operating activities ( 317,079 ) ( 69,079 ) Cash flows from investing activities: Purchase of fixed assets ( 1,910 ) – Net cash provided by (used in) investing activities ( 1,910 ) – Cash flows from financing activities: Proceeds/payments from short term borrowings-net – ( 6,000 ) Proceeds from notes payable – 12,171 Proceeds from the sale of common stock 175,000 – Proceeds from the sale of preferred stock 120,000 136,070 Net cash provided by (used in) financing activities 295,000 142,241 Impact of foreign exchange – ( 165 ) Net increase (decrease) in cash and cash equivalents ( 23,989 ) 73,162 Cash and cash equivalents at beginning of period 37,336 26,841 Cash and cash equivalents at end of period $ 13,347 $ 99,838 Supplemental disclosure of cash flow information: Cash paid for interest – – Cash paid for income taxes – – The accompanying notes are an integral part of the consolidated financial statements. 5 Kisses From Italy Inc. Notes to Unaudited Consolidated Financial Statements For the Three and Nine Months Ended September 30, 2021 and 2020 NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Kisses From Italy Inc. (the “Company”) was incorporated in Florida on March 7, 2013. The Company’s main focus is to develop a fast, casual food dining chain 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 Fort Lauderdale, Florida. Three additional restaurants, which are located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which are in leased facilities, were fully operational by April 2016. In December 2017, the Company vacated one of its restaurants due to a hurricane and has not re-opened that location. During the three months ended June 30, 2021, the Company consolidated its two Wyndham stores into one location to become more efficient. The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. The Bari location was closed in the fourth quarter of 2020 and currently remains closed as of the date of this Report due to Covid-19. On May 28, 2021 the Company opened its first franchise in Chino, California. Due to the onset of Covid-19 the Company has temporarily waived any franchise fees so that the franchisee could well establish the operations at that location. The Company’s accounting year-end is December 31. COVID-19 On March 11, 2020, the World Health Organization declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease. Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. All of the Company’s three corporate-owned restaurants which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham location in Pompano Beach, Florida, have fully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than other sites due to CDC recommendations. Except for our Bari location, our US locations are now open and are operating at near pre-Covid revenue levels. There can be no assurances that we will be allowed to remain open at full capacity or that we can maintain current sales levels. 6 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Management’s Representation of Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at and as of December 31, 2020, filed as part of the Company’s Annual Report on Form 10-K with the SEC on April 15, 2021. Basis of Presentation and Principles 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 Kisses from Italy Bari, Italy and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC. All intercompany accounts and transactions are eliminated in consolidation. Going Concern The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception. 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 of equity and convertible debt as interim measures to finance working capital needs and may continue its efforts to raise additional capital through the sale of common stock or other securities and obtain short-term loans. The Company will be required to continue to do 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. 7 Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables 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 its 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. These receivables are related to the sale of our private label branded products sold in retail and grocery stores in Canada. As of September 30, 2021, and December 31, 2020, our trade receivable amounted to $ 6,137 and $ 5,761 , respectively, with an allowance for doubtful accounts of $- 0 - for both periods. Other Receivable Other receivables are comprised of two components, a receivable from the government for Employee Retention Credits (“ERC”) and Value Added Tax at the Company’s Bari location in Italy. The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period due to the effects of the coronavirus outbreak. The updated ERC provides a refundable credit of up to $5,000 for each full-time equivalent employee a company retained from March 13, 2020, to Dec. 31, 2020, and up to $14,000 for each retained employee from Jan. 1, 2021, to June 30, 2021. The Company qualifies as an employer if it was ordered to fully or partially shut down or if the Company’s gross receipts fell below 50% for the same quarter in 2019 (for 2020) and below 80% (for 2021). As of September 30, 2021 and December 31, 2020 the Company had ERC credits receivable of $ 45,939 and $- 0 - respectively. Valued Added Tax (“VAT”) The Valued Added Tax (“VAT”) VAT is a broadly-based consumption tax which is assessed to the value that is added to goods and services. The Value Added Tax (“VAT”), applies to nearly all goods and services that are bought and sold within the European Union. In Italy where the Company operates, the VAT tax ranges between 4 and 10% for food products and alcohol. As of September 30, 2021 and December 31, 2020 the Company had a VAT net receivable from its Bari location amounting to $ 4,839 . 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. To date, this difference has been immaterial for the Bari location. 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. Since the Company began the branded retail products operations initiative in Canada in late 2020, the difference in the exchange rate and the average monthly rate did not have a material impact on the Company’s financial statements. 8 Revenue Recognition The Company recognizes revenue under the guidelines of ASC 606. Sales, as presented in the Company’s consolidated statement of earnings, represent franchise revenue; and food and beverage product sold which is presented net of discounts, coupons, employee meals and complimentary meals. Revenue is recognized using the five step approach required under the guidelines of ASC 606. 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 September 30, 2021 and December 31, 2020, the Company cash equivalents totaled $ 13,347 and $ 37,336 , respectively. Property and equipment Depreciation is computed by the straight-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: Estimated useful lives of property Computers, software, and office equipment 1 – 6 years Machinery and equipment 3 – 5 years Leasehold improvements Lesser of lease term or estimated useful life 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. 9 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. On Dec. 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements. Stock-based Compensation The Company accounts for stock-based compensation using the fair 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 lease 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 an impact on our financial statements. Canadian Government and Provincial Sales Tax (“G.S.T.” and “P.S.T.”) The Company does not collect any Canadian G.S.T. (Government Sales Tax) and P.S.T. (Provincial Sales Tax) as the Company acts as product distributor and not as a final sales retailer. 10 Inventory The inventory is comprised of alcoholic beverages at our new Bari location in Italy which opened in 2019 and inventory for retail sales held in Canada. Our US locations do not have liquor licenses. The balance of inventory on September 30, 2021 and December 31, 2020 was $ 5,866 and $ 4,051 , respectively. Net Loss per Share Net loss per common share is computed by 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 – GOING CONCERN AND LIQUIDITY As of September 30, 2021 the Company had cash on hand of $ 13,347 a working capital deficiency of $ 109,555 and an accumulated deficit of $ 12,748,823 Management has concluded that these financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. The Company believes it will be successful in raising sufficient capital to operate for the next 12 months, however, there is no assurance that financing, whether debt or equity, will be available to the Company, satisfactorily completed or on terms favorable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders and any debt financing may contain covenants limiting certain corporate actions. Any failure by the Company to successfully raise additional financing would have a material adverse effect on its business, including the possible inability to continue operations. 11 NOTE 4 – PROPERTY AND EQUIPMENT As of September 30, 2021 and December 31, 2020 the Company had $ 6,320 and $ 8,480 in property and equipment, all located at its Bari location in Italy. As of March 31, 2021 all property and equipment and leaseholds at its US locations had been fully depreciated. NOTE 5 – ACCRUED AND OTHER LIABILITIES The following table sets forth the components of the Company’s accrued liabilities on September 30, 2021 and December 31, 2020. Schedule of accrued and other liabilities September 30, 2021 December 31, 2020 Sales tax payable $ 1,245 $ 3,804 Accrued interest payable 3,604 2,067 Payroll tax liabilities 125,931 142,648 Total accrued liabilities $ 130,780 $ 148,519 The Company is in arrears on its payroll tax payments as of September 30 2021. Included in the “payroll tax liabilities” as of September 30, 2021 is approximately $ 41,630 in interest and penalties. NOTE 6 – PROMISSORY NOTES PAYABLE As of September 30, 2021 and December 31, 2020 we had two unsecured 8 % notes payable amounting to $ 12,171 that mature in June 2023. NOTE 7 – CONVERTIBLE NOTES As of September 30, 2021 and December 31, 2020, the outstanding principal balance of convertible notes was $ 10,000 . NOTE 8 – STOCKHOLDERS EQUITY Common Stock The Company has authorized 200,000,000 shares of Common Stock. On September 30, 2021 and December 31, 2020, there were 169,683,651 and 154,832,335 shares of common stock issued and outstanding, respectively, with a $ 0.001 par value. 12 During the nine months ended September 30, 2021, the Company issued the following shares: · 1,500,000 shares of common stock to an investor relations firm valued at $300,000 · 10,000,000 shares to its executive officers valued at $1,675,000 · 100,000 shares to a service provider valued at $16,750 · 1,750,000 shares of common stock were sold to accredited investors yielding the company $175,000 in proceeds · 1,501,306 shares in common stock were issued upon the conversion of Series C Preferred Stock Preferred Stock On December 19, 2019, the Company filed a 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. There were no shares of Series A Stock outstanding as of September 30, 2021 and 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. 13 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 September 30, 2021. 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 divided by the floor price of $0.10 established by the Board of Directors. The holders of the Series C Stock shall not be entitled to voting 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 September 30, 2021 and December 31, 2020 there were 139,610 shares and 79,610 shares of Series C Preferred outstanding, respectively, which were purchased at a price of $ 1.00 per share. NOTE 9 – COMMITMENTS AND CONTINGENCIES As of September 30, 2021, the Company had three operating restaurants. The Company leases these spaces based upon the following schedules: · Kisses From Italy 9 th LLC based in Fort Lauderdale, Florida leases approximately 990 square feet and has paid $3,273 per month since 2018, pending completion of the required renovations to the exterior and interior of the property necessitated due to hurricane damage that occurred to the location in 2018. The landlord has been very slow in making these changes. It was agreed upon that when work was completed, and approved by the City of Fort Lauderdale, the rent would be increased to the market rate at that time. Beginning on May 1 , 2021, the rent increased to $5,857.50 per month and was renewed by the Company for an additional five-year term with standard annual escalator costs. · Kisses From Italy-Palm Aire based in Pompano Beach, Florida leases approximately 2,300 square feet for $3,933.00 per month. The Company has a one-year automatic renewal provision for this lease on May 1st of each year under the same terms. · Kisses From Italy – based in Bari, Italy, leases approximately 2,200 square feet of space for 1,400 euros per month under the terms of a six-year lease which ends on May 5, 2024 and has an optional automatic renewal provision for six years. 14 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements. Overview 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 Fort Lauderdale, Florida. Three additional restaurants, which are located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which are in leased facilities, were fully operational by April 2016. In December 2017, the Company vacated one of its restaurants due to a hurricane and did not re-open. During the three months ended June 30, 2021, the Company consolidated its two Wyndham stores into one location to become more efficient. The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. The Bari location was closed in the fourth quarter of 2020 and currently remains closed as of the date of this Report due to Covid-19. In May 2017, we completed our National Franchise License, which permits us to sell franchises in all of the United States, except New York, Virginia, and Maryland which licenses we hope to obtain if sufficient demand exists in the future. In September 2017, we completed the purchase of two franchise locations in Florida. 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. 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 listing by the OTC Markets Group to the OTCQB under the symbol “KITL”. The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy, in October 2019. 15 Recent Developments Development Agreement On June 18, 2020, Kisses From Italy Franchising LLC, the Company’s wholly-owned subsidiary, entered into a multi-unit development agreement (the “Development Agreement”) pursuant to which it granted development rights to Demasar Management Inc., a Canadian corporation (“Developer”) to open and operate up to 100 Kisses From Italy Italian restaurants in Canada. Under the Agreement, Developer is obligated to open a minimum of 20 restaurants by June 17, 2025. In consideration of the development rights, the Development Agreement provides for a franchise fee of $4,000 Canadian dollars (“CAD”) for each restaurant. Upon execution of the Development Agreement, the Developer paid $400,000 CAD to the Company, and the Company issued Denis Senecal, a director of the Developer, 9,500,000 shares of common stock of the Company. The Developer will have a right of first refusal to obtain development rights to additional restaurants in Canada if it is in compliance with the Development Agreement and has opened the minimum 20 restaurants. If the Developer receives a bona fide offer from an unaffiliated third party to purchase the Developer’s rights under the Development Agreement, Kisses From Italy-Franchising LLC will have the option, exercisable for 30 days to purchase such business, If Kisses From Italy Franchising LLC does not exercise such option, the Developer may sell its rights to said third party for a $5,000 transfer fee. The Agreement contains certain non-competition and non-solicitation provisions. The Company and Developer will share profits for all locations developed and agreed to an allocation of franchise royalties. Advisory Agreement On June 17, 2020, the Company entered into a five-year distribution-financing-lead generation agreement (“Advisory Agreement”) with Denis Senecal pursuant to which he will provide business development, financial advisory and franchise lead generation services to the Company in consideration for the issuance of 9,500,000 shares of the Company’s common stock. Such common stock has “piggyback” registration rights for one year from the date of issuance for one registration statement. The Advisory Agreement will automatically be renewed for an additional five-year term unless either party notifies the other within 180 days prior to the expiration of the initial term that it desires not to renew the Agreement. Fransmart Consulting Agreement On April 22, 2021, Kisses from Italy-Franchising, LLC (“Franchisor”) entered into a consulting agreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”), effective as of April 16, 2021, pursuant to which Fransmart will serve as Franchisor’s exclusive global franchise developer and representative for a period of ten years. In consideration for its services, Fransmart is entitled to certain fees, royalties, and commissions contingent upon Fransmart achieving certain agreed upon milestones. In addition, Fransmart was granted a stock option to purchase 16,000,000 shares of the Company’s common stock, exercisable by Fransmart on a cashless basis. 16 Opening of New Franchise Location On May 28, 2021 the Company opened its first franchise in Chino, California. Due to the onset of Covid-19 the Company has waived any franchise fees so that the franchisee could well establish the operations at that location. Covid-19 Pandemic On March 11, 2020, the World Health Organization declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease. Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. The Company’s two corporate-owned restaurants in Fort Lauderdale, Florida and the Wyndham location in Pompano Beach, Florida, have fully re-opened subject to recommended social distancing guidelines. The Company’s Bari location in Italy remains closed. Except for our Bari location, our US locations are now open and are operating at near pre-Covid revenue levels. Results of Operations Comparison of Results of Operations for the three months ended September 30, 2021 and 2020 Revenue and Cost of Sales Total revenues for the three months ended September 30, 2021 were $85,727 compared to $44,331 during the three months ended September 30, 2020. Revenues for the three months ended September 30, 2021 was comprised of $82,371 in food sales and $3,356 in sales of branded products to retail locations in Canada, which the Company began selling in the fourth quarter of 2020, compared to food sales of $44,331 during the three months ended September 30, 2020. The significant increase in food sales in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 is due to the mitigation of some of the impact of Covid-19 on the restaurant industry. Cost of goods sold during the three months ended September 30, 2021 was $43,644 compared to $29,164 during the three months ended September 30, 2020. This increase is attributable to higher sales volumes in the 2021 period. Operating expenses Operating expenses were $157,166 for the three months ended September 30, 2021, compared to $940,854 during the three months ended September 30, 2020. Non-cash stock-based compensation was $-0- and $770,000, for the periods ended September 30, 2021 and September 30, 2020, respectively. Excluding the stock-based compensation in both periods, operating expenses were $157,166 for the three months ended September 30, 2021 compared to $170,854 for the three months ended September 30, 2020. The reduction in operating expenses for the three months ended September 30, 2021 is attributable to a reduction of consulting fees of $12,370, a reduction of depreciation expense of $12,465, and a reduction of executive compensation of $4,950; offset by an increase in payroll of $13,017 and an increase in general and administrative expenses of $6,130. 17 Other income and expense Other expenses comprising interest expense on debt and interest expense related to the beneficial conversion feature of Preferred C stock was $95,545 for the three months ended September 30, 2021 compared to $34,943 during the three months ended September 30, 2020. The increase in other expenses is attributable to the recording of approximately $95,100 in the beneficial conversion features of Preferred C Stock. Net Loss/Net Profit As a result of the forgoing, the net loss attributable to Kisses from Italy, Inc. for the three month period ended September 30, 2021 was $204,754 for the period ended September 30, 2021 compared to a loss of $954,265 for same period ended September 30, 2020. Comparison of Results of Operations for the nine months ended September 30, 2021 and 2020 Revenue and Cost of Sales Total revenues for the nine months ended September 30, 2021 were $328,479 compared to $454,998 during the nine months ended September 30, 2020. Revenues for the nine months ended September 30, 2021 comprises $302,176 in food sales and $26,303 in sales of branded products to retail locations in Canada, which the Company began selling in the fourth quarter of 2020, compared to food sales of $163,413 and franchise sales of $291,585 during the nine months ended September 30, 2020. The decrease in total revenue in 2021 compared to 2020 is due to $291,585 in franchise sales in the 2020 period compared to zero in 2021, offset to a lesser extent by the increase in food sales in the nine months ended September 30, 2021 due to the mitigation of the impact of Covid-19. Cost of goods sold during the nine months ended September 30, 2021 was $155,953 compared to $80,649 during the nine months ended September 30, 2020. This increase is attributable to higher food sales volumes in 2021 and franchise sales in 2020 with no cost of goods sold associated with those sales. Operating expenses Operating expenses were $3,646,423 for the nine months ended September 30, 2021, compared to $3,241,362 during the nine months ended September 30, 2020. Non-cash stock-based compensation was $3,231,573 and $2,788,301 for the nine month periods ended September 30, 2021 and September 30, 2020, respectively. Excluding the stock-based compensation in both periods, operating expenses were $414,850 for the nine months ended September 30, 2021 compared to $453,122 for the nine months ended September 30, 2020. This decrease is primarily attributable to a decrease in depreciation expense of $34,907, a decrease in executive compensation of $17,631, a decrease of $11,334 in payroll, a decrease of rent of $8,226; offset by an increase in consulting and professional fees of $11,511 and an increase in general and administrative expenses of $22,315. Other income and expense Other expenses comprising interest expense was $347,747 for the nine months ended September 30, 2021 compared to $497,367 during the nine months ended September 30, 2020. The decrease in other expenses is attributable to fewer conversions of equity instruments with beneficial conversion issues in which interest expense was recognized. Net Loss As a result of the forgoing, the net loss attributable to Kisses from Italy, Inc. for the period ended September 30, 2021 was $3,831,930 for the period ended September 30, 2021 compared to a loss of $3,358,312 for same period ended September 30, 2020. 18 Liquidity and Capital Resources On September 30, 2021, we had $13,347 in cash and cash equivalents. Net cash used in operating activities was $317,079 during the nine months ended September 30, 2021, compared to net cash used of $69,079 during the nine months ended September 30, 2020. The increase in net cash used in operating activities of $248,000 is primarily attributable to our increase in losses in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 after subtracting non-cash items in both periods. Net cash provided by financing activities was $295,000 for the nine months ended September 30, 2021, compared to $142,261 during the nine months ended September 30, 2020. The increase in net cash provided by financing activities is primarily attributable to sales of common stock of $175,000 in 2021 compared to zero in the same period in 2020. Net cash used in investing activities was $1,910 due to the purchase of fixed assets during the nine months ended September 30, 2021 compared to $-0- during the period ended September 30, 2020. We estimate that we will need approximately $1,000,000 to fully effectuate our business development plans, including opening additional company-owned restaurants and continuing to develop and enhance the marketing of our franchise concept. Subject to the continued impact of Covid-19, we currently believe that we can open at least two additional restaurants for approximately $300,000. We may use some of the cash we received from the Development Agreement to open additional locations or for franchise marketing. We believe that continuing to open company-owned restaurants will assist us to market other locations. There can be no assurances that additional financing, either through equity or debt, will be available on a timely basis, on favorable terms or at all. While we have had discussions with potential investors and investment bankers, we have no agreement with any third party to provide additional financing. Our inability to obtain additional financing may have a significant negative impact on our continued development and results of our operations. Covid-19 has also caused significant disruptions to the global financial markets, which impacts our ability to raise additional capital. If the Company is unable to obtain adequate capital due to the continued spread of Covid-19, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. Going Concern Our consolidated financial statements were prepared assuming that we will continue as a going concern and do not include adjustments for the recoverability and the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements that may be necessary should we be unable to continue in operation. In addition, the Company continues to experience negative cash flows from operations. Also, if the Company is unable to obtain adequate capital due to the continued spread of Covid-19, the Company may be required to further reduce the scope, delay, or eliminate some or all of its planned operations. These factors, 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. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. 19 Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. See notes to our financial statements, Note 2 – Summary Of Significant Accounting Policies. Recent Accounting Pronouncements There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position, or cash flows. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is a smaller reporting company and is not required to provide this information. ITEM 4. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures – Our management, with the participation of our principal executive officer and principal financial officer, has 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 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 principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021. Inherent Limitations – Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all errors 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 –. During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 20 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings. ITEM 1A. RISK FACTORS We are a smaller reporting company and are not required to provide this information. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the nine months ended September 30, 2021, the Company issued the following shares: · 1,500,000 shares of common stock to an investor relations firm valued at $300,000; · 10,000,000 shares of common stock to its executive officers valued at $1,675,000; · 100,000 shares of common stock to a service provider valued at $16,750; · 1,750,000 shares of common stock were sold to accredited investors yielding the company $175,000 in proceeds for working capital purposes; and · 1,501,316 shares in common stock were issued upon the conversion of Series C Preferred Stock. These transactions were exempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D as promulgated by the Securities and Exchange Commission under of the Securities Act, as transactions by an issuer not involving any public offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 21 ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS Exhibit No. Description 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in iXBRL, and included in exhibit 101). 22 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on November 15, 2021. KISSES FROM ITALY INC. By: /s/ Michele Di Turi Michele Di Turi Co-Chief Executive Officer and President (Principal Executive Officer) By: /s/ Claudio Ferri Claudio Ferri Co-Chief Executive Officer and Chief Investment Officer (Principal Financial Officer and Principal Accounting Officer) 23