What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-08 · 145 added, 167 removed, 77 unchanged (80% of the section changed)

16 unchanged sentences

Kisses From Italy Inc.

(together with its subsidiaries),

hereinafter referred to as “us,” “our,” “we,” or the “Company”) was incorporated in the

State of Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business.

The Company operates through its wholly-owned subsidiaries,

Kisses From Italy 9 th LLC, Kisses From Italy-Franchising LLC, Kisses From Italy, Inc.

(Canada) (a company incorporated

under the laws of Canada and registered in Quebec on December 23, 2020), and Kisses From Italy Italia SRLS (a limited liability company

incorporated in Italy), and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

We commenced operations by opening our initial corporate-owned

restaurant in Fort Lauderdale, Florida in May 2015.

By April 2016, we opened three additional restaurants located in various Wyndham Hotel

properties in the Pompano Beach, Florida area.

In September 2017, Hurricane Irma caused significant damage to the area, which resulted

in Wyndham halting operations at its hotel properties for repairs and renovations and the closure of our Wyndham hotel locations.

2017, we vacated one of our restaurants in the Wyndham Hotel properties due to damage from the hurricane and have not re-opened such restaurant.

with its subsidiaries, hereinafter referred to as “us,” “our,” “we,” or the “Company”)

was incorporated in the State of Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business.

The Company operates through

its wholly-owned subsidiaries, Kisses From Italy 9 th LLC, Kisses From Italy-Franchising LLC, Kisses From Italy, Inc.

(a company incorporated under the laws of Canada and registered in Quebec on December 23, 2020), and Kisses From Italy Italia SRLS (a

limited liability company incorporated in Italy), and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

We commenced operations by

opening our initial corporate-owned restaurant in Fort Lauderdale, Florida in May 2015.

By April 2016, we opened three additional restaurants

located in various Wyndham Hotel properties in the Pompano Beach, Florida area.

In September 2017, Hurricane Irma caused significant damage

to the area, which resulted in Wyndham halting operations at its hotel properties for repairs and renovations and the closure of our Wyndham

hotel locations.

In December 2017, we vacated one of our restaurants in the Wyndham Hotel properties due to damage from the hurricane

and have not re-opened such restaurant.

During the first half of 2021, we consolidated the remaining two Wyndham stores into one location.

While our Fort Lauderdale location was reopened in

early November 2017, we were only able to reopen two of the hotel locations in Pompano Beach in late January 2018.

We also elected not

to reopen our fourth location, as the damages were too excessive.

If we can raise additional capital, of which there is no assurance,

we intend to own and operate up to 10 restaurants and utilize them as a showcase in the marketing of our proposed franchise operations.

In May 2017, we completed our National Franchise License

which permits us to sell franchises in all of the states in the United States except for New York, Virginia, and Maryland, which licenses

we hope to obtain if sufficient demand exists in the future.

We opened our first European location in Ceglie del

Campo, Bari, Italy, in October 2019.

The Bari location closed in April 2020 due to the Covid-19 pandemic, briefly re-opened and has not

re-opened as of the date of this Report.

Such location was intended to serve as the distribution center for products for European locations,

as well as to be used as a training facility for European franchises.

However, this initiative has been severely curtailed due to the

onset and lingering impact of Covid -19 in Europe.

Our two corporate-owned restaurants, one located in

Fort Lauderdale, Florida, and one within the Wyndham location in Pompano Beach, Florida, have fully re-opened without limitation or any

social distancing requirement.

In September 2019, the Company’s common stock

was approved for trading by FINRA and in October 2019 was approved for uplisting by the OTC Markets Group to the OTCQB under the symbol

While our Fort Lauderdale

location was reopened in early November 2017, we were only able to reopen two of the hotel locations in Pompano Beach in late January

We also elected not to reopen our fourth location, as the damages were too excessive.

If we can raise additional capital, of which

there is no assurance, we intend to own and operate up to 10 restaurants and utilize them as a showcase in the marketing of our proposed

franchise operations.

In May 2017, we completed

our National Franchise License which permits us to sell franchises in all of the states in the United States except for New York, Virginia,

and Maryland, which licenses we hope to obtain if sufficient demand exists in the future.

We opened our first European

location in Ceglie del Campo, Bari, Italy, in October 2019.

The Bari location closed in April 2020 due to the Covid-19 pandemic, briefly

re-opened and has not re-opened as of the date of this Report.

Such location was intended to serve as the distribution center for products

for European locations, as well as to be used as a training facility for European franchises.

However, this initiative has been severely

curtailed due to the onset and lingering impact of Covid -19 in Europe.

Our two corporate-owned restaurants,

one located in Fort Lauderdale, Florida, and one within the Wyndham location in Pompano Beach, Florida, have fully re-opened without limitation

or any social distancing requirement.

In September 2019, the Company's

common stock was approved for trading by FINRA and in October 2019 was approved for uplisting by the OTC Markets Group to the OTCQB under

the symbol “KITL”.

In June of 2020, the Company entered into a multi-unit

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Agreement in Montreal, Quebec, Canada.

In September of 2020, we entered retail food and grocery

stores with Kisses From Italy branded products in Canada.

The product launch began in November of 2020 and Kisses From Italy branded products

were in nine retail stores by the end of 2020.

Currently, Kisses From Italy branded products are in 50 stores across Ontario and Quebec,

In April of 2021, we entered into a Consulting Agreement

with Fransmart, LLC, a Delaware limited liability company (“Fransmart”), pursuant to which we engaged Fransmart as our exclusive

global franchise developer and representative for a period of ten years.

In June of 2021, the Company’s first franchise

location opened in Chino, California.

In November of 2021, the Company opened its second franchise location in Montreal, Canada.

On March 9, 2022, Articles of Amendment

to the Company’s Articles of Incorporation to increase the number of its authorized common stock from 200,000,000 shares to 300,000,000

shares became effective.

Such action was approved by the Board of Directors on January 25, 2022 and a majority of the Company’s

shareholders on January 27, 2022.

The purpose of the share increase was to make available additional shares of common stock to meet

the current obligations of the Company to issue common stock, including under outstanding convertible securities.

The Company expects to generate franchise fees from its franchise locations once the franchises

become established.

In September of 2020, we

entered retail food and grocery stores with Kisses From Italy branded products in Canada.

The product launch began in November of 2020

and Kisses From Italy branded products were in nine retail stores by the end of 2020.

Currently, Kisses From Italy branded products are

in 40 stores across Ontario and Quebec, Canada.

April of 2021, we entered into a Consulting Agreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited

liability company (“Fransmart”), pursuant to which we engaged Fransmart as our exclusive global franchise developer and representative

for a period of ten years.

In June of 2021, the Company’s

first franchise location opened in Chino, California.

In November of 2021, the Company opened its second franchise location in Montreal,

March 9, 2022, the Company filed Articles of Amendment to its Articles of Incorporation to increase the number of its authorized

common stock from 200,000,000 shares to 300,000,000 shares.

Such action was approved by the Board of Directors on January 25, 2022 and

a majority of the Company’s shareholders on January 27, 2022.

The purpose of the share increase was to make available additional

shares of common stock to meet the current obligations of the Company to issue common stock, including under outstanding convertible securities.

On April 11, 2022, the Company entered into a securities

purchase agreement, dated as of April 6, 2022, (the “Talos Purchase Agreement”) with Talos Victory Fund, LLC, a Delaware limited

liability company (“Talos”), pursuant to which the Company issued to Talos a promissory note in the principal amount of $165,000 (the

“Talos Note”).

The Company received $148,500 gross proceeds from Talos due to the original issue discount on the Talos

In connection with the execution and delivery of the Talos Purchase Agreement and the issuance of the Talos Note, the Company issued

to Talos 500,000 commitment shares and a warrant to purchase an additional 1,650,000 shares of common stock of the

Recent Developments

On July 26, 2022, the Company entered into a securities

purchase agreement (the “Purchase Agreement”) with 1800 Diagonal Lending LLC, a Virginia limited liability company ( the “Lender”),

pursuant to which the Company issued the Lender a promissory note in the principal amount $70,000.00 (the “Note”).

bears interest at a rate of 9% per annum and is due and payable on July 26, 2023.

Upon an event of default under the Note, the interest

increases to 22%.

The Company has the right to prepay the Note in full

at any time upon three trading days’ prior written notice, subject to a prepayment penalty if the Note is prepaid on or before January

The prepayment penalty is equal to 20% of the outstanding principal and interest under the Note for prepayment made on or before

September 24, 2022, 25% of the outstanding principal and interest under the Note for prepayment made between September 25, 2022 and November

23, 2022 and 29% of the outstanding principal and interest under the Note for prepayment made between September 26, 2022 and January 22,

The Note is convertible at the option of the Lender

at any time after January 22, 2023 at a conversion price equal to 65% of the lowest closing bid price of the Company’s common stock

on the OTCQB market or other applicable exchange during the ten trading days preceding the conversion date, provided that no such conversion

may result in the Lender and its affiliates beneficially owning more than 4.99% of the then outstanding shares of the common stock of

For as long as the Note is outstanding, the Company must have authorized and reserved, free of preemptive rights, nine times

the number of shares issuable upon full conversion of the Note (initially 25,846,153 shares), subject to the 4.99% beneficial ownership

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 has had a negative on

the global economy, leading to disruptions and volatility in the global financial markets.

The continuing effect of the Covid-19 continues

to be uncertain and subject to change.

We do not know the full extent of the effects on the economy, the markets we serve, our business,

or our operations in the future.

The Company’s two corporate-owned restaurants

in Fort Lauderdale, Florida and the Wyndham location in Pompano Beach, Florida, have fully re-opened without any Covid-19 restrictions.

The Company’s Bari location in Italy remains closed due to such restrictions.

Going forward there can be no assurance that our restaurants

will be allowed to remain open or if open, at full capacity, or that we can achieve historic sales levels.

The Company entered into

a Strategic Alliance Agreement, effective as of March 1, 2023 (the “SAA”), with SC Culinary LLC, a New York limited liability

company (“SC Culinary”).

SC Culinary is currently

the creator and owner of, and in possession of, a quick-service food concept (the “Concept”) and is developing and will develop

all intellectual property rights related to the Concept (the “Intellectual Property Rights”), all of which were or will be

developed or acquired by SC Culinary, independently, or assigned to it by Scott Conant.

Scott Conant, who owns all rights in and to his

name, voice, image, and likeness (the “NIL Rights”), has granted SC Culinary the exclusive right to license the NIL Rights

to third parties.

Pursuant to the SAA, SC Culinary

will license its interest in the Concept, the Intellectual Property Rights, and the NIL

Rights (collectively, the “License”) to a wholly-owned

subsidiary of the Company to be established (the “Subsidiary”) for the purpose of developing the Concept into the business

of the Subsidiary (the “Brand”).

In consideration for the

use of the License under the SAA, SC Culinary is entitled to receive certain minimum cash payments and restricted shares of common stock

of the Company (the “Shares”) upon the achievement of certain milestones.

Notwithstanding the foregoing, the issuance of the

Shares to SC Culinary is subject to anti-dilution protection, wherein the Company shall issue SC Culinary additional shares of common

stock in order to maintain the percentage owned by SC Culinary in the Company at the time of the issuance.

The SAA terminates on the

tenth (10th) anniversary of the effective date but may automatically renew for successive five (5) year periods unless either party provides

ninety (90) days’ notice of termination.

SC Culinary is entitled to

terminate the SAA in the event of default by the Company and the Subsidiary.

In the event of termination, SC Culinary shall have the absolute

right to cause the Subsidiary and the Company to cease to operate the Brand except for the limited purposes of honoring existing franchise

In such an event, SC Culinary will grant the Subsidiary a limited license to use the Brand and SC Culinary’s rights

in the Intellectual Property solely in connection with and for the term of the existing franchise agreements (with no further rights of

In the event that SC Culinary

terminates the SAA for any reason, SC Culinary shall have the sole and absolute right to use, exploit and operate the Brand and all Intellectual

Property separate and apart from the Company without the payment of any amounts or other consideration to the Company, the Subsidiary

or relevant third parties or the need for the approval of any kind from the Company or relevant third parties.

Results of Operations

Three months ended September 30, 2022, and September 30, 2021

Revenue and Cost of Sales

Total revenues for the three months ended September

30, 2022 were $101,522 compared to $85,727 during the three months ended September 30, 2021.

The increase in revenue is primarily attributable

to higher sales at the Company’s Kisses-Palm Sea Royal location based in Pompano Beach, Florida.

Cost of goods sold during the three months ended September

30, 2022, was $56,179 compared to $43,644 during the three months ended September 30, 2021.

This increase is attributable to higher sales

and increased costs due to the high inflationary trends in the food industry.

Operating expenses

Operating expenses were $214,298 for the three months

ended September 30, 2022, compared to $157,166 during the three months ended September 30, 2021.

The increase in expenses in the three

month period ended September 30, 2022 period is primarily attributable to an increase in general and administrative expense of $49,167

and an increase in consulting and professional fees of $20,508 over 2021 levels.

The increases are due to higher expenses due to inflationary

trends, as well as increased professional fees associated with raising capital to fund the Company’s operations.

Other income and expense

Other expense for the three months ended September

30, 2022 was $118,536 compared to $95,545 during the three months ended September 30, 2021.

The increase in the 2022 period is due to

a change in the fair market value of the derivative liability of $109,411 in the 2022 period compared to $-0- in the 2021 period, offset

by a reduction in interest expense in the 2022 period of $86,420.

As a result of the foregoing during the three months

ended September 30, 2022, we incurred a net loss of $287,491 and a net loss of $5,596 attributable to non-controlling interests in the

three months ended September 30, 2022, compared to a net loss of $210,628 and a net loss of $5,874 attributable to non-controlling interests

for the three months ended September 30, 2021.

The increase in the net loss in the 2022 period compared to the 2021 period is attributable

higher operating expenses and the recording of a derivative liability in 2022.

Nine months ended September 30, 2022, and September 30, 2021

Comparison of Results of Operations for the three months ended March

31, 2023, and March 31, 2022

Revenue and Cost of Sales

Total revenues for the nine months ended September

30, 2022 were $311,484 compared to $328,479 during the nine months ended September 30, 2021.

The decrease in revenue is primarily attributable

to lower sales at the Company’s Kisses From Italy 9th LLC’s restaurant based in Fort Lauderdale, Florida.

Cost of goods sold during the nine months ended September

30, 2022, was $162,125 compared to $155,953 during the three months ended September 30, 2021.

The increase in cost of sales is attributable

to higher food costs due to the high inflationary trends in the food industry.

Total revenues for the three

months ended March 31, 2023, were $115,460 compared to $97,287 during the three months ended March 31, 2022.

Revenues for the three months

ended March 31, 2023, were comprised of $112,149 in food sales and $3,310 in retail sales, compared to food sales of $91,838 in food sales

and $5,989 in sales of branded products to retail locations in Canada during the three months ended March 31, 2022.

The increase in revenue

is primarily attributable to slightly higher demand for the Company’s products.

Cost of goods sold during

the three months ended March 31, 2023, $58,871 was compared to $45,176 during the three months ended March 31, 2022.

This is attributable

to higher sales volumes and offset by an increase in food price in 2023 compared to the 2022 period.

Operating expenses

Operating expenses were $556,125 for the nine months

ended September 30, 2022, compared to $3,646,423 during the nine months ended September 30, 2021.

Non-cash stock-based compensation was

$5,170 and $3,231,573, respectively, for the nine months ended September 30, 2022 and September 30, 2021.

Operating expenses were $531,283

for the three months ended March 31, 2023, compared to $203,450 during the three months ended March 31, 2022.

Non-cash stock-based compensation

was $206,700 and $5,170, for the periods ended March 31, 2023, and March 31, 2022, respectively.

Excluding the stock-based compensation

in the nine months ended September 30, 2022 and 2021, operating expenses were $550,955 and $414,850 respectively.

The increase in expenses

in the nine month period ended September 30, 2022 period is primarily attributable to an increase in consulting and professional fees

of $47,734 and an increase in G&A expense of $82,503 over 2021 levels.

The increases are due to higher expenses due to inflationary

trends, as well as increased professional fees associated with raising capital to fund the Company’s operations.

in both periods, operating expenses were $324,583 for the three months ended March 31, 2023, compared to $198,282 for the three months

ended March 31, 2022.

This is primarily attributable to an increase in all general and administrative categories of approximately $30,000

primarily due to inflationary increases, and an increase consulting expenses of approximately $89,000 primarily due to expenses associated

with the SC Culinary transaction.

Other income and expense

Other expenses comprised of interest expense and the

change in the fair value of the derivative liability was $421,040 for the nine months ended September 30, 2022 compared to $347,747 during

the nine months ended September 30, 2021.

The increase in the 2022 period is due to a derivative liability of $109,411 in 2022 compared

to $-0- in the 2021 period, partially offset by a decline in interest expense of $36,118.

As a result of the foregoing during the nine months

ended September 30, 2022, we incurred a net loss of $827,805 and a net gain of $10,934 attributable to non-controlling interests in 2022,

compared to a net loss of $3,821,644 and a net profit of $10,286 attributable to non-controlling interests for the nine months ended September

The decrease in the net loss during the nine months ended September 30, 2022 is primarily attributable to $3,231,573 in stock

based compensation in the nine months ended September 30, 2021, compared to $5,170 in the nine months ended September 30, 2022.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $435,076

as of September 30, 2022.

The Company has historically financed its operations

through convertible notes and equity issuances.

The COVID-19 pandemic has caused significant disruptions

to the global financial markets.

The full impact of the COVID-19 outbreak continues to evolve, is highly uncertain and subject to change.

The Company continues to estimate the effects of the COVID-19 outbreak on its operations and financial condition.

While significant uncertainty

remains, the Company believes that the COVID-19 outbreak will continue to have a negative impact on the ability to raise financing and

access capital.

Other expenses comprised

of interest expense, financing fees, loss on the extinguishment of debt, and derivative liabilities were $477,687 for the three months

ended March 31, 2023, compared to $2,293 during the three months ended March 31, 2022.

The increase in the 2023 period is attributable

to the issuance of 6,000,000 commitment shares issued to lenders valued at $198,000 and due to the loss of $168,060 on the extinguishment

of dent and a change of $66,342 on derivative liabilities.

As a result of the foregoing,

during the three months ended March 31, 2023, we incurred a net loss of $952,381 and a net loss of $950,498 attributable to non-controlling

interests, compared to a net loss of $153,094 and a net loss of $2,889 attributable to non-controlling interests for the three months

ended March 31, 2022.

and Capital Resources

On March 31, 2023, we had $34,255 in cash and cash

Net cash used in operating activities was $290,238

during the nine months ended September 30, 2022, compared to net cash used of $317,079 during the nine months ended September 30, 2021.

The increased net cash used in operating activities for the 2022 period compared to 2021 is primarily attributable to a decrease in profitability

of approximately $232,564 net of non-cash stock based compensation in the 2022 period.

during the three months ended March 31, 2023, compared to net cash used of $119,390 during the three months ended March 31, 2022.

increase in net cash used in operating activities is primarily attributable to significantly increased losses in 2023 period.

Net cash provided by financing activities was $-0-

for the nine months ended September 30, 2022, compared to $295,000 during the nine months ended September 30, 2021.

The increase in net

cash provided by financing activities is primarily attributable to proceeds of $550,000 from the sale of convertible notes, and $250,000

of proceeds from a note payable in the 2022 period, compared to the sales of common stock and preferred stock in private offering for

proceeds of $295,000 in the nine months ended September 30, 2021.

for the three months ended March 31, 2023, compared to $5,000 during the three months ended March 31, 2022.

The decrease in net cash provided

by financing activities is primarily attributable to proceeds of $5,000 in 2022 for the sale of Preferred C stock compared to $-0- during

the 2023 period.

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.

We currently believe that we can open at least two additional restaurants for approximately

There can be no assurances that additional financing,

36 unchanged sentences

of the need to make estimates about the effects of matters that are inherently uncertain.

Our significant accounting policies are more

fully discussed in Note 2 to our unaudited financial statements contained herein.

See notes to our financial statements, Note

2 – Summary Of Significant Accounting Policies.

Recent Accounting Pronouncements

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis