UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-167667
TWO HANDS CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware |
|
42-1770123 |
|
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
|
Incorporation or Organization) |
|
Identification No.) |
|
|
|
|
|
100 Broadview Avenue #300 Toronto, Ontario, Canada |
|
M4M 3H3 |
|
(Address of Principal Executive Offices) |
|
(Zip Code) |
|
|
|
|
(416) 357-0399
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer [ ] |
Accelerated filer [ ] |
|
Non-accelerated filer [ ] |
Smaller reporting company [X] |
|
Emerging Growth Company [ ] |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $18,587,319
As of March 27, 2018 the registrant had 451,217,690 outstanding shares of Common Stock.
Documents incorporated by reference: None.
2
TABLE OF CONTENTS
|
PART I |
|
Page |
|
Item 1. |
Business |
4 |
|
Item 1A. |
Risk Factors |
5 |
|
Item 1B. |
Unresolved Staff Comments |
8 |
|
Item 2. |
Properties |
8 |
|
Item 3. |
Legal Proceedings |
8 |
|
Item 4. |
Mine Safety Disclosures |
8 |
|
PART II |
|
|
|
Item 5. |
Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
9 |
|
Item 6. |
Selected Financial Data |
9 |
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 |
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
14 |
|
Item 8. |
Financial Statements and Supplementary Data |
14 |
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
29 |
|
Item 9A. |
Controls and Procedures |
29 |
|
Item 9B. |
Other Information |
29 |
|
PART III |
|
|
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
30 |
|
Item 11. |
Executive Compensation |
32 |
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
33 |
|
Item 13. |
Certain Relationships and Related Transactions and Director Independence |
34 |
|
Item 14. |
Principal Accountant Fees and Services |
34 |
|
PART IV |
|
|
|
Item 15. |
Exhibits, Financial Statement Schedules |
35 |
|
|
Signatures |
37 |
3
PART I
ITEM 1. BUSINESS
HISTORICAL DEVELOPMENT
Two Hands Corporation (formerly Innovative Product Opportunities Inc.) was incorporated on April 3, 2009 in the State of Delaware.
OUR BUSINESS
Two Hands Corporation (formerly Innovative Product Opportunities Inc.) (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
From inception (April 3, 2009) until June 30, 2014 our business was a product development firm creating products designed, prototyped and produced in numerous industries including consumer and household goods, office products, furniture, and toys
On March 1, 2012 the Company entered into a license agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) (“Cigar & Spirits”). The agreement granted the Company the right to market the products of Cigar & Spirits including but not limited to the sales, promotion, and advertising vehicles of the Magazine. On July 8, 2013, The Company received written notice that Cigar & Spirits will cancel the license agreement on August 1, 2013.
Since July 1, 2014, our business is a research and product development firm. Over the past few years we have specialized in computer vision and gesture recognition technologies. We have leveraged our relationship with our product development team of programmers and designers to implement our vision for building a state of the art co-parenting application due to launch in the second quarter of 2018. The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Ontario, Canada.
RESEARCH AND DEVELOPMENT
We have not spent any funds on research and development activities since our inception on April 3, 2009.
EMPLOYEES
As of March 27, 2018, we had one employee, Nadav Elituv, the Chief Executive Officer of the Company. We believe that our relations with our employee is good. All other services to the Company are provided by contractors who are primarily paid with stock-based compensation.
CUSTOMERS
We intend to market our services via trade and industry publications as well as internet marketing efforts. Many products developed are new and innovative that requires public recognition to realize potential. Where possible we plan to merge our efforts for both design and publishing to maximize our opportunities.
COMPETITION
We compete with other software developers and systems integrators who offer one or more services competitive with the service we intend to sell. The co-parenting application technology is competitive, characterized by the frequent introduction of new products and includes numerous domestic and foreign competitors, some of which are substantially larger and have greater financial and other resources than we do. We compete principally on the basis of offering quality products. Our competition includes:
·
2Houses
·
Our Family Wizard
4
PRODUCT DEVELOPMENT
We have suspended the work on interactive displays, and staging & lighting products. We have redeployed our resources to develop a co-parenting application that is currently in beta testing and is due to be launched in the second quarter of 2018.
MANUFACTURING AND PRODUCT SOURCING
Most supplies used in the manufacturing process are readily available from any number of local and international suppliers, at competitive prices. Delivery of product will vary depending on source and quantity required.
ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and other information included in this Form 10-K. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected and you may lose some or all of your investment. The trading price of our common stock could decline due to any of these risks, and you could lose all or a part of your investment. We cannot assure any investor that we will successfully address these risks. Prospective investors should carefully consider the following risk factors:
RISKS RELATED TO OUR BUSINESS
WE ARE A DEVELOPMENT STAGE ENTERPRISE THAT LACKS ANY OPERATING HISTORY OR REVENUES AND WE MAY NEVER GENERATE REVENUES OR BECOME PROFITABLE.
We are a development stage enterprise without financial resources and an operating history on which an investor can base its assessment of our business plan. We expect to incur losses in the foreseeable future due to significant costs associated with our business startup and development, including costs associated with our on-going operations. Our operations may never generate sufficient revenues to fund our continuing operations and we may never generate positive cash flow from our operations. Further, we may not attain or sustain profitability in any future period. If we do not successfully develop our business, you may lose all or part of your investment.
IF WE FAIL TO SUCCESSFULLY MANAGE OUR NEW PRODUCT DEVELOPMENT OR IF WE FAIL TO ANTICIPATE THE ISSUES ASSOCIATED WITH SUCH DEVELOPMENT OR EXPANSION, OUR BUSINESS MAY SUFFER.
We have not completed development on any product. Our ability to anticipate and manage a variety of issues associated with any new product development or market expansion, such as:
·
market acceptance;
·
effective management of inventory levels in line with anticipated
Our business may suffer if we fail to successfully anticipate and manage these issues associated with product development and magazine publishing and you may lose all or part of your investment.
OUR INDEPENDENT AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Currently, we have limited assets, nor do we have operations or a source of revenue sufficient to cover our operational costs and allow us to continue as a going concern. Since our inception on April 3, 2009 through December 31, 2017, we have an accumulated deficit of $24,454,462. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement our business plan. We are currently funding our initial operations by way of loans from our Chief Executive Officer and others and through the issuance of common stock in exchange for services. Accordingly, these factors raise substantial doubt as to our ability to continue as a going concern.
5
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO FULFILL OUR BUSINESS PLAN.
We require substantial funds to further develop and implement our business plan over the next 12 months we expect to expend approximately $50,000 in cash for legal, accounting and related services and an additional $150,000 in cash to implement our business plan. To meet our future obligations, from time to time, we may need to issue debt or shares of our common stock or other equity instruments such as warrants. However, we may not be able to obtain additional financing when needed, or if available, such financing may not be on commercially reasonable terms. If we are unable to obtain financing when needed, we may be forced to curtail our planned development, which would negatively affect the value of your investment.
WE CURRENTLY HAVE ONLY LIMITED CUSTOMERS AND IF WE CANNOT ATTRACT CUSTOMERS WE WILL NOT GENERATE REVENUES AND OUR BUSINESS WILL FAIL.
As of March 27, 2018, we have not generated any profit. We may not be able to successfully attract other customers and in the event that we do attract customers, we may not be able to maintain such customers and as a result, we will not generate revenues and our business will fail. If our business fails, you will lose all or part of your investment.
WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR PLANNED GROWTH, WHICH WOULD ADVERSELY AFFECT OUR BUSINESS AND COULD RESULT IN INCREASING COSTS AS WELL AS A DECREASE IN OUR STOCK PRICE.
We intend to establish a customer base and develop new products for them. To manage our anticipated growth, we must continue to improve our operational and financial systems and expand, train, retain and manage our employee base to meet new opportunities. Because of the registration of our securities, we are subject to reporting and disclosure obligations, and we anticipate that we will hire additional finance and administrative personnel to address these obligations. In addition, the anticipated growth of our business will place a significant strain on our existing managerial and financial resources. If we cannot effectively manage our growth, our business may be harmed.
WE WILL INCUR INCREASED COSTS AND DEMANDS UPON MANAGEMENT AS A RESULT OF COMPLYING WITH THE LAWS AND REGULATIONS AFFECTING PUBLIC COMPANIES, WHICH COULD HARM OUR OPERATING RESULTS.
As a public company, we will incur significant additional legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also will incur costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission ("SEC"). The expenses incurred by reporting companies for reporting and corporate governance purposes have increased dramatically in recent years. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We are unable to currently estimate these costs with any degree of certainty. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage previously available. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers. Currently we do not have a system of checks and balances in place covering our financial operations and investors will bear the economic risk associated with the lack of such oversight.
BECAUSE WE DO NOT HAVE AN AUDIT COMMITTEE, SHAREHOLDERS WILL HAVE TO RELY ON THE DIRECTORS, WHO ARE NOT INDEPENDENT, TO PERFORM THESE FUNCTIONS.
We do not have an audit or compensation committee comprised of independent directors. These functions are performed by the board of directors as a whole. The members of the Board of Directors are not independent directors. Thus, there is a potential conflict in that the board members are also engaged in management and participate in decisions concerning management compensation and audit issues that may affect management performance.
6
WE MAY HAVE ADDITIONAL CAPITAL REQUIREMENTS TO CONTINUE OUR OPERATIONS BUT THEY MIGHT NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR AT ALL, AND IF UNAVAILABLE OUR ABILITY TO RUN OUR BUSINESS WILL BE IMPAIRED.
We have limited working capital. As a result, it may be impossible to expand our operations. If we are unable to generate sufficient revenues to cover operating expenses or raise additional funds after the twelve months or during the twelve months should we determine to undertake additional projects, outside of our current business plan, we will be unlikely to expand our business operations.
RISKS RELATED TO OUR STOCK
OUR COMMON STOCK MAY BE DIFFICULT OR IMPOSSIBLE TO SELL YOUR SHARES FOR THE FORESEEABLE FUTURE.
Our shares are listed on the Over-the-Counter Bulletin Board, trading symbol TWOH.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT WHICH MAY MAKE OUR STOCK LESS LIQUID AND MAKE IT HARDER FOR INVESTORS TO BUY AND SELL OUR SHARES.
Trading in our securities is subject to the SEC's "penny stock" rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL SHARES OF OUR COMMON STOCK AT OR ABOVE THE PRICE YOU PAID.
We cannot predict the extent to which a trading market will remain or how liquid that market might become. The selling stockholders will sell their shares at such prices and such times as they determine. It is possible that they may not sell their shares at all. The selling stockholders will sell at prevailing market prices or privately negotiated prices. The trading price of our common stock is therefore likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:
-
Quarterly variations in our results of operations or those of our competitors.
-
Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments.
-
The emergence of new sales or publishing channels in which we are unable to compete effectively.
-
Commencement of, or our involvement in, litigation.
-
Any major change in our board or management.
-
General economic conditions and slow or negative growth of related markets.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
7
WE MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK WHICH WOULD REDUCE INVESTORS' PERCENTAGE OF OWNERSHIP, DECREASE THE VALUE OF INVESTORS' INVESTMENT AND MAY DILUTE OUR SHARE VALUE.
Our Certificate of Incorporation authorizes the issuance of 3,000,000,000 shares of common stock and 1,000,000 shares of preferred stock. In the past, we have been able to pay for some of the services we require through the issuance of our common stock. We may continue to compensate our consultants and other staff with common stock in order to preserve our cash for other uses. The future issuance of authorized common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the common stock held by our investors, may decrease the value of our investors' investment and might have an adverse effect on any trading market for our common stock, if one ever exists.
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE, AND, AS A RESULT, STOCKHOLDERS WILL NEED TO SELL SHARES TO REALIZE A RETURN ON THEIR INVESTMENT.
We have not declared or paid any cash dividends on our capital stock since inception. We intend to retain any future earnings to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any.
YOU MAY NOT BE ABLE TO SELL YOUR SHARES IN OUR COMPANY
Our securities are subject to the penny stock rules, which apply generally to equity securities with a price of less than $5.00 per share, other than securities registered on certain national exchanges or quoted on the NASDAQ system. The penny stock rules reduce the level of trading activity and the secondary market for a security that becomes subject to the penny stock rules. Therefore, investors may find it more difficult to sell their Shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES.
Our principal executive offices are located at 100 Broadview Avenue #300, Toronto, Ontario Canada M4M 3H3. Our offices are adequate for our current needs.
ITEM 3. LEGAL PROCEEDINGS
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AN ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Our common stock has traded over the counter and has been quoted on the Over-The-Counter Bulletin Board since February 17, 2010. The stock currently trades under the symbol "TWOH.OB." The following table sets forth the high and low bid prices for our common stock for each quarter during the last two fiscal years, so far as information is reported, as quoted on the Over-the-Counter Bulletin Board. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
NUMBER OF STOCKHOLDERS
The number of record holders of our common stock as of March 27, 2018 was approximately 31, not including nominees of beneficial owners.
DIVIDEND POLICY
We have not paid dividends on our common stock and we do not anticipate paying dividends on our common stock in the foreseeable future. We intend to retain our future earnings, if any, to finance the growth of our business.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of December 31, 2017, we do not have any securities authorized for issuance under equity compensation plans.
SECURITIES ISSUED UNDER STOCK OPTION PLANS
During the fiscal year ended December 31, 2017, we did not issue securities under any Stock Option Plans.
RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended December 31, 2017, the Company did not issue unregistered securities.
ITEM 6. SELECTED FINANCIAL DATA.
As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-K contains "forward-looking statements" that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this Form 10-K and other filings we make with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
The following discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this Form 10-K.
BUSINESS OVERVIEW
Two Hands Corporation (formerly Innovative Product Opportunities Inc.) (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
From inception (April 3, 2009) until June 30, 2014 our business was a product development firm creating products designed, prototyped and produced in numerous industries including consumer and household goods, office products, furniture, and toys
On March 1, 2012 the Company entered into a license agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) (“Cigar & Spirits”). The agreement granted the Company the right to market the products of Cigar & Spirits including but not limited to the sales, promotion, and advertising vehicles of the Magazine. On July 8, 2013, The Company received written notice that Cigar & Spirits will cancel the license agreement on August 1, 2013.
Since July 1, 2014, our business is a research and product development firm. Over the past few years we have specialized in computer vision and gesture recognition technologies. We have leveraged our relationship with our product development team of programmers and designers to implement our vision for building a state of the art co-parenting application due to launch in the second quarter of 2018. The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Ontario, Canada.
MANAGEMENT'S STRATEGIC VISION
We strive to create a complete co-parenting solution. It is our ultimate goal to improve the lives of families especially the lives of children that are affected by a divorce.
“Two Hands” is the product of years of searching for the ideal solution that will reduce the stress and worries of co-parenting. Our application fulfills our mission and vision that focuses on organization and communication to improve family relationships despite a divorce.
We would like to be recognized as the company that improves family relationships and improved organization and communication between family members.
Our mission is to equip parents with the best tools to be able to communicate with each other in a divorced or separated household. “Two Hands App” began as an idea to help ease the worries of parents when it comes to co-parenting after a divorce or a separation.
A personal experience has led the creator of the app to come up with a better solution that uses the internet foremost to provide better communication and organization between divorced parties.
After years of collaborating with fellow parents and co-parents, and through the help of our designers and programmers, “Two Hands App” was conceived. It has all the important features that any parent, co-parent or caregiver would ever need to deal with any kind of activity concerning children. “Two Hands App” focuses on reducing the stress of parents and their children.
10
“Two Hands App” is accessed primarily through the internet which makes it easier to connect to people and manage one or two households at the same time. We have made it possible for the application to be accessed from all kinds of devices and have made it easier to understand even for someone who is not tech savvy.
“Two Hands App” is under development. Our team of designers and developers understand that along with constant changes in technology, the lives of families and children are also changing as well. There is no doubt that we keep abreast with life’s constant changes to provide the best service for co-parents everywhere.
We plan to launch our application in the second quarter of 2018.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventories, impairment of long-term assets, stock-based compensation, income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies, among others, may be impacted significantly by judgment, assumptions and estimates used in the preparation of the Financial Statements:
STOCK-BASED COMPENSATION
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period.
The Company also grants awards to non-employees and determines the fair value of such stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is completed.
The Company has not adopted a stock option plan and has not granted any stock options.
REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance effective upon an entity’s adoption of ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company will adopt ASU 2014-09 in the first quarter of fiscal 2018. ASU 2014-09 is not expected to have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.
11
In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company does not anticipate a material impact to its consolidated financial statements on adopting ASU 2016-02. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016.
REVENUES
Our revenue for the year ended December 31, 2017 was $43,466, compared to $133,605 for the year ended December 31, 2016. The decrease in revenue is due to the Company concentrating on the development of the Two Hands App. Revenue earned in 2016 relates to installation of a touch and gesture interactive bar-top experience.
COSTS OF GOODS SOLD
Our cost of sales for year ended December 31, 2017 was $0 compared to $42,914 for the year ended December 31, 2016. Cost of sales decrease to $0 in 2017 because revenue generated in 2017 was for services only, whereas, revenue generated in 2016 included both services and sale of goods.
OPERATING EXPENSES
Our general and administrative expense for the year ended December 31, 2017 was $428,799, compared to $502,502 for the year ended December 31, 2016, respectively. The expenses can be primarily attributed to our need to pay for officer compensation, professional fees, transfer agent and investment relations. The decrease in general and administrative expense is primarily due to the decrease in officer compensation payable in cash. During the year ended December 31, 2017, CEO compensation expense of $463,750 for 5,003,750 shares of common stock to be issued of the Company was recorded. During the year ended December 31, 2016, we issued 120,075,000 shares of common stock of the Company valued at $259,250 for consulting services.
OTHER INCOME (EXPENSE)
Gain on extinguishment of the debt for the year ended December 31, 2017 was $0, compared to $6,366 for the year ended December 31, 2016. Interest expense for the year ended December 31, 2017 was $28,784, compared to $101,200 for the year ended December 31, 2016. The decrease in interest expense is primarily due to the conversion of principal and interest of various convertible notes on September 1, 2016.
NET INCOME/LOSS
Our net loss for the year ended December 31, 2017 was $877,867, compared to $769,887 for the year ended December 31, 2016, respectively. Our losses during the year ended December 31, 2017 and 2016 are due to costs associated with professional fees, our transfer agent, investor relations and stock-based compensation for services.
12
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
As of December 31, 2017, we had cash of $18,771 and total liabilities of $717,171. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer, shareholders and others.
The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the year ended December 31, 2017, the Company incurred a net loss of $877,867 and used cash in operating activities of $161,414, and at December 31, 2017, had a stockholders’ deficit of $696,706. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending December 31, 2017, expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.
Over the next 12 months we expect to expend approximately $50,000 in cash for legal, accounting and related services and an additional $150,000 in cash to implement our business plan. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer, note holders, shareholders and others in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. We expect that we will be required to raise an additional $200,000 in cash by issuing new debt or equity for operating costs in order to implement our business plan in the next twelve months. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer, note holders, shareholders and others. The loans from our Chief Executive Officer, note holders, shareholders and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter and has been quoted on the Over-The Counter Bulletin Board since February 17, 2011. The stock currently trades under the symbol “TWOH.OB.”
OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related notes are included as part of this Annual Report.
14
TWO HANDS CORPORATION
INDEX
December 31, 2017 and 2016
|
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSOLIDATED FINANCIAL STATEMENTS |
16 |
|
Consolidated Balance Sheets |
17 |
|
Consolidated Statements of Operations |
18 |
|
Consolidated Statement of Stockholders' Equity (Deficit) |
19 |
|
Consolidated Statements of Cash Flows |
20 |
|
Notes to Consolidated Financial Statements |
21 |
|
|
|
15
![[TWOH10KDEC3120172.GIF]](https://content.edgar-online.com/edgar_conv_img/2018/03/29/0001511164-18-000188_TWOH10KDEC3120172.GIF)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Two Hands Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Two Hands Corporation (“the Company”) as of December 31, 2017, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2017.
Salt Lake City, UT
March 29, 2018
![[TWOH10KDEC3120174.GIF]](https://content.edgar-online.com/edgar_conv_img/2018/03/29/0001511164-18-000188_TWOH10KDEC3120174.GIF)
16
![[TWOH10KDEC3120176.GIF]](https://content.edgar-online.com/edgar_conv_img/2018/03/29/0001511164-18-000188_TWOH10KDEC3120176.GIF)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Two Hands Corporation
We have audited the accompanying consolidated balance sheet of Two Hands Corporation (f/y/a Innovative Product Opportunities, Inc.) (the “Company”) as of December 31, 2016, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Two Hands Corporation as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has negative working capital and has incurred losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
/s/ KLJ & Associates, LLP
KLJ & Associates, LLP |
|
|
Edina,, MN |
|
|
March 31, 2017 |
|
5201 Eden Ave
Suite 300
Edina, MN 55436
630.277.2330
17
|
Two Hands Corporation |
|||||||
|
CONSOLIDATED BALANCE SHEETS |
|||||||
|
|
|||||||
|
|
|
|
December 31, 2017 |
|
December 31, 2016 |
||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash |
|
|
$18,771 |
|
|
$1,280 |
|
|
Accounts and sundry receivable, net |
|
|
-- |
|
|
10,188 |
|
|
|
Total current assets |
|
18,771 |
|
|
11,468 |
|
|
Property and equipment, net |
|
1,694 |
|
|
- |
|
|
Total assets |
|
|
$20,465 |
|
|
$11,468 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
||
|
|
Accounts payable and accrued liabilities |
|
$251,679 |
|
|
$38,231 |
|
|
|
Convertible notes, net of unamortized debt discount of $0 and $26,173, respectively |
|
164,763 |
|
|
135,979 |
|
|
|
Notes payable |
|
258,995 |
|
|
105,048 |
|
|
|
Due to related parties |
|
41,734 |
|
|
14,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
717,171 |
|
|
294,057 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
717,171 |
|
|
294,057 |
||
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit |
|
|
|
|
|
||
|
|
Preferred stock; $0.001 par value; 1,000,000 shares authorized, -0 - issued and outstanding |
|
- |
|
|
- |
|
|
|
Common stock; $0.0001 par value; 3,000,000,000 shares authorized, 406,217,690 and 406,217,690 shares issued and outstanding, respectively |
|
40,621 |
|
|
40,621 |
|
|
|
Shares to be issued |
|
469,218 |
|
|
5,468 |
|
|
|
Additional paid-in-capital |
|
23,247,917 |
|
|
23,247,917 |
|
|
|
Accumulated deficit |
|
(24,454,462) |
|
|
(23,576,595) |
|
|
|
Total stockholders’ deficit |
|
(696,706) |
|
|
(282,589) |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit |
|
$20,465 |
|
|
$11,468 |
||
The accompanying footnotes are an integral part of these financial statements.
18
|
Two Hands Corporation |
||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||
|
|
||||||
|
|
For the year ended December 31, 2017 |
|
For the year ended December 31, 2016 |
|||
|
|
|
|
|
|
|
|
|
Sales |
|
$ 43,466 |
|
|
$ 133,605 |
|
|
Cost of sales |
|
-- |
|
|
42,914 |
|
|
Gross profit |
|
43,466 |
|
|
90,691 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Bad debts |
|
-- |
|
|
3,992 |
|
|
General and administrative |
428,799 |
|
|
502,502 |
||
|
Share-based compensation - services |
-- |
|
|
256,000 |
||
|
Share-based compensation - salaries |
463,750 |
|
|
3,250 |
||
|
Total operating expenses |
|
892,549 |
|
|
765,744 |
|
|
Loss from operations |
|
(849,083) |
|
|
(675,053) |
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
-- |
|
|
6,366 |
|
|
Accretion of debt discount and interest expense |
|
(28,784) |
|
|
(101,200) |
|
|
Total other income (expense) |
|
(28,784) |
|
|
(94,834) |
|
|
|
|
|
|
|
|
|
|
Net loss for the year |
|
$ (877,867) |
|
|
$ (769,887) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic |
|
$ (0.00) |
|
|
$ (0.01) |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding – basic |
|
406,217,690 |
|
|
133,347,669 |
|
The accompanying footnotes are an integral part of these financial statements.
19
The accompanying footnotes are an integral part of these financial statements.
20
The accompanying footnotes are an integral part of these financial statements.
21
Two Hands Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017 and 2016
NOTE 1 - NATURE OF OPERATIONS
Two Hands Corporation (formerly Innovative Product Opportunities Inc.) (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
From inception (April 3, 2009) until June 30, 2014 our business was a product development firm creating products designed, prototyped and produced in numerous industries including consumer and household goods, office products, furniture, and toys
On March 1, 2012 the Company entered into a license agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) (“Cigar & Spirits”). The agreement granted the Company the right to market the products of Cigar & Spirits including but not limited to the sales, promotion, and advertising vehicles of the Magazine. On July 8, 2013, The Company received written notice that Cigar & Spirits will cancel the license agreement on August 1, 2013.
Since July 1, 2014, our business is a research and product development firm. Over the past few years we have specialized in computer vision and gesture recognition technologies. We have leveraged our relationship with our product development team of programmers and designers to implement our vision for building a state of the art co-parenting application due to launch in the second quarter of 2018. The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Ontario, Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements present the balance sheets and statements of operations, stockholders' equity and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the year ended December 31, 2017, the Company incurred a net loss of $877,867 and used cash in operating activities of $161,414, and at December 31, 2017, had a stockholders’ deficit of $696,706. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in this situation. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. The Company is funding its initial operations by way of loans from its Chief Executive Office and others, and the use of equity to pay some operating expenses. The Company's officers and directors have committed to advancing certain operating costs of the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, I8 Interactive Corporation. All intercompany transactions and balances have been eliminated in consolidation.
22
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized.
The costs of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized in the results from operations. Depreciation is provided over the estimated useful lives of the assets, which are as follows:
Computer equipment
50% declining balance
In the year of acquisition, one half the normal rate of depreciation is provided.
REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740, Income Taxes. Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
NET LOSS PER SHARE
Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period increased to include the number of additional common shares that would have been outstanding if potentially dilutive securities had been issued. At December 31, 2017 and 2016, we excluded the common stock issuable upon conversion of convertible promissory notes of 206,301,000 shares and 180,201,000 shares, respectively, as their effect would have been anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in the Company’s functional currency which is the United States dollars. In accordance with FASB ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' equity (deficit), whereas gains or losses resulting from foreign currency transactions are included in results of operations.
23
STOCK-BASED COMPENSATION
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period.
The Company also grants awards to non-employees and determines the fair value of such stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is completed.
The Company has not adopted a stock option plan and has not granted any stock options.
COMPREHENSIVE INCOME (LOSS)
The Company has adopted ASC Topic 220 - Comprehensive Income, which establishes standards for reporting and the display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners or distributions to owners. Among other disclosures, Topic 220 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is displayed in the statement of stockholders' deficit and in the balance sheet as a component of stockholders' deficit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments such as cash, accounts and sundry receivable, accounts payable and accrued liabilities, convertible notes, notes payable and due to related parties are reported at cost, which approximates fair value due to the short term nature of these financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance effective upon an entity’s adoption of ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company will adopt ASU 2014-09 in the first quarter of fiscal 2018. ASU 2014-09 is not expected to have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company does not anticipate a material impact to its consolidated financial statements on adopting ASU 2016-02. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
24
NOTE 3 – CONVERTIBLE NOTES
On June 10, 2014, the Company agreed to amend and add certain terms to unsecured, non-interest bearing promissory notes payable on demand issued to The Cellular Connection Ltd. issued during the period from February 22, 2013 to June 10, 2014 with a total carrying value $42,189. Under the terms of the Side Letter Agreement, the issue price of the Note is $42,189 with a face value of $54,193 and interest rate 20% per year. The terms of the Note include a fixed conversion price of $0.40 per share of Company’s common stock and a maturity date of December 31, 2014. The amendment of the terms of the Note resulted in a beneficial conversion feature of $42,189. The beneficial conversion feature of $42,189 is included in additional paid-in capital. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. On June 20 and 26, 2014 the Company elected to convert $5,500 of principal into 13,750 shares of the Company's common stock. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2015, the face value increased by 20% and the maturity date was extended to December 31, 2015. From January 1 to December 31, 2015, the Company elected to convert $31,932 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 159,660 shares of common stock of the Company at a fixed conversion price of $0.20 per share. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2016, the face value increased by 20% and the maturity date was extended to December 31, 2016. On March 21, 2016 the Company elected to convert $16,750 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 83,750 shares of common stock of the Company at a fixed conversion price of $0.20 per share. On September 1, 2016 the Company elected to convert $2,000 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2017, the face value increased by 20% and the maturity date was extended to December 31, 2017. The consolidated statement of operations includes interest expense of $2,610 and $5,300 for the year ended December 31, 2017 and 2016, respectively. At December 31, 2017 and December 31, 2016 the carrying amount of the June 10, 2014 Note is $15,660 (face value of $15,660 less $0 unamortized discount) and $13,050, respectively.
On June 10, 2014, the Company entered into a Side Letter Agreement with Dorset Solutions Inc. to amend and add certain terms to invoices issued for services during the period from August 21, 2012 to May 17, 2014 with a total carrying value $17,150. Under the terms of the Side Letter Agreement, the issue price of the Note is $17,150 with a face value of $22,295 and interest rate 20% per year. The terms of the Note include a fixed conversion price of $0.40 per share of Company’s common stock and a maturity date of December 31, 2014. The amendment of the terms of the Note resulted in a beneficial conversion feature of $17,150. The beneficial conversion feature of $17,150 is included in additional paid-in capital. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2015, the face value increased by 20% and the maturity date was extended to December 31, 2015. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2016, the face value increased by 20% and the maturity date was extended to December 31, 2016. The consolidated statement of operations includes interest expense of $0 and $5,351 for the years ended December 31, 2017 and 2016, respectively.
On September 1, 2016, Dorset Solutions Inc. assigned the Side Letter Agreement dated June 10, 2014 and additional invoices for services from the period from May 19, 2015 to November 22, 2015 with a total carrying value $38,830 to Great Basin Management Inc. (“Great Basin”). In addition on September 1, 2016, the Company entered into a Side Letter Agreement with the Great Basin to amend and add certain terms to the Side Letter Agreement and to invoices issued for services. Under the terms of the amended Side Letter Agreement, the issue price of the Note is $32,464 and interest rate 20% per year. The terms of the Note include a fixed conversion price of $0.000812 per share of Company’s common stock and a maturity date of December 31, 2016. The amendment of the terms of the Note resulted in a beneficial conversion feature of $19,520. The beneficial conversion feature of $19,520 is included in additional paid-in capital. The modification of the Note has been accounted for as debt extinguishment and the issuance of a new debt instrument. Accordingly, in connection with extinguishment of the original debt, the Company recognized a $6,366 gain in the consolidated statement of operations. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. On September 1, 2016 the Company elected to convert $32,464 of principal and interest of the convertible note due to Great Basin into 40,000,000 shares of common stock of the Company at a fixed conversion price of $0.000812 per share. As a result, the convertible note was fully settled. The consolidated statement of operations includes interest expense of $19,520 for the year ended December 31, 2016.
25
On June 10, 2014, the Company entered into Side Letter Agreement with the Doug Clark, former Chief Executive Officer, to amend and add certain terms to the related party advances of $82,495 for the period from March 2009 to June 2014 and officer and director compensation accrued and unpaid of $137,000 for the period October 1, 2013 to May 19, 2014. Under the terms of the Side Letter Agreement, the issue price of the Note is $219,495 with a face value of $272,038 and interest rate 20% per year. The terms of the Note include a fixed conversion price of $0.40 per share of Company’s common stock and a maturity date of December 31, 2014. The amendment of the terms of the Note resulted in a beneficial conversion feature of $219,495. The beneficial conversion feature of $219,495 is included in additional paid-in capital. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2015, the face value increased by 20% and the maturity date was extended to December 31, 2015. From January 1 to December 31, 2015, the Company elected to convert $14,688 of principal and interest of a convertible note due to Doug Clark into 36,719 shares of common stock of the Company at a fixed conversion price of $0.40 per share. In accordance with the original terms of the Side Letter Agreement, the convertible note was renewed on January 1, 2016, the face value increased by 20% and the maturity date was extended to December 31, 2016. The consolidated statement of operations includes interest expense of $0 and $62,352 for the years ended December 31, 2017 and 2016, respectively.
On September 1, 2016, Doug Clark, former Chief Executive Officer and related party, assigned the Side Letter Agreement dated June 10, 2014 with a total carrying value $382,016 to DC Design Inc. (“DC Design”). In addition on September 1, 2016, the Company entered into an amended Side Letter Agreement with DC Design to amend and add certain terms to the Side Letter Agreement and advances from the period from June 25, 2014 to December 24, 2014. Under the terms of the amended Side Letter Agreement, the issue price of the Note is $174,252 and interest rate 20% per year. The terms of the Note include a fixed conversion price of $0.003 per share of Company’s common stock and a maturity date of December 31, 2017. The modification of the Note has been accounted for as debt extinguishment and the issuance of a new debt instrument. Accordingly, in connection with extinguishment of the original debt, the Company recognized a $207,764 gain with a related party as an increase in additional paid-in capital in the consolidated statement of equity. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. On September 1, 2016 the Company elected to convert $60,000 of principal and interest of the convertible note due to DC Design into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.003 per share. The consolidated statement of operations includes interest expense of $26,173 for the year ended December 31, 2016. At December 31, 2017 and 2016, the carrying amount of the September 1, 2016 Note is $149,102 (face value of $149,102 less $0 unamortized discount) and $122,929 (face value of $149,102 less $26,173 unamortized discount), respectively.
NOTE 4 - NOTES PAYABLE
As of December 31, 2017 and 2016, notes payable due to Stuart Turk and The Cellular Connection Limited, a corporation controlled by Stuart Turk, totaling $258,995 and $105,048, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment.
NOTE 5 – DUE TO RELATED PARTY
As of December 31, 2017 and December 31, 2016 advances of $41,734 and $14,799, respectively, were due to Nadav Elituv, the Company's Chief Executive Officer. The balance is non-interest bearing, unsecured and have no specified terms of repayment.
Employment Agreements
On July 1, 2015, the Company executed an employment agreement for the period from July 1, 2015 to June 30, 2016 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 25,000 shares of Common Stock of the Company with a fair value of $5,000 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On July 1, 2016, the Company executed an employment agreement for the period from July 1, 2016 to June 30, 2017 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 7,500 shares of Common Stock of the Company with a fair value of $1,500 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On July 1, 2017, the Company executed an employment agreement for the period from July 1, 2017 to June 30, 2018 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 10,000,000 shares of Common Stock of the Company with a fair value of $926,000 ($0.0926 per share).
Stock-based compensation – salaries expense related to these employment agreements for the years ended December 31, 2017 and 2016 is $463,750 and $3,250, respectively. Stock-based compensation – salaries expense is recognized ratably over the requisite service period.
26
NOTE 6 - INCOME TAXES
A reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax-expense as reported is as follows:
|
|
|
2017 |
|
2016 |
||
|
Net loss before income taxes per consolidated financial statements |
|
|
$ (877,867) |
|
|
$ (769,887) |
|
Income tax rate |
|
|
35% |
|
|
35% |
|
Income tax recovery |
|
|
(307,300) |
|
|
(268,800) |
|
Non-deductible share-based payments |
|
|
162,300 |
|
|
90,700 |
|
Non-deductible interest |
|
|
10,100 |
|
|
38,600 |
|
Valuation allowance change |
|
|
134,900 |
|
|
139,500 |
|
Income tax expense (recovery) |
|
|
$ -- |
|
|
$ -- |
The significant component of deferred income tax assets at December 31, 2017 and 2016 is as follows:
|
|
|
2017 |
|
2016 |
||
|
Net operating loss carry-forward |
|
|
$ 306,800 |
|
|
$ 373,300 |
|
Valuation allowance |
|
|
(306,800) |
|
|
(373,300) |
|
Net deferred income tax asset |
|
|
$ -- |
|
|
$ -- |
During the ended December 31, 2017, the deferred tax asset was decreased by $201,400 for the reduction in the enacted U.S Federal corporate tax rate to 21% in 2018.
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management’s judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.
As of December 31, 2017 and 2016 the Company has no unrecognized income tax benefits. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the year ended December 31, 2017 and 2016 and no interest or penalties have been accrued as of November December 31, 2017 and 2016. As of December 31, 2017 and 2016, the Company did not have any amounts recorded pertaining to uncertain tax positions.
The tax years from 2009 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.
NOTE 7 - STOCKHOLDERS' EQUITY
The Company is authorized to issue an aggregate of 3,000,000,000 common shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.001 per share. No preferred shares have been issued.
On July 26, 2016, pursuant to stockholder consent, our Board of Directors authorized an amendment (the "Amendment") to our Certificate of Incorporation, as amended, to (i) change the name of the Company to Two Hands Corporation and (ii) effect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.0001, on a 1 for 2,000 basis (the "Reverse Stock Split"). We filed the Amendment with the Delaware Secretary of State on July 27, 2016 with an effective date of August 16, 2016.
On the Effective Date, each holder of common stock received 1 share of our common stock for each 2,000 shares of our common stock they own immediately prior to the Reverse Stock Split. We did not issue fractional shares in connection with the Reverse Stock Split. Fractional shares were rounded up to the nearest whole share. All share information has been revised to reflect the reverse stock split from the Company’s inception.
On March 21, 2016 the Company elected to convert $16,750 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 83,750 shares of common stock of the Company at a fixed conversion price of $0.20 per share.
27
On March 22, 2016, the Company agreed to issue 25,000 shares of common stock valued at $70,000 ($2.80 per share) to a consultant as stock-based compensation for development, implementation and maintenance of sound business strategies.
On March 22, 2016, the Company and Nadav Elituv, the Chief Executive Officer of the Company, agreed to cancel, for no consideration, 76,750 shares of common stock of the Company held by Nadav Elituv.
On June 1, 2016, the Company agreed to issue 50,000 shares of common stock valued at $30,000 ($0.60 per share) to a consultant as stock-based compensation for development, implementation and maintenance of sound business strategies.
On September 1, 2016, the Company agreed to issue 200,000,000 shares of common stock valued at $260,000 ($0.0013 per share) to settled accrued liabilities for salary due to the Nadav Elituv, the Chief Executive Officer of the Company.
On September 1, 2016, the Company agreed to issue 100,000,000 shares of common stock valued at $130,000 ($0.0013 per share) to several consultants as stock-based compensation for development, implementation and maintenance of sound business strategies.
On September 1, 2016, the Company agreed to issue 20,000,000 shares of common stock valued at $26,000 ($0.0013 per share) to a consultant as stock-based compensation for director’s fees.
On September 1, 2016 the Company elected to convert $32,464 of principal and interest of a convertible note due to Great Basin Management Inc. into 40,000,000 shares of common stock of the Company at a fixed conversion price of $0.000812 per share.
On September 1, 2016 the Company elected to convert $60,000 of principal and interest of a convertible note due to DC Design Inc. into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.003 per share.
On September 1, 2016 the Company elected to convert $2,000 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.0001 per share.
On November 7, 2016 the Company agreed to issue 5,000,000 shares of common stock to settled accrued liabilities of $251,047 for salary and stock payable of $282 due to the Nadav Elituv, the Chief Executive Officer of the Company.
Shares to be issued
As at December 31, 2017 and December 31, 2016, the Company had total shares to be issued for 5,031,092 shares of common stock and 27,342 shares of common stock, respectively, for stock-based compensation –salaries (see Note 5).
NOTE 8 – SUBSEQUENT EVENTS
On January 8, 2018, the Company entered into Side Letter Agreement (“Note”) with The Cellular Connection Ltd., to amend and add certain terms to the advances of $14,930 for the period from June 2014 and December 2017. Under the terms of the Note, the issue price of the Note is $14,930 with a face value of $17,916. The terms of the Note include a fixed conversion price of $0.0001 per share of Company’s common stock and a maturity date of December 31, 2018. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2019. The outstanding face value of the Note shall increase by another 20% on January 1, 2020 and again on each one year anniversary of the Note until the Note has been paid in full.
On January 8, 2018, the Company entered into Side Letter Agreement (“Note”) with Stuart Turk, to amend and add certain terms to the advances of $244,065 for the period from July 2014 and December 2017. Under the terms of the Note, the issue price of the Note is $244,065 with a face value of $292,878. The terms of the Note include a fixed conversion price of $0.0001 per share of Company’s common stock and a maturity date of December 31, 2018. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2019. The outstanding face value of the Note shall increase by another 20% on January 1, 2020 and again on each one year anniversary of the Note until the Note has been paid in full.
On February 7, 2018 the Company elected to convert $2,000 of principal and interest of a convertible note due to The Cellular Connection Ltd. into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.0001 per share.
On February 7, 2018, the Company agreed to issue 25,000,000 shares of common stock valued at $177,500 ($0.0071 per share) to settled accrued liabilities for salary due to the Nadav Elituv, the Chief Executive Officer of the Company.
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
We have had no changes in or disagreements with our accountants. None of our principal independent accountants have resigned or declined to stand for re-election.
ITEM 9A(T). CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2017. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2017, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2018: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in our internal control over financial reporting, which are included within disclosure controls and procedures, that occurred during our fiscal quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
29
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the name, age, positions and offices that each director and officer have held for the past five years as of December 31, 2017. Members of the Board are elected and serve for one year terms or until their successors are elected and qualify. Our executive officers are elected by and serve at the pleasure of our Board of Directors. There are no family relationships among our directors and executive officers.
|
Name |
Age |
Position |
|
Nadav Elituv |
54 |
President, Chairman, Chief Executive Officer and Director |
|
Grant Stummer |
51 |
Director |
|
|
|
|
BOARD OF DIRECTORS
Our board of directors consists of only one director. Directors serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.
The following is information on the business experience of our directors and executive officers:
BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS
Nadav Elituv has been our President, Chief Executive Officer and Director since June 2014. Mr. Elituv devotes a minimum of 40% of his working time to the affairs of our Company. Since August 2008, Mr. Elituv has serviced as the President and Founder of Imagin8. Imagin8 is a startup and leading developer of hand and body motion-based interactive digital technologies that are designed to enhance new consumer experiences from touch-screens to floor-screens. Mr. Elituv is the results-driven leader of an innovative digital technology enterprise, for over twenty years. With a track record for building, developing and motivating high-performance teams and is an expert in high-tech systems. This includes the design and implementation of computer-vision and gesture-recognition software. Mr. Elituv has solid career experience driving strategic initiatives and meeting critical business mandates.
Grant Stummer, has been our director since April 2009. Mr. Stummer is CEO of a private plastic injection tool and part manufacturer. Since 1992 he has worked his way to co-owner of the Mississauga based company. This niche ISO9001 certified plastics company produces complex components that are used worldwide in many industries. In the last 15 years he has tripled his sales and has implemented systems that have increased his profitability as a lean manufacturer. Mr. Stummer's knowledge and contacts in the plastic industry offer our company insight and direction from the industry.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
We are not aware of any material legal proceedings that have occurred within the past five years concerning any director, director nominee, or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We do not have any securities registered under Section 12 of the Exchange Act, as amended. Accordingly, our directors, executive officers, and stockholders beneficially owning more than 10% of our common stock are not required to comply with the reporting requirements of Section 16(a) of the Exchange Act.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We will provide a copy of our Code of Ethics to any person, free of charge, upon written request to Nadav Elituv at Two Hands Corporation, 100 Broadview Avenue #300, Toronto, Ontario, Canada M4M 3H3.
30
PROCEDURE FOR NOMINATING DIRECTORS
There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.
The Board of Directors will consider candidates for director positions that are recommended by any of our stockholders. The recommended candidate should be submitted to us in writing addressed to 100 Broadview Avenue #300, Toronto, Ontario, Canada M4M 3H3. The recommendation shall include the following information: name of candidate; address, phone, and fax number of candidate; a statement signed by the candidate certifying that the candidate wishes to be considered for nomination to our Board of Directors and stating why the candidate believes that he or she meets the director qualification criteria and would otherwise be a valuable addition to our Board of Directors; a summary of the candidate's work experience for the prior five years and the number of shares of our stock beneficially owned by the candidate.
The Board will evaluate the recommended candidate and will determine whether or not to proceed with the candidate in accordance with our procedures. We reserve the right to change our procedures at any time to comply with the requirements of applicable laws.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board's primary responsibility is to oversee management of our company and, in so doing, serve the best interests of our company and our stockholders. Our full Board of Directors performs all of the functions normally designated to an Audit Committee, Compensation Committee and Nominating Committee.
Although our Board does not have a separately-designated standing Audit Committee, our full Board of Directors performs the functions usually designated to an Audit Committee.
31
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
Summary Compensation Table
|
Name & Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|
Nadav Elituv, Principal Executive Officer, President, Chairman and Director |
2017 |
$ 180,000 |
$ - |
$ 463,750 |
$ - |
$ - |
$ - |
$ - |
$ 643,750 |
|
|
2016 |
$ 360,000 |
$ - |
$ 3,250 |
$ - |
$ - |
$ - |
$ - |
$ 363,250 |
|
|
|
|
|
|
|
|
|
|
|
|
Grant Stummer, Director |
2017 |
$ - |
$ - |
$ -- |
$ - |
$ - |
$ - |
$ - |
$ -- |
|
|
2016 |
$ - |
$ - |
$ 26,000 |
$ - |
$ - |
$ - |
$ - |
$ 26,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 1, 2015, the Company executed an employment agreement for the period from July 1, 2015 to June 30, 2016 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 25,000 shares of Common Stock of the Company with a fair value of $5,000 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On September 1, 2016, the Company agreed to issue 20,000,000 shares of common stock valued at $26,000 ($0.0013 per share) to Grant Stummer, Director as stock-based compensation for director’s fees.
On July 1, 2016, the Company executed an employment agreement for the period from July 1, 2016 to June 30, 2017 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 7,500 shares of Common Stock of the Company with a fair value of $1,500 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On July 1, 2017, the Company executed an employment agreement for the period from July 1, 2017 to June 30, 2018 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 10,000,000 shares of Common Stock of the Company with a fair value of $926,000 ($0.0926 per share).
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
At December 31, 2017, there were no unexercised options, no stock that has not vested and no equity incentive plan ward for each name executive officer.
We do not have any qualified or non-qualified defined benefit plans or nonqualified defined contribution plans or other deferred compensation plans. There are no contracts, agreements, plans or arrangements that provide for payment to our named executive officer following or in connection with the resignation, retirement or termination of the named executive officer, a change in control of our Company, or a change in the named executive officer's responsibilities following a change in control.
32
DIRECTOR COMPENSATION
On July 1, 2015, the Company executed an employment agreement for the period from July 1, 2015 to June 30, 2016 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 25,000 shares of Common Stock of the Company with a fair value of $5,000 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On September 1, 2016, the Company agreed to issue 20,000,000 shares of common stock valued at $26,000 ($0.0013 per share) to Grant Stummer, Director as stock-based compensation for director’s fees.
On July 1, 2016, the Company executed an employment agreement for the period from July 1, 2016 to June 30, 2017 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 7,500 shares of Common Stock of the Company with a fair value of $1,500 ($0.20 per share) and an annual salary of $360,000 payable monthly on the first day of each month from available funds.
On July 1, 2017, the Company executed an employment agreement for the period from July 1, 2017 to June 30, 2018 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 10,000,000 shares of Common Stock of the Company with a fair value of $926,000 ($0.0926 per share).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2017, Nadav Elituv and Grant Stummer served as our directors. We do not have a separately standing compensation committee and our board of directors did not perform similar functions as there was no executive compensation paid from our inception on April 3, 2009 through the end of our most recently completed fiscal year ended December 31, 2017. Our board of directors performs the functions of a compensation committee, however as of March 27, 2018, the board of directors does not have any set compensation.
During the fiscal year ended December 31, 2017, none of our executive officers:
·
served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire the board of directors) of another entity, one of whose executive officers served as a member of our board of directors;
·
served as a director of another entity, one of whose executive officers served as a member of our board of directors; or
·
served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire the board of directors) of another entity, one of whose executive officers served as a member of our board of directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 27, 2018, as to shares of our common stock beneficially owned by: (1) each person who is known by us to own beneficially more than 5% of our common stock, (2) our named executive officer listed in the summary compensation table, (3) each of our directors and (4) all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
33
|
|
Number of Shares Beneficially Owned |
|
Percentage of Class (2) |
|
Name and Address (1) |
Class |
||
|
Nadav Elituv |
230,490,703 |
Common |
51.08% |
|
|
|||
(1) The address of all individual directors and executive officers is c/o Two Hands Corporation, 100 Broadview Avenue #300, Toronto, Ontario, Canada M4M 3H3
(2) The number of shares of common stock issued and outstanding on March 27, 2018 was 451,217,690 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 2017 and 2016 advances of $41,734 and $13,975, respectively, were due to Nadav Elituv, the Company's Chief Executive Officer and at December 31, 2017 and 2016, advances of $0 and $824, respectively were due to 2130555 Ontario Limited, a company controlled by Nadav Elituv. The advances are non-interest bearing, unsecured and have no specified terms of repayment. The advances were used to pay for operational costs and services.
Our policy with regard to transactions with related persons or entities is that such transactions must be on terms no less favorable than could be obtained from non-related persons. The above-described transactions were conducted at arm’s length and on terms no less favorable than those that could be obtained from non-related person.
The above related party transactions are not necessarily indicative of the amounts that would have been incurred had a comparable transaction been entered into with an independent party. The terms of these transactions were more favorable than would have been attained if the transactions were negotiated at arm's length.
DIRECTOR INDEPENDENCE
As of March 27, 2018, Nadav Elituv and Grant Stummer serve as our directors. Mr. Elituv is not an independent director. Mr. Stummer is an "independent" director, as defined under the standards of independence set forth in the NASDAQ Marketplace Rules. We have our common stock quoted on the Over-the-Counter Bulletin Board, or OTCBB. The OTCBB does not require that a majority of our board of directors be independent.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Fees related to services performed by Sadler, Gibb & Associates, LLC and our former auditors, KLJ & Associates, LLP, for the years ended December 31, 2017 and 2016 were as follows:
|
|
2017 |
|
2016 |
|
Audit Fees |
$ 16,665 |
|
$ 10,000 |
|
Audit-Related Fees |
0 |
|
0 |
|
Tax Fees |
0 |
|
0 |
|
All Other Fees |
0 |
|
0 |
|
Total |
$ 16,665 |
|
$ 10,000 |
Pre-Approval Policies
The Board's policy is to pre-approve all audit services and all non-audit services before they commence, including the fees and terms thereof, to be provided by our independent auditor. All of the services provided during the fiscal year ended December 31, 2017 were pre-approved. No audit, review or attest services were approved in accordance with Section 2-01(c)(7)(i)(C) of Regulation S-X during the fiscal year ended December 31, 2017.
34
During the approval process, the Board considered the impact of the types of services and the related fees on the independence of the independent registered public accounting firm. The services and fees were deemed compatible with the maintenance of that firm's independence, including compliance with rules and regulations of the SEC. Throughout the year, the Board will review any revisions to the estimates of audit fees initially estimated for the engagement.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a. The following documents are filed as part of this annual report on Form 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017 and 2016
Consolidated Statement of Stockholders' Deficit for the years ended December 31, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
35
3. EXHIBITS
The exhibits listed below are filed with or incorporated by reference in this annual report on Form 10-K.
|
|
|
|
Incorporated by reference |
|||
|
Exhibit |
Exhibit Description |
Filed herewith |
Form |
Period ending |
Exhibit |
Filing date |
|
Certificate of Incorporation, dated April 3, 2009 |
(i) |
S-1 |
|
3.1 |
6/22/2010 |
|
|
Bylaws, dated April 3, 2009 |
(ii) |
S-1 |
|
3.2 |
6/22/2010 |
|
|
Certificate of Amendment to the Certificate of Incorporation, dated August 8, 2013 |
(iii) |
10-Q |
|
3.3 |
8/14/2013 |
|
|
Specimen Stock Certificate |
(iv) |
S-1 |
|
4.1 |
6/22/2010 |
|
|
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, dated August 6, 2013 |
|
10-Q |
|
4.2 |
8/14/2013 |
|
|
Innovative Product Opportunities Inc. Trust Agreement |
|
S-1 |
|
10.1 |
6/22/2010 |
|
|
Side Letter Agreement, The Cellular Connection Ltd., dated January 8, 2018 |
X |
|
|
|
|
|
|
Side Letter Agreement, Stuart Turk, dated January 8, 2018 |
X |
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
X |
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
X |
|
|
|
|
|
|
101.INS* |
XBRL Instance Document |
X |
|
|
|
|
|
101.SCH* |
XBRL Taxonomy Extension Schema Document |
X |
|
|
|
|
|
101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase Document |
X |
|
|
|
|
|
101.LAB* |
XBRL Taxonomy Extension Label Linkbase Document |
X |
|
|
|
|
|
101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document |
X |
|
|
|
|
|
101.DEF* |
XBRL Taxonomy Extension Definition Linkbase Definition |
X |
|
|
|
|
36
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
DATE |
TWO HANDS CORPORATION |
|
|
|
|
March 29, 2018 |
By: /s/ Nadav Elituv Nadav Elituv, President (Principal Executive Officer), Principal Financial Officer and Director |
|
|
|
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
|
SIGNATURE |
TITLE |
DATE |
|
|
|
|
|
|
|
|
|
By: /s/ Nadav Elituv Nadav Elituv |
President (Principal Executive Officer), Principal Financial Officer and Director |
March 29, 2018 |
|
|
|
|
|
|
|
|
37