UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


                

For the quarterly period ended March 31, 2017


OR


 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _________ to __________


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  

(Address of Principal Executive Offices)

 


M4M 3H3

(Zip Code)

 

 

 

 

 

 

(416) 357-0399

(Registrant's telephone number, including area code)


N/A

 (Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 x       No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer              

¨

Accelerated filer                         

¨

Non-accelerated filer           

¨

Smaller reporting company    

x


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 number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of May 12, 2017, the issuer had 406,217,690 shares of its common stock issued and outstanding, par value $0.0001 per share.



1





TWO HANDS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2017



TABLE OF CONTENTS


PART I

 

PAGE

Item 1.

Financial Statements (Unaudited)

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

15

Item 4.

Controls and Procedures

15

PART II

 

 

Item 1.

Legal Proceedings

16

Item 1A.

Risk Factors

16

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

16

Item 3.

Defaults Upon Senior Securities

16

Item 4.

Mining Safety Disclosures

16

Item 5.

Other Information

16

Item 6.

Exhibits

17

 

Signatures

18







2





PART I - FINANCIAL INFORMATION


Item 1. Financial Statements.


TWO HANDS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31, 2017

 

December 31, 2016

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash

 

$

112

 

$

1,280

 

Accounts and sundry receivable, net

 

--

 

 

10,188

 

 

Total current assets                       

 

112

 

 

11,468

 

 

 

 

 

 

 

 

Total assets                                         

 

$

112

 

$

11,468

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

133,527

 

$

38,231

 

Convertible notes, net of unamortized debt discount of $21,686 and $26,173, respectively

 

143,077

 

 

135,979

 

Notes payable

 

125,064

 

 

105,048

 

Due to related party   

 

16,125

 

 

14,799

 

 

Total current liabilities      

 

417,793

 

 

294,057

 

 

 

 

 

 

 

 

Total liabilities                              

 

417,793

 

 

294,057

 

 

 

 

 

 

 

 

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

 

Stock payable

 

5,843

 

 

5,468

 

Additional paid-in capital                        

 

23,247,917

 

 

23,247,917

 

Accumulated deficit

 

(23,712,062)

 

 

(23,576,595)

 

Total stockholders’ deficit

 

(417,681)

 

 

(282,589)

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

$

112

 

$

11,468



The accompanying footnotes are an integral part of these financial statements.    







3





TWO HANDS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


 

For the three months ended March 31, 2017

 

For the three months ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

-- 

 

 

$

64,874 

 

 

 

Cost of sales

 

-- 

 

 

12,792 

 

 

 

 Gross profit

 

-- 

 

 

52,082 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

   General and administrative

127,995 

 

 

119,838 

 

 

 

   Share-based compensation - services

-- 

 

 

70,000 

 

 

 

   Share-based compensation - salaries

375 

 

 

1,250 

 

 

 

Total expenses

 

128,370 

 

 

191,088 

 

 

 

Loss from operations

 

(128,370)

 

 

(139,006)

 

 

 

 

 

 

 

 

 

 

 

 

Other income (loss)

 

 

 

 

 

 

 

 

Accretion of debt discount and interest expense

 

(7,097)

 

 

(18,151)

 

 

 

 

 

(7,097)

 

 

(18,151)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

$

(135,467)

 

 

$

(157,157)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic

 

$

(0.00)

 

 

$

(0.14)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic

406,217,690

 

1,138,860

 

 







The accompanying footnotes are an integral part of these financial statements.    








4





TWO HANDS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

For the three months ended March 31, 2017

 

For the three months ended March 31, 2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss for the year                          

 

 

$

(135,467)

 

 

$

(157,157)

 

 

Adjustments to reconcile net loss

to cash used in operating activities

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

-- 

 

 

58 

 

 

 

Stock issued for services and salary                 

 

 

375 

 

 

71,250 

 

 

 

Accretion of debt discount

 

 

7,097

 

 

18,151 

 

 

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

10,188

 

 

(37,899)

 

 

 

Increase in prepaid expenses

 

 

--

 

 

5,575

 

 

 

Increase in deferred revenue

 

 

--

 

 

(10,288) 

 

 

 

Increase in accounts payable and accrued liabilities            

 

 

95,304

 

 

96,836 

 

 

 

Net cash (used in) operating  activities                                     

 

 

(22,503)

 

 

(13,474)

 

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

 

 

 

 

Repayment on advances

 

 

--

 

 

(1,549)

 

 

 

Advances by related party         

 

 

5,439

 

 

3,403 

 

 

 

Repayment of advances by related party                

 

 

(4,120)

 

 

(2,567)

 

 

 

Proceeds from notes payable

 

 

20,016 

 

 

14,758 

 

 

 

Net cash provided by financing  activities         

 

 

21,335 

 

 

14,045 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash                           

 

 

(1,168) 

 

 

571 

 

 

 

 

 

 

 

 

 

 

 

Cash, beginning of the period                

 

 

1,280 

 

 

23 

 

 

 

 

 

 

 

 

 

 

 

Cash, end of the period                

 

 

$

112 

 

 

$

594 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

Cash paid during the period

 

 

Interest paid

 

 

$

-- 

 

 

$

-- 

 

 

 

Income tax paid

 

 

$

-- 

 

 

$

-- 

 








The accompanying footnotes are an integral part of these financial statements.    










5





TWO HANDS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION


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”) and moved offices to our new California address with Cigar and 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 2017.   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 accompanying unaudited financial statements of Two Hands Corporation have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2016 of Two Hands Corporation in our Form 10-K filed on March 31, 2017.


The interim financial statements present the balance sheets, statements of operations and cash flows of Two Hands Corporation.  The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.


The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of March 31, 2017 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature.  Interim results are not necessarily indicative of results of operations for the full year.


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.  Currently, the Company does not have significant operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company has an accumulated deficit at March 31, 2017 of $23,712,062. 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.



6





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.


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. Net sales under certain long-term contracts for product design, which may provide for periodic payments, are recognized under the percentage-of-completion method. Estimated cost-at-completion for these contracts are reviewed on a routine periodic basis, and adjustments are made periodically to the estimated cost-at-completion, based on actual costs incurred, progress made, and estimates of the costs required to complete the contractual requirements. When the estimated cost-at-completion exceeds the contract value, the contract is written down to its net realizable value, and the loss resulting from cost overruns is immediately recognized.


To properly match net sales with costs, certain contracts may have revenue recognized in excess of billings (unbilled revenues), and other contracts may have billings in excess of net sales recognized (customer deposits). Under long-term contracts, the prerequisites for billing the customer for periodic payments generally involve the Company's achievement of contractually specific, objective milestones.


Revenue for services contracts will be recognized under a proportional performance model if the following criteria are met (i) the arrangement provides for periodic billings as services are provided (ii) the customer receives value as the services as rendered, not just upon the completion of the services and (iii) the customer need not re-perform services that it has already received if it terminates the service contract early and hires another service provider to complete the service deliverable. If these criteria are not met, the Company will recognize revenue on the service contracts using the completed contract method.


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. There were no potentially dilutive securities outstanding during the periods presented.



7





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.


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


In accordance with the requirements of FASB ASC 820, Fair Value Measurements and Disclosures, and FASB ASC 825, Financial Instruments, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date.  The statement establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs.  The statement requires fair value measurements be classified and disclosed in one of the following categories:


Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant inputs to the valuation model are unobservable.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.



8





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 is currently in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.


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 is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.


In March 2016, the FASB issued the ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled.  The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period.  The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.


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.




9




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 condensed consolidated statement of operations includes interest expense of $643 and $1,318 for the three months ended March 31, 2017 and 2016, respectively.  At March 31, 2017 and December 31, 2016 the carrying amount of the June 10, 2014 Note is $13,694 (face value of $15,660 less $1,966 unamortized discount) and $13,050, 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 condensed 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 condensed consolidated statement of operations includes interest expense of $6,454 and $8,677 for the three months ended March 31, 2017 and 2016, respectively. At March 31, 2017 and December 31, 2016 the carrying amount of the September 1, 2016 Note is $129,383 (face value of $149,103 less $19,720 unamortized discount) and $122,929, respectively.


NOTE 4 – NOTES PAYABLE


As of March 31, 2017 and December 31, 2016 notes payable due to The Cellular Connection Limited totaling $125,064 and $105,048, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment.


NOTE 5 – RELATED PARTY TRANSACTIONS


As of March 31, 2017 and December 31, 2016 advances of $16,125 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.


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 50,000,000 shares of Common Stock of the Company 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 15,000,000 shares of Common Stock of the Company and an annual salary of $360,000 payable monthly on the first day of each month from available funds.



10





NOTE 6 - 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.


NOTE 7 – SUBSEQUENT EVENTS


In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2017 to the date these condensed consolidated financial statements were issue, and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements.































11





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


This report on Form 10-Q 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 our Form 10-K filed on March 29, 2016, 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 report, and in our Form 10-K filed on March 29, 2016.


BUSINESS OVERVIEW

 

We incorporated on April 3, 2009 as Two Hands Corporation (formerly Innovative Product Opportunities, Inc.) under the laws of the State of Delaware. We are currently in the development stage. We expect to incur losses in the foreseeable future due to significant costs associated with our business start-up, developing our business and costs associated with on-going operations. Our business is to be a product development participating in the creation of products, from hand sketches and design through prototyping and construction.


On March 1, 2012 the company entered into a license agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) (“Cigar & Spirits”) and moved offices to our new California address with Cigar and Spirits. The agreement grants 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. The Company has not earned revenues from rights acquired under this license agreement. On July 7, 2013, the Company received notice from Cigar & Spirits that the license agreement would be cancelled effective 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 2017.   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.



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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.


“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 2017.


RESULTS OF OPERATIONS


COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016


REVENUES


Our revenue for the three months ended March 31, 2017 was $0, compared to $64,874 for the three months ended March 31, 2016. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer and shareholders.

 

COSTS OF GOODS SOLD


Our cost of sales for three months ended March 31, 2017 was $0 compared to $12,792 for the three months ended March 31, 2016.


OPERATING EXPENSES


Our general and administrative expense for the three months ended March 31, 2017 was $127,995, compared to $119,838 for the three months ended March 31, 2016, respectively. The expenses can be primarily attributed to our need to pay for officer compensation, professional fees, transfer agent and investment relations. During the three months ended March 31, 2017, no shares of common stock and stock payable of the Company were issued for consulting services and salary. During the three months ended March 31, 2016, we issued 25,000 shares of common stock of the Company valued at $70,000 for consulting services.


OTHER INCOME (EXPENSE)


Accretion of debt discount for the three months ended March 31, 2017 was $7,097, compared to $18,151 for the three months ended March 31, 2016.


NET INCOME/LOSS


Our net loss for the three months ended March 31, 2017 was $135,467, compared to $157,157 for the three months ended March 31, 2016, respectively. Our losses during the three months ended March 31, 2017 and 2016 are due to costs associated with professional fees, our transfer agent, investor relations, bad debt and stock-based compensation for services.




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LIQUIDITY AND CAPITAL RESOURCES


LIQUIDITY


As of March 31, 2017, we had cash of $112 and total liabilities of $417,793.  Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations.

 

The Company’s condensed 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 three months ended March 31, 2017, the Company incurred a net loss of $135,467 and used cash in operating activities of $22,503, and at March 31, 2017, had a stockholders’ deficit of $417,681. 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, 2016, 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.




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ITEM 3. 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 4T. CONTROLS AND PROCEDURES


EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES


As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in 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 United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.


We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2017, subject to obtaining additional financing: (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 above 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.


Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.


CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING


There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.



15





PART II - OTHER INFORMATION


ITEM 1. 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 our Company or our officers and directors in their capacity as such that could have a material impact on our operations or finances.


ITEM 1A. RISK FACTORS


A smaller reporting company is not required to provide the information required by this Item.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


During the quarter ended March 31, 2017, we did not have any unregistered sales of equity securities.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


During the quarter ended March 31, 2017, we did not have any defaults upon senior securities.

ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5. OTHER INFORMATION.


Not applicable.



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ITEM 6. EXHIBITS


 

 

 

Incorporated by reference

Exhibit

Exhibit Description

Filed herewith

Form

Period ending

Exhibit

Filing date

3.1

Certificate of Incorporation, dated April 3, 2009

(i)

S-1

 

3.1

6/22/2010

3.2

Bylaws, dated April 3, 2009

(ii)

S-1

 

3.2

6/22/2010

3.3

Certificate of Amendment to the Certificate of Incorporation, dated August 8, 2013

(iii)

10-Q

 

3.3

8/14/2013

4.1

Specimen Stock Certificate

(iv)

S-1

 

4.1

6/22/2010

4.2

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

10.1

Innovative Product Opportunities Inc. Trust Agreement

 

S-1

 

10.1

6/22/2010

31

 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

 

 

 

 

32

Certification of the Chief Executive Officer and Chief Financial 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

 

 

 

 



* In accordance with Regulation S-T, the XBRL-related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith and not “filed.”






17





SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

 

 

TWO HANDS CORPORATION

 

 

 

 

May 12, 2017

By:  /s/ Nadav Elituv

Nadav Elituv, President (Principal Executive Officer), Principal Financial Officer and Director

 

 

 

 




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EXHIBIT 31.1

  

 

TWO HANDS CORPORATION

OFFICER'S CERTIFICATE PURSUANT TO SECTION 302


 

 

I, Nadav Elituv, certify that:

  

1.   I have reviewed this Form 10-Q of TWO HANDS CORPORATION;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 


 

Dated: May 12, 2017

 




 

 

By:  /s/ Nadav Elituv  

Nadav Elituv

President (Principal Executive Officer), Principal Financial Officer and Director




EXHIBIT 32.1

 

 

 

TWO HANDS CORPORATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO SECTION 906 OF 

THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of TWO HANDS CORPORATION (the Registrant) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Nadav Elituv, Principal  Executive Officer and Principal Financial Officer of the Company, certify,  pursuant to 18 U.S.C.  ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

  

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

A signed original of this written statement required by Section 906 has been provided to Nadav Elituv and will be retained by TWO HANDS CORPORATION and furnished to the Securities and Exchange Commission or its staff upon request.

  

 

Dated:  May 12, 2017

 

 

By:  /s/ Nadav Elituv  

Nadav Elituv


President (Principal Executive Officer), Principal Financial Officer and Director