10-Q: Kindcard Reports Wider Losses, Control Weaknesses

Sentiment:

Quarterly Report 22 September 2025 2:26 PM

Kindcard, Inc. reported a significant increase in net loss for the six months ended July 31, 2025, alongside a growing working capital deficit and identified material weaknesses in internal controls.

Delay expectedThe proprietary payment processing DEB Platform, which entered into a development contract on December 21, 2021, is still in testing and is only anticipated to go into production in the second quarter of FY 2026.An Advisory Agreement related to the compliance and state licensing program for the Deb Platform, effective May 25, 2022, was suspended as of January 31, 2023, and placed on hold until the Deb Platform is released.

Capital raiseThe company intends to fund its business by way of private placements.The company intends to fund its business by advances from related parties.On June 18, 2025, 5,160,799 shares of common stock were issued to a consultant in exchange for consulting services.A 1% Convertible Promissory Note for $296,498 was issued to RMR Management Group LLC (CEO's company) on September 15, 2023, convertible at RMR's option into common stock at $0.01 per share.Promissory notes totaling $24,669 and $37,505 were issued to RMR Management Group LLC for expenses paid and loans, with maturity dates extended to December 31, 2025.A 6% Promissory Note for $75,000 was issued to RMR Management Group LLC on May 17, 2024.

Worse than expectedNet loss for the six months ended July 31, 2025, significantly increased to $233,544 from $173,587 in the prior year, indicating deteriorating profitability.The working capital deficit grew to $1,010,913, highlighting severe liquidity issues.Total liabilities increased by over $100,000 in six months, further straining the company's financial position.Management concluded that disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting.The company explicitly states "substantial doubt as to the Company's ability to continue as a going concern."

Summary

Net loss for the six months ended July 31, 2025, was $233,544, a substantial increase from $173,587 for the same period in 2024.
Working capital deficit increased to $1,010,913 as of July 31, 2025, compared to $929,357 at January 31, 2025.
Total liabilities rose to $1,240,933 at July 31, 2025, from $1,132,511 at January 31, 2025.
Revenue for the six months ended July 31, 2025, increased to $176,521 from $166,793 in the prior year period.
The company issued 5,160,799 shares of common stock for consulting services on June 18, 2025.
Management concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses in internal controls over financial reporting.
The proprietary Deb Platform, currently in testing, is anticipated to go into production in the second quarter of fiscal year 2026.

Sentiment

Score: 2

Explanation: The company faces significant financial challenges, including widening losses, a substantial working capital deficit, and material weaknesses in internal controls. The explicit 'going concern' warning and heavy reliance on related party financing indicate a precarious financial position, despite some revenue growth. The delay in the Deb Platform's production further adds to the negative sentiment.

Positives

Total revenue increased to $176,521 for the six months ended July 31, 2025, compared to $166,793 for the same period in 2024.
Gross profit increased to $137,821 for the six months ended July 31, 2025, from $126,459 in the prior year period.
Cash balance slightly increased to $9,285 at July 31, 2025, from $9,089 at January 31, 2025.

Negatives

Net loss significantly widened to $233,544 for the six months ended July 31, 2025, from $173,587 for the same period in 2024.
Working capital deficit increased to $1,010,913 at July 31, 2025.
Total liabilities increased to $1,240,933 at July 31, 2025, from $1,132,511 at January 31, 2025.
General and Administrative Expenses rose substantially to $349,646 for the six months ended July 31, 2025, from $260,585 in the prior year period.
The company has an accumulated deficit of $1,655,678 at July 31, 2025.
Disclosure controls and procedures were deemed not effective due to material weaknesses in internal controls over financial reporting.
Significant reliance on related party financing, with $342,173 owed to the CEO's company (RMR Management Group LLC) as of July 31, 2025.

Risks

Substantial doubt about the company's ability to continue as a going concern due to ongoing operating losses and the need for additional funding.
Material weaknesses in internal controls over financial reporting, indicating a risk of misstatements in financial reporting.
Reliance on private placements and advances from related parties for funding, which may not be sufficient or sustainable.
The proprietary Deb Platform, a key technology, is still in testing and not yet in production, posing a risk to future revenue generation.
Potential for dilution of existing shareholders due to future capital raises, including convertible notes held by related parties.
Uncertainty regarding a settlement arrangement with the Sellers of Kindcard MA and Croesus Holdings Corp due to failure to deliver certain Tendercard Assets.

Future Outlook

The company anticipates requiring additional financing to fully implement its plan of operations until it generates more revenue. Its proprietary DEB Platform is currently in testing and is expected to go into production in the second quarter of fiscal year 2026. The company intends to fund its business through private placements and advances from related parties.

Management Comments

"The Company believes that mobile wallet technology will ultimately grow to become the preferred method for merchants and consumers to transact at the point of sale, and it is our goal to capture significant market share from the mobile wallet segment through our proprietary consumer app and merchant services platform, Pay with Deb."
"The Company is dedicated to providing universal access to digital payment tools for all entities, persons, and governments, who accept or pay with money."
"Combined with excellent customer service, the Company aims to grow its user base and merchant network exponentially over the next two years."

Industry Context

Kindcard operates in the FinTech and PayTech sectors, focusing on alternative Closed-Loop payment solutions and mobile wallet technology. The company aims to capture market share in the growing mobile wallet segment, competing with other digital payment providers and traditional gift card solutions. Its Tendercard platform offers gift card and loyalty programs to small and mid-sized businesses, while the Deb Platform is designed for broader digital payment processing.

Comparison to Industry Standards

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weakness	Management concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to the existence of material weaknesses in internal controls over financial reporting.	2025-07-31	Increases risk of financial misstatement and reduces investor confidence.

Related Party Transactions

Owed $342,173 to the CEO's company, RMR Management Group LLC, as of July 31, 2025.
A 1% Convertible Promissory Note for $296,498 was issued to RMR Management Group LLC on September 15, 2023, convertible into common stock at $0.01 per share.
Promissory Note for $24,669 issued to RMR Management Group LLC on May 1, 2024, with a 10% interest rate and extended maturity to December 31, 2025.
Additional short-term loans totaling $37,505 from RMR Management Group LLC during the period ended January 31, 2025, with interest rates from 6% to 10% and extended maturity to December 31, 2025.
A 6% Promissory Note for $75,000 issued to RMR Management Group LLC on May 17, 2024, with monthly installments.
An executive of the company provided a non-interest bearing revolving credit account for working capital, with a balance of $4,925 owed at July 31, 2025.

Stakeholder Impact

Shareholders: Potential for significant dilution from convertible notes and future capital raises; increased risk due to going concern warning and internal control weaknesses; uncertainty regarding the value of their investment.
Creditors: Increased risk due to the company's substantial liabilities, working capital deficit, and going concern warning.
Employees: Potential uncertainty regarding job security given the company's financial challenges and reliance on external funding.
Customers/Partners: Potential impact on service continuity or platform development if financial issues persist or the Deb Platform launch is further delayed.

Next Steps

Raise additional capital through private placements and related party advances.
Bring the proprietary DEB Platform into production in the second quarter of FY 2026.
Address and remediate material weaknesses in internal controls over financial reporting.
Negotiate a settlement arrangement with the Sellers regarding undelivered Tendercard Assets.

Key Dates

Date	Description
2016-11-18	KindCard, Inc. (f/k/a MWF Global Inc.) incorporated in Nevada.
2021-06-01	RMR Management LLC purchased 54,000,000 shares of common stock, becoming the Majority Stockholder.
2021-06-07	Company entered into a Stock Purchase Agreement to acquire intellectual property and operational assets of Tendercard division and 100% of Kindcard MA shares.
2021-06-16	Michael Rosen appointed as a Director of the Company.
2021-06-30	William D. Mejia resigned; Michael Rosen appointed sole officer.
2021-07-09	Company filed Certificate of Amendment for name change to Kindcard, Inc.
2021-08-16	Closing of the Stock Purchase Agreement.
2021-08-26	Tendercard, Inc., a wholly owned subsidiary, incorporated in Nevada.
2021-09-21	FINRA implemented the name change, symbol changed to KCRDD for 20 business days.
2021-12-21	Company entered into a contract to develop its proprietary payment processing DEB Platform.
2022-01-14	Deb, Inc., a wholly owned subsidiary, incorporated in Nevada.
2022-05-25	Company and an advisor entered into an Advisory Agreement for compliance and state licensing program development.
2023-01-26	Issued 6,500,000 shares to Brian Schultz and 3,500,000 shares to Nicholas Cardoso for advisory services.
2023-01-31	Agreement with advisor for compliance program suspended; $7,500 in accrued expenses expected to be paid in Q2 FY2025.
2023-04-14	SBA loan installment payments of $731 began.
2023-06-06	Company and a consultant entered into a consulting agreement to issue 675,000 restricted shares.
2023-06-20	Accredited investor purchased 500,000 restricted shares for $25,000.
2023-08-01	Effective date of consulting agreement with a consultant for 200,000 restricted shares.
2023-08-09	Company and a consultant entered into a consulting agreement for 200,000 restricted shares.
2023-08-28	Issued 50,000 shares of common stock pursuant to a consulting agreement.
2023-09-15	Company issued a 1% Convertible Promissory Note for $296,498 to RMR Management Group LLC.
2024-01-09	Consulting agreement for 200,000 shares terminated, no further shares to be issued.
2024-03-15	Company entered into an SBA accommodation plan with reduced installment payments of $73.
2024-05-01	Company issued a Promissory Note for $24,669 to RMR Management Group LLC.
2024-05-17	Company issued a 6% Promissory Note for $75,000 to RMR Management Group LLC.
2025-01-31	Fiscal year end.
2025-03-15	SBA accommodation plan extended for an additional six months with installment payments of $366.
2025-06-18	Company issued 5,160,799 shares of common stock to a consultant for services.
2025-07-31	End of the quarterly period covered by this report.
2025-09-22	Date of filing of this Quarterly Report on Form 10-Q.
2025-11-16	Maturity date of the $75,000 promissory note to RMR Management Group LLC.
2025-12-31	Extended maturity date for several short-term loans from RMR Management Group LLC.

Recommendation

strong sell

The company exhibits severe financial distress, marked by a widening net loss, a substantial working capital deficit, and an explicit "going concern" warning. The identified material weaknesses in internal controls raise significant concerns about financial reporting reliability. Heavy reliance on related party financing, coupled with the delayed production of the key Deb Platform, indicates a high-risk investment profile. Despite some revenue growth, the overall financial health and operational challenges suggest a strong likelihood of further value erosion for shareholders.

Keywords

FinTech, PayTech, mobile wallet, gift card, loyalty platform, SEC filing, 10-Q, Kindcard, KCRD, financial reporting, internal controls, going concern, related party transactions

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