10-Q: Two Hands Corp. Faces Going Concern Doubts Amid Pivot

Two Hands Corporation reported a net loss of $666,750 for the first six months of 2025 and disclosed substantial doubt about its ability to continue as a going concern, despite a strategic pivot in its food service business.

Summary

• Reported a net loss of $336,318 for the three months ended June 30, 2025, a decrease from $495,041 for the same period in 2024.
• Reported a net loss of $666,750 for the six months ended June 30, 2025, a decrease from $1,277,187 for the same period in 2024.
• Sales for the three and six months ended June 30, 2025, were $0, a significant drop from $226,289 and $389,766 respectively in 2024, following the asset sale of gocart.city and Grocery Originals on May 1, 2024.
• Cash on hand as of June 30, 2025, was $3,783, up from $1,733 at December 31, 2024.
• Used $348,705 in cash from operating activities for the six months ended June 30, 2025, an increase from $213,429 in the prior year period.
• Total liabilities as of June 30, 2025, were $3,464,169, down from $3,665,969 at December 31, 2024.
• Stockholders' deficit was $(3,419,073) as of June 30, 2025, an improvement from $(3,568,234) at December 31, 2024.
• Working capital deficiency was $(3,426,597) as of June 30, 2025, an improvement from $(3,580,522) at December 31, 2024.
• The company is taking steps to reinvigorate its legacy business and establish a new pathway in the same business space, while also evaluating the artisan crafted denim and premium combed Pima cotton yarns space.
• Engaged Chef Einat Admony and Vanessa Fayzulin to lead the revitalization of its food service division in June 2025.

Sentiment

Score: 1

Explanation: The company faces severe financial distress, including a going concern warning, zero revenue from core operations, and heavy reliance on dilutive financing and related-party advances. The strategic pivot is vague and unproven, indicating high operational and financial risk.

Positives

• Net loss decreased to $666,750 for the six months ended June 30, 2025, from $1,277,187 in the prior year, indicating a reduction in overall losses.
• Cash balance increased to $3,783 as of June 30, 2025, from $1,733 at December 31, 2024.
• Working capital deficiency improved to $(3,426,597) as of June 30, 2025, from $(3,580,522) at December 31, 2024.
• Total liabilities decreased to $3,464,169 as of June 30, 2025, from $3,665,969 at December 31, 2024.
• Successfully settled a line of credit of $850,972 by converting it into 170,194,403 shares of common stock on April 14, 2025, eliminating this debt.

Negatives

• Sales for the three and six months ended June 30, 2025, were $0, a 100% decrease from the prior year periods, due to the sale of gocart.city and Grocery Originals assets.
• Incurred a net loss of $666,750 for the six months ended June 30, 2025, and used $348,705 in cash from operating activities, raising substantial doubt about its ability to continue as a going concern.
• Accumulated deficit reached $95,186,898 as of June 30, 2025.
• Total assets significantly decreased to $45,096 as of June 30, 2025, from $97,735 at December 31, 2024.
• Professional fees increased by 193% to $254,193 for the six months ended June 30, 2025, primarily due to legal fees from compliance and debt agreement reviews.
• Amortization of debt discount and interest expense increased by 61% to $138,312 for the six months ended June 30, 2025.
• Incurred an initial derivative expense of $235,220 for the six months ended June 30, 2025, related to a convertible promissory note.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring net losses, negative cash flows from operations, and a significant accumulated deficit.
• The company is dependent on raising additional capital through common stock placement, with no assurance of success.
• Current funding relies on cash advances from the Chief Executive Officer, note holders, and shareholders, but there are no oral or written agreements for future funds.
• Inability to obtain financing or generate sufficient cash from operations could require the company to curtail or terminate its business entirely.
• Future capital raises through equity or convertible debt securities may result in significant dilution to existing stockholders.
• Issuance of debt securities could impose restrictions on operations and have rights senior to common stock holders.
• Material weaknesses in internal control over financial reporting exist, including inadequate segregation of duties, ineffective risk assessment, and insufficient written policies and procedures, which could adversely affect financial reporting reliability.
• Remediation efforts for internal control weaknesses are dependent on securing additional financing, which may not be successful.
• The company's revenue is derived from Canadian operations, and its consolidated financial statements are in U.S. dollars, exposing it to foreign exchange risk from changes in the U.S. dollar relative to the Canadian dollar.

Future Outlook

The company expects to spend approximately $300,000 in cash for operations, legal, accounting, and related services over the next 12 months to implement its business plan. It hopes to compensate independent contractors with stock-based compensation to conserve cash. The company is currently in discussions with investors for private loans and an equity line of credit to secure additional capital, acknowledging that the inability to raise funds could lead to curtailment or termination of operations.

Management Comments

• "In June 2025, the Company announced, after fully evaluating the legacy business, the Company is taking steps to reinvigorate it and establish a new pathway in the same business space."
• "The Company will also continue to evaluate the business in the artisan crafted denim and premium combed Pima cotton yarns space."
• "In June, 2025, the Issuer announced it has engaged renowned culinary expert Chef Einat Admony and accomplished executive Vanessa Fayzulin to lead the revitalization of its food service division."
• "We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others; however, we do not have any oral or written agreements with them or others to loan or advance funds to us."
• "We expect to be able to secure additional capital through advances from our Chief Executive Officer in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees, however, we do not have any written or oral agreements with any other third parties which require them to fund our operations."
• "We are currently in discussions with investors for private loans and an equity line of credit."

Industry Context

The company has undergone a significant strategic shift, divesting its online grocery delivery and brick-and-mortar grocery store assets (gocart.city and Grocery Originals) to focus solely on its wholesale food distribution branch, Cuore Food Services. This move positions the company in a more niche segment of the food industry, moving away from the highly competitive consumer-facing online grocery market. The announced intent to 'reinvigorate' the legacy business and explore the artisan crafted denim and premium combed Pima cotton yarns space suggests a broad and potentially unfocused strategy, especially given the prior cessation of work on its co-parenting and 'Gone' applications. The engagement of culinary experts for the food service division indicates an attempt to specialize and add value within its remaining food business.

Comparison to Industry Standards

• The company's complete cessation of sales revenue from its primary grocery operations (gocart.city and Grocery Originals) in Q2 2025, following their sale, makes direct comparison to established grocery delivery or retail benchmarks challenging. Companies like Instacart or Amazon Fresh, while larger, operate on a different scale and business model (marketplace vs. asset ownership).
• The pivot to solely Cuore Food Services (wholesale food distribution) places the company in a B2B segment. Without specific financial metrics for Cuore Food Services alone, it's difficult to assess its performance against wholesale food distributors like Sysco or US Foods, which operate at a much larger scale and have established supply chains and client bases.
• The mention of evaluating the artisan crafted denim and premium combed Pima cotton yarns space introduces a completely unrelated industry, making direct comparisons to its current or former food business irrelevant. This diversification, if pursued, would require entirely different industry benchmarks and competitive analysis, such as comparing to premium textile manufacturers or fashion brands.
• The company's significant accumulated deficit of $95.2 million and ongoing net losses, coupled with minimal cash reserves ($3,783), are far below industry standards for sustainable operations in either the food distribution or textile sectors, which typically require substantial working capital and investment.
• The reliance on related-party advances and the continuous issuance of highly dilutive common stock to settle debt and expenses are not standard practices for healthy, publicly traded companies and indicate severe financial distress compared to industry peers that typically access traditional capital markets.

Management Changes

Corporate Governance

Legal Proceedings

• The company may be involved from time to time in ordinary litigation, negotiation, and settlement matters that are not expected to have a material effect on operations or finances.
• No pending or threatened litigation against the company or its officers and directors that could have a material impact on operations or finances are currently known.

Related Party Transactions

• A non-redeemable convertible note with a carrying value of $100,000 was assigned by Jordan Turk to Emil Assentato (Chief Executive Officer) on December 30, 2024. As of June 30, 2025, the carrying amount of this note is $109,918.
• Notes payable to Emil Assentato (Chief Executive Officer) totaled $284,350 as of June 30, 2025, comprising $278,100 in advances and $6,250 in interest. These notes are unsecured, bear 8% annual interest, and are due on demand.
• During the six months ended June 30, 2024, the company issued advances of $53,428 to Nadav Elituv (former CEO) for expenses paid on behalf of the company.
• Accrued salary of $405,754 was due to Nadav Elituv for services provided during the six months ended June 30, 2024.
• On February 26, 2024, the company issued 8,000,000 shares of common stock with a fair value of $109,600 to settle $296,000 (CAD $400,000) of accrued salary and expenses due to Nadav Elituv.
• A consulting agreement with 2130555 Ontario Limited, a company controlled by Nadav Elituv, for CAD $24,000 per month was in effect from January 1, 2024, to December 31, 2024, and was terminated at the end of 2024.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from ongoing and potential future issuance of common stock to settle debt and raise capital. The going concern warning and lack of revenue pose substantial risk to investment value.
• **Creditors**: Promissory notes and related-party notes are unsecured, increasing risk of non-repayment given the company's financial instability and going concern issues.
• **Employees/Management**: Compensation for officers and directors is a significant expense, and the company hopes to use stock-based compensation for contractors, which could affect cash flow for other operational needs.
• **Customers**: The sale of gocart.city and Grocery Originals means former customers of these services are no longer served by the company. Cuore Food Services customers (businesses) may face uncertainty regarding the company's long-term viability.
• **Suppliers**: The company's liquidity issues and reliance on related-party funding could pose risks to timely payments to suppliers, although the filing mentions efforts to manage accounts payable.

Next Steps

• Implement a business plan over the next 12 months, with an expected cash expenditure of approximately $300,000 for operations, legal, accounting, and related services.
• Seek to compensate independent contractors with stock-based compensation to conserve cash.
• Continue discussions with investors for private loans and an equity line of credit.
• Appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management, subject to obtaining additional financing.
• Adopt sufficient written policies and procedures for accounting and financial reporting, subject to obtaining additional financing.

Key Dates

Recommendation

The company is in a precarious financial position, evidenced by a going concern warning, zero revenue from its core business activities after an asset sale, and a minimal cash balance. Its strategy to 'reinvigorate' a legacy business and explore unrelated ventures like denim and yarns appears unfocused and lacks clear financial projections. The heavy reliance on related-party advances and highly dilutive stock issuances to manage liabilities indicates severe liquidity issues. Material weaknesses in internal controls further compound the risk. Given the substantial operational and financial uncertainties, the stock carries extreme risk and is highly likely to decline.

Keywords

Food distribution, Wholesale food, Grocery business, SEC filing, 10-Q, Financial results, Going concern, Convertible notes, Related party transactions, Corporate governance, Liquidity, Capital raise, Two Hands Corporation