Notes
to Consolidated Financial Statements
March
31, 2020
(Unaudited)
Note
1 - Basis of Presentation
The
accompanying unaudited condensed financial statements of American International Holdings Corp. (“AMIH” or the “Company”)
have been prepared in accordance with the generally accepted accounting principles in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed
or omitted, pursuant to the applicable rules and regulations for interim financial reporting. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or
cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash
flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Annual Report on Form 10-K for the
year ended December 31, 2019. The interim results for the three months ended March 31, 2020 are not necessarily indicative of
the results to be expected for the year ending December 31, 2020 or for any future interim periods.
Impact
of COVID-19 Pandemic on Consolidated Financial Statements. The outbreak of the 2019 novel coronavirus disease (“COVID-19”),
which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health
and governmental authorities to contain and combat its outbreak and spread has severely impacted the U.S. and world economies,
the market for health spa services, nutrition supplements and our other business offerings during the end of the first quarter
of 2020, and continuing through the second and third quarters of 2020. Government mandated ‘stay-at-home’ and similar
orders have to date, and may in the future, prevent us from staffing our spas and construction services, and prohibited us from
operating altogether. Specifically, as a result of COVID-19 and ‘stay-at-home’ and social distancing orders issued
in McKinney and The Woodlands, Texas, we had to close both of our MedSpas, VISSIA Mckinney and VISSIA Waterway, Inc., which were
closed effective March 10, 2020, and which resulted in both the loss of income and the loss of most of our workforce, who had
to be let go. Vissia Waterway, Inc. reopened effective June 21, 2020 and Vissia Mckinney is scheduled to reopen on or before July
31, 2020. Due to the termination of employees associated with the shutdown we were forced to expend resources to attract, hire
and train completely new staff for preparation of the re-launchings. Additionally, the operations of the MedSpas will continue
to be subject to potential additional shutdowns in the future in the event the number of COVID-19 positive people continues to
grow in McKinney and The Woodlands, Texas, and in the event local and state governments issue further ‘stay-at-home’,
work stoppage or similar social distancing orders. Although our MedSpas were forced to close, Legend Nutrition was able to remain
open as an essential business as we sold vitamins and other nutritional supplements. Though the store was able to remain open,
the store saw a deep decline in sales due to social distancing orders and decreases in customers who were willing to venture out
to brick and mortar establishments. Moving forward, even if our locations are able to continue to operate through the COVID-19
pandemic, we expect to deal with the loss of available employees due to health concerns which in the future may limit our ability
to operate. Separately, economic recessions, including those brought on by the COVID-19 outbreak may have a negative effect on
the demand for our services and our operating results. We have also experienced delays due to the COVID-19 outbreak in receiving
products and supplies which we need to operate. All of the above may be exacerbated in the future as the COVID-19 outbreak and
the governmental responses thereto continues. Furthermore, all of the above may be exacerbated due to the fact that all of our
operations currently take place in the state of Texas, which has recently experienced some of the largest increases in the number
of cases of, and the number of hospitalizations related to, COVID-19.
Note
2 - Organization, Ownership and Business
Prior
to May 31, 2018, the Company was a 93.2% owned subsidiary of American International Industries, Inc. (“American” or
“AMIN”) (OTC Pink: AMIN). Effective May 31, 2018, the Company issued 10,100,000 shares of restricted common stock.
As a result of the issuance of the common shares, a change in control occurred. American International Industries, Inc. ownership
decreased from 93.2% to 6.4%. No one individual or entity owns at least 50% of the outstanding shares of the Company. Effective
April 12, 2019, the Company changed its business focus to the services of medical spas.
On
April 12, 2019, the Company entered into a Share Exchange Agreement (the “Agreement”) with Novopelle Diamond, LLC
(“Novopelle”) and all three members of Novopelle, pursuant to which the Company issued 18,000,000 shares of the Company
common stock to the members (three individuals) of Novopelle Diamond, LLC (“Novopelle”), a Texas limited company,
to acquire 100% of the membership interests of Novopelle. The issuance of these shares represents a change in control of the Company.
Concurrent with the issuance, Jacob Cohen, Esteban Alexander and Alan Hernandez, representing the three former members of Novopelle,
were elected to the board of directors and to the office of Chief Executive Officer, Chief Operating Officer and Chief Marketing
officer of the Company, respectively. Everett Bassie and Charles Zeller resigned as board members of the Company. This transaction
was treated as a reverse acquisition for accounting purposes, with the Company remaining the parent company and Novopelle (which
has since been renamed VISSIA McKinney, LLC) becoming a wholly-owned subsidiary of the Company.
The
unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: VISSIA McKinney,
LLC (f/k/a Novopelle Diamond, LLC), VISSIA Waterway, Inc. (f/k/a Novopelle Waterway, Inc.), Novopelle Tyler, Inc., Legend
Nutrition, Inc., and Capitol City Solutions USA, Inc. All significant intercompany transactions and balances have been eliminated
in consolidation.
Note
3 - Recently Issued Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other
standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company
believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated
financial position or results of operations upon adoption.
In
February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU
No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key
information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and
leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements
to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For
public companies, the Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard
provides a number of optional practical expedients in transition. The Company elected the package of practical expedients, which
permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification
and initial direct costs; and all of the new standard’s available transition practical expedients.
During
the first quarter of 2020, the Company entered into two new lease agreements, each of which has a lease term of five years. Accordingly,
the Company recognized a right of use asset of $348,279 and operating lease liabilities of $348,279 at the beginning of the lease,
based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating
lease.
The
new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease
recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize
right-of-use (ROU) assets or lease liabilities.
In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480);
Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II)
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” to simplify the accounting for certain instruments
with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument
is indexed to its own stock, for purposes of determining liability or equity classification. Further, companies that provide earnings
per share (“EPS”) data will adjust the basic EPS calculation for the effect of the feature when triggered and will
also recognize the effect of the trigger within equity. The standard is effective for public companies for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this new
standard on January 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.
In
August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure
requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective
basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures
upon issuance while delaying adoption of the additional disclosures until their effective date. The Company adopted ASU No. 2018-13
effective on January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard
simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including
interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the
impact of adopting this standard on its consolidated financial statements.
In
June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718)”: Improvements to Nonemployee
Share-Based Payment Accounting. This ASU was issued to expend the scope of Topic 718 to include share-based payment transactions
for acquiring goods and services from nonemployees. Previously, these awards were recorded at the fair value of consideration
received or the fair value of the equity instruments issued and were measured at the earlier of the commitment date of the date
performance was completed. The amendments in this ASU require nonemployee share-based payment awards to be measured at the grant-date
fair value of the equity instrument. ASU 2018-07 was effective for fiscal years, including interim periods within those fiscal
years beginning after December 15, 2018. The Company adopted ASU 2018-07 effective on October 1, 2019 and it did not have a material
impact on the Company’s consolidated financial statements.
Note
4 – Property and Equipment
Property
and equipment was as follows at March 31, 2020 and December 31, 2019:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Leasehold improvements
|
|
$
|
117,542
|
|
|
$
|
102,264
|
|
Furniture & fixtures
|
|
|
40,819
|
|
|
|
23,115
|
|
Equipment
|
|
|
60,164
|
|
|
|
49,180
|
|
|
|
|
218,525
|
|
|
|
174,559
|
|
Less accumulated depreciation and amortization
|
|
|
30,081
|
|
|
|
19,744
|
|
Net property and equipment
|
|
$
|
188,444
|
|
|
$
|
154,815
|
|
During
the three months ended March 31, 2020, the Company’s fixed assets was increased by $43,966, which included leasehold improvements
of $15,278, furniture & fixtures of $17,704 and equipment of $10,984. Depreciation and amortization expense for the three
months ended March 31, 2020 and 2019 was $10,337 and $1,794, respectively.
Note
5 – Goodwill
As
of March 31, 2020, the Company had goodwill of $29,689 in connection with the acquisition of the assets in October 2019 associated
with and related to a retail vitamin, supplements and nutrition store located in McKinney, Texas.
Goodwill
is not amortized, but is evaluated for impairment annually or when indicators of a potential impairment are present. The annual
evaluation for impairment of goodwill is based on valuation models that incorporate assumptions and internal projections of expected
future cash flows and operating plans. The Company believes such assumptions are also comparable to those that would be used by
other marketplace participants. The Company determined no impairment adjustment was necessary for the periods presented.
Note
6 – Operating Right-of-Use Lease Liability
On
January 1, 2019, the Company adopted Accounting Standards Update No. 2016-2, Leases (Topic 842), as amended, which supersedes
the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities
and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosure surrounding the amount, timing
and uncertainty of cash flows arising from leasing arrangements.
As
of March 31, 2020, the Company had four (4) leasing agreements subject to Accounting Standards Codification (ASC) 842.
Location
1 – VISSIA Mckinney, LLC
On
January 1, 2019, the Company recognized an operating right-of-use asset in the amount $287,206 and an operating lease liability
in the amount of $294,774 in connection with Location 1. The lease term is eighty-four (84) months and expires in November 2025.
The
following is a schedule, by year, of maturities of lease liabilities as of March 31, 2020:
2020
|
|
|
40,549
|
|
2021
|
|
|
54,951
|
|
2022
|
|
|
55,854
|
|
2023
|
|
|
56,776
|
|
2024
|
|
|
57,715
|
|
2025
|
|
|
53,828
|
|
Total
undiscounted cash flows
|
|
|
319,673
|
|
Less
imputed interest (8%)
|
|
|
(88,184
|
)
|
Present
value of lease liability
|
|
$
|
231,489
|
|
Total
rental expense related to this location for the three months ended March 31, 2020 was $13,966. The operating lease right-of-use
asset net balance at March 31, 2020 related to this location was $222,189.
Location
2 – Legend Nutrition, Inc.
On
January 1, 2019, the Company recognized an operating right-of-use asset in the amount $68,334 and an operating lease liability
in the amount of $68,334 in connection with Location 2. The lease term is twenty-four (24) months and expires in December 2020.
The
following is a schedule, by year, of maturities of lease liabilities as of March 31, 2020:
2020
|
|
|
27,814
|
|
Total undiscounted cash flows
|
|
|
27,814
|
|
Less imputed interest (8%)
|
|
|
(3,458
|
)
|
Present value of lease liability
|
|
$
|
24,356
|
|
Total
rental expense related to this location for the three months ended March 31, 2020 was $9,211. The operating lease right-of-use
asset net balance at March 31, 2020 related to this location was $24,356.
Location
3 – VISSIA Waterway, Inc.
On
January 1, 2020, the Company recognized an operating right-of-use asset in the amount $234,485 and an operating lease liability
in the amount of $234,485 in connection with Location 3. The lease term is sixty (60) months and expires in December 2024.
The
following is a schedule, by year, of maturities of lease liabilities as of March 31, 2020:
2020
|
|
|
40,441
|
|
2021
|
|
|
55,540
|
|
2022
|
|
|
57,206
|
|
2023
|
|
|
58,922
|
|
2024
|
|
|
60,690
|
|
Total
undiscounted cash flows
|
|
|
272,799
|
|
Less
imputed interest (8%)
|
|
|
(51,617
|
)
|
Present
value of lease liability
|
|
$
|
221,182
|
|
Total
rental expense related to this location for the three months ended March 31, 2020 was $14,314. The operating lease right-of-use
asset net balance at March 31, 2020 related to this location was $220,349.
Location
4 – Capitol City Solutions USA, Inc.
On
January 1, 2020, the Company recognized an operating right-of-use asset in the amount of $113,794 and an operating lease liability
in the amount of $113,794 in connection with Location 4. The lease term is sixty-one (61) months and expires in January 2025.
The
following is a schedule, by year, of maturities of lease liabilities as of March 31, 2020:
2020
|
|
|
20,466
|
|
2021
|
|
|
27,288
|
|
2022
|
|
|
27,288
|
|
2023
|
|
|
27,288
|
|
2024
|
|
|
27,288
|
|
2025
|
|
|
2,274
|
|
Total
undiscounted cash flows
|
|
|
131,892
|
|
Less
imputed interest (8%)
|
|
|
(24,830
|
)
|
Present
value of lease liability
|
|
$
|
107,062
|
|
Total
rental expense related to this location for the three months ended March 31, 2020 was $6,822. The operating lease right-of-use
asset net balance at March 31, 2020 related to this location was $107,062.
Note
7 – Accrued Compensation for Related Parties
At
March 31, 2020, accrued compensation was $70,500, representing cash compensation for the Company’s executive officers.
Note
8 – Notes Payable
Notes
payable represents the following at March 31, 2020:
Note payable to a related party dated May 17, 2019 for $30,000, with interest at 5% per annum and due on April 30, 2020. The Note is unsecured and is currently past due.
|
|
$
|
30,000
|
(1)
|
|
|
|
|
|
Note payable to an individual dated July 8, 2019 for $40,000, with interest at 8% per annum and due on July 8, 2020. The Note is a convertible promissory note. The Note holder has the right to convert all or any portion of the principal amount and accrued interest due on the Note into the shares issued under the Company’s qualified Regulation A offering circular (the “Offering Statement”), at the offering price of such offering ($0.50 per share). The Note is currently past due.
|
|
|
40,000
|
(2)
|
|
|
|
|
|
Note payable to a financial group dated August 26, 2019 for $75,000, with interest at 12% per annum and due on August 26, 2020. The Note is a convertible promissory note in the event of default. The Note holder has the right to convert all or any portion of the principal amount and accrued interest due on the Note into the shares of the Company at the price equal to 50% of the lowest trading price on the primary trading market on which the Company’s common stock is quoted for the last ten (10) trading days immediately prior to but not including the conversion date.
|
|
|
75,000
|
|
Less: partial conversion
|
|
|
(51,070
|
)
|
|
|
|
23,930
|
(3)
|
|
|
|
|
|
Note payable to an unrelated party dated October 15, 2019 for $75,000, with interest at 10% per annum and due on July 15, 2020. The Note is a convertible promissory note. The Note holder has the right to convert all or any portion of the principal amount and accrued interest due on the Note into the shares under the Offering Statement at the offering price. Furthermore, the Company issued 10,000 shares of the Company’s common stock to the unrelated party investor as further consideration to enter into the loan with the Company.
|
|
|
75,000
|
(4)
|
|
|
|
|
|
Note payable of $78,750 to an unrelated party dated October 28, 2019 for cash of $75,000, with interest at 10% per annum and due on October 28, 2020. The Note is a convertible promissory note. The conversion price is equal to the lesser of (i) the price per share of common stock sold to investors in the Offering Statement ($0.50 per share), or (ii) a variable conversion price equal to 60% multiplied by the lowest trading price for the common stock during the ten (10) trading day period ending on the latest completed trading day prior to the conversion date, representing a discount rate of 40%.
|
|
|
78,750
|
(5)
|
|
|
|
|
|
Note payable of $78,750 to an unrelated party dated October 28, 2019 for cash of $75,000, with interest at 10% per annum and due on October 28, 2020. The Note is a convertible promissory note. The conversion price equals the lesser of (i) the price per share of common stock sold to investors in the Offering Statement ($0.50 per share), or (ii) a variable conversion price equal to 60% multiplied by the lowest trading price for the common stock during the ten (10) trading day period ending on the latest completed trading day prior to the conversion date, representing a discount rate of 40%.
|
|
|
78,750
|
(6)
|
|
|
|
|
|
Note payable of $78,750 to an unrelated party dated October 28, 2019 for cash of $75,000, with interest at 10% per annum and due on October 28, 2020. The Note is a convertible promissory note. The conversion price equals the lesser of (i) the price per share of common stock sold to investors in the Offering Statement ($0.50 per share), or (ii) a variable conversion price equal to 60% multiplied by the lowest trading price for the common stock during the ten (10) trading day period ending on the latest completed trading day prior to the conversion date, representing a discount rate of 40%.
|
|
|
78,750
|
(7)
|
|
|
|
|
|
On October 18, 2019, Legend Nutrition, Inc. (“Legend”), a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement with David Morales to acquire all of the assets associated with and related to a retail vitamin, supplements and nutrition store located in McKinney, Texas. Pursuant to the Asset Purchase Agreement, Legend purchased a variety of assets including software, contracts, bank and merchant accounts, products, inventory, computers, security systems and other intellectual properties (the “Assets”). For consideration of the Assets, Legend issued to Mr. Morales a promissory note in the amount of $75,000 bearing an interest rate of five percent (5%) per annum and with a maturity date of one year.
|
|
|
75,000
|
|
Less: partial repayment
|
|
|
(9,000
|
)
|
|
|
|
66,000
|
(8)
|
|
|
|
|
|
Note
payable of $157,500 to an unrelated party dated February 24, 2020 for cash of $150,000, net of original issue discount of
$7,500, with interest at 8% per annum and due on February 24, 2021. The Note is a convertible promissory note. The conversion
price equals 60% of the lowest daily volume weighted average price (VWAP) for the common stock during the ten (10) trading
day period prior to and including the conversion date, representing a discount rate of 40%.
|
|
|
157,500
|
(9)
|
|
|
|
|
|
The
Company incurred long term debt in the amount of $37,027 in 2019 to purchase equipment used in its operations. The total purchase
price was $37,027, with the Company making a down payment in the amount of $3,000. The note is due in monthly payments of
$1,258.50, including interest at 8%, due in September 2021. The Company incurred $335 on imputed interest expense due to related
party borrowing during the three months ended March 31, 2020. The outstanding balance of this note was $25,676 as of March
31, 2020.
|
|
|
25,676
|
(10)
|
|
|
|
|
|
|
|
$
|
654,356
|
|
Less:
unamortized discount
|
|
|
(386,504
|
)
|
Total
|
|
$
|
267,852
|
|
Convertible
notes
|
|
$
|
146,176
|
|
Non-convertible
notes
|
|
$
|
121,676
|
|
Short-term
non-convertible notes
|
|
$
|
114,125
|
|
Long-term
non-convertible notes
|
|
$
|
7,551
|
|
The
maturities of long-term debt are as follows:
Year
|
|
Amounts
|
|
2021
|
|
|
7,551
|
|
Total
|
|
$
|
7,551
|
|
Note
9 – Loans from Related Parties
As
of March 31, 2020, the Company had a short-term note payable in the amount of $13,473 to Kemah Development Texas, LP, a company
owned by Dror Family Trust, a related party.
|
|
$
|
13,473
|
|
|
|
|
|
|
Note
payable to Isaak Cohen, father to the Company’s CEO, dated June 21, 2019 for $40,000, with interest at 8% per annum
and due on June 21, 2020. The promissory note is unsecured. Furthermore, the Company issued 50,000 shares of the Company’s
common stock to the related party investor as further consideration to enter into the loan with the Company. The Company issued
50,000 shares of common stock valued at $0.10 per share, or $5,000, based on recent sales of common stock to the third party,
which was accounted for at a discount on the note. The principal of this Note and accrued interest of $2,214 was paid in full
during the first quarter of 2020. Accordingly, unamortized discount as of the payment date in the amount of $2,363 was expensed.
|
|
|
-
|
|
|
|
|
|
|
Note
payable to Isaak Cohen, father to the Company’s CEO, dated September 9, 2019 for $100,000, with interest at 8% per annum
and due on September 9, 2020. The promissory note is unsecured. Furthermore, the Company issued 100,000 shares of the Company’s
common stock to the related party investor as further consideration to enter into the loan with the Company. The Company issued
100,000 shares of common stock valued at $1.00 per share, or $100,000, based on the market price at the grant date, which
was accounted for at a discount on the note.
|
|
|
100,000
|
|
|
|
|
|
|
As
of March 31, 2020, outstanding loan balances payable to two of the Company officers and board members, Jacob Cohen and Esteban
Alexander, was $35,879. The Company incurred $715 on imputed interest expense due to related party borrowing during the three
months ended March 31, 2020.
|
|
|
35,879
|
|
|
|
|
|
|
On
April 12, 2019, the Company entered into individual share exchange agreements and promissory notes with each of Daniel Dror,
Winfred Fields and former Directors Everett Bassie and Charles Zeller (the “AMIH Shareholders”), whereby the AMIH
Shareholders agreed to cancel and exchange a total of 5,900,000 shares of their AMIH common stock. The Company issued individual
promissory notes with an aggregate principal amount of $350,000 (the “Promissory Notes”) for cancellation of the
5,900,000 shares of common stock. The Promissory Notes have a term of two years and accrue interest at the rate of 10% per
annum until paid in full by the Company. The Company recorded interest of $8,821 on these notes during the three months ended
March 31, 2020. The accrued interest on these notes was $34,037 as of March 31, 2020.
|
|
|
350,000
|
|
|
|
$
|
499,352
|
|
Less:
unamortized discount
|
|
|
(44,263
|
)
|
|
|
|
455,089
|
|
Short-term
loans payable
|
|
$
|
105,089
|
|
Long-term
loans payable
|
|
$
|
350,000
|
|
The
maturities of long-term debt are as follows:
Year
|
|
Amounts
|
|
2021
|
|
|
350,000
|
|
Total
|
|
$
|
350,000
|
|
Note
10 – Derivative Liabilities
Notes
that are convertible at a discount to market are considered embedded derivatives.
Under
Financial Accounting Standard Board (“FASB”), U.S. GAAP, Accounting Standards Codification, “Derivatives and
Hedging”, ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance
sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market
prices are not readily available, fair values are determined using market-based pricing models incorporating readily observable
market data and requiring judgment and estimates.
The
Company’s convertible note has been evaluated with respect to the terms and conditions of the conversion features contained
in the note to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815.
The Company determined that the conversion features contained in the notes totaled $468,750, and represent a freestanding derivative
instrument that meets the requirements for liability classification under ASC 815. As a result, the fair value of the derivative
financial instrument in the note is reflected in the Company’s balance sheet as a liability. The fair value of the derivative
financial instrument of the convertible note was measured using the Lattice Model at the inception date of the note and will do
so again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into
additional paid in capital upon conversion.
The
Convertible Note derivatives were valued as of December 31, 2019, issuance, conversion and March 31, 2020 as set forth in the
table below.
Derivative liabilities as of December 31, 2019
|
|
$
|
458,745
|
|
Initial derivative liabilities at new note issuance
|
|
|
141,165
|
|
Conversion
|
|
|
-
|
|
Mark to market changes
|
|
|
26,937
|
|
Derivative liabilities as of March 31, 2020
|
|
$
|
626,847
|
|
As
of March 31, 2020, the Company had derivative liabilities of $626,847, and recorded changes in derivative liabilities in the amount
of $26,937 during the three months ended March 31, 2020.
The
following assumptions were used for the valuation of the derivative liability related to the Notes:
|
-
|
The
stock price would fluctuate with the Company’s projected volatility;
|
|
-
|
The
projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of
the Company and the term remaining for each note ranged from 161% through 231% at issuance, conversion, and quarters ends;
|
|
-
|
The
Company would not redeem the notes;
|
|
-
|
An
event of default adjusting the interest rate would occur initially 0% of the time for all notes with increases 1% per month
to a maximum of 10% with the corresponding penalty;
|
|
-
|
The
Company would raise capital quarterly at market, which could trigger a reset event; and
|
|
-
|
The
Holder would convert the note monthly if the Company was not in default.
|
Note
11 – Billing in Excess of Costs and Estimated Earnings
The
Company has two long-term contracts in progress during the first quarter of 2020, one of which was completed. Work has started
on the long-term contracts that will have costs and earnings in the following periods:
Job
|
|
Normandy
|
|
|
Gateway Village
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Contract Revenues
|
|
|
640,998
|
|
|
|
6,692,266
|
|
|
|
|
|
Estimated cost of goods sold (COGS)
|
|
|
578,118
|
|
|
|
4,725,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Gross Profit
|
|
|
62,880
|
|
|
|
1,966,354
|
|
|
|
|
|
Gross Margin
|
|
|
10
|
%
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COGS in 2019
|
|
|
199,482
|
|
|
|
1,444,397
|
|
|
|
|
|
COGS in three months ended March 31, 2020
|
|
|
329,201
|
|
|
|
1,801,717
|
|
|
$
|
2,130,918
|
|
Total actual COGS
|
|
|
528,683
|
|
|
|
3,246,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion (POC)
|
|
|
100
|
%
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues – POC
|
|
|
640,998
|
|
|
|
4,349,319
|
|
|
|
|
|
less: previously recognized
|
|
|
(220,886
|
)
|
|
|
(1,496,680
|
)
|
|
|
|
|
recognized in three months ended March 31, 2020
|
|
|
420,112
|
|
|
|
2,852,639
|
|
|
$
|
3,272,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill to Date
|
|
$
|
640,998
|
|
|
$
|
4,723,811
|
|
|
$
|
5,364,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Billing in excess of costs and estimated earnings
|
|
$
|
-
|
|
|
$
|
374,492
|
|
|
$
|
374,492
|
|
Contract
assets represent revenue recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable
contracts), which was $0 as of March 31, 2020. Unbilled receivables, which represent an unconditional right to payment subject
only to the passage of time, are reclassified to accounts receivable when they are billed under the terms of the contract. Contract
liabilities represent amounts billed to clients in excess of revenue recognized to date, which was $374,492 as of March
31, 2020. The Company recognized revenue of $3,272,751 during the three months ended March 31, 2020 in connection with
such contract assets. The Company anticipates that substantially all incurred cost associated with contract assets as of March
31, 2020 will be billed and collected within one year.
Note
12 – Income Taxes
The
Company has current net operating loss carryforwards in excess of $86,640 as of March 31, 2020, to offset future taxable
income, which expire beginning 2029.
Deferred
taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities
as measured by the enacted tax rates, which will be in effect when these differences reverse. The components of deferred income
tax assets are as follows:
March 31, 2020
|
Deferred Tax Asset:
|
|
|
|
|
Net Operating Loss
|
|
$
|
18,157
|
|
Valuation Allowance
|
|
|
(18,157
|
)
|
Net Deferred Asset
|
|
$
|
—
|
|
At
March 31, 2020, the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined
whether it was more likely than not that the deferred tax asset/(liability) would be realized.
Note
13 – Capital Stock
The
Company is authorized to issue up to 5,000,000 shares of preferred stock, $0.0001 par value, of which three shares were designated
as Series A Preferred Stock and 2,000,000 were designated as Series B Preferred stock, the balance of 2,999,997 shares of preferred
stock were undesignated as of March 31, 2020.
The
holders of Series A Preferred Stock have no dividend rights, liquidation preference and conversion rights. As long as any shares
of Series A Preferred Stock remain issued and outstanding, the holders of Series A Preferred Stock have the right to vote on all
shareholder matters equal to sixty percent (60%) of the total vote. At the option of the Company, Series A Preferred Stock is
redeemable at $1.00 per share.
The
holders of Series B Preferred Stock have the same dividend rights as common stockholders on a fully converted basis, are entitled
to receive pari passu with any distribution of any of the assets of the Company to the holders of the Company’s common stock,
but not prior to any holders of senior securities. Each share of Series B Preferred Stock may be converted, at the option of the
holder thereof, into that number of shares of common stock of the Company as equals $1.00 divided by 90% of the average of the
volume weighted average prices (“VWAP”) of the Company’s common stock, for the five trading days immediately
preceding the date the notice of conversion is received, subject to the limit of 4.999% of the Company’s outstanding shares
of common stock. The holders of Series B Preferred Stock have no voting rights.
As
of March 31, 2020, and December 31, 2019, there was no preferred stock issued and outstanding.
The
Company is authorized to issue up to 195,000,000 shares of common stock, $0.0001 par value, of which 28,137,998 shares were issued
and outstanding at March 31, 2020 and 27,208,356 were issued and outstanding at December 31, 2019.
On
July 5, 2019, our Board of Directors adopted and approved our 2019 Stock Option and Incentive Plan (the “Plan”).
The Plan is intended to promote the interests of our Company by providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Company as an incentive for them to remain in the service of
the Company. The maximum number of shares available to be issued under the Plan is currently 10,000,000 shares, subject to adjustments
for any stock splits, stock dividends or other specified adjustments which may take place in the future. The Company issued
a total of 500,000 shares to eligible persons under the Plan and recorded $160,000 as Stock Based Compensation against these issuances
for the three months ended March 31, 2020, based on the market price at the grant date.
On
January 1, 2020, the Company issued Jesse J. Dickens, CEO of CCS, 500,000 shares of restricted common stock pursuant to an employment
agreement entered into on October 1, 2019. Mr. Dickens will receive an annual base salary
of $120,000, plus an equity grant in the amount of one million (1,000,000) shares of restricted common
stock (the “Equity Shares”) subject to a vesting period of one-year, of which two-hundred and fifty thousand (250,000)
shares were issued to Mr. Dickens upon signing the Employment Agreement and the remaining shares issuable as follows: 250,000
shares on January 1, 2020, 250,000 shares on April 1, 2020, and 250,000 shares on July 1, 2020. Accordingly, 250,000 shares
were recognized as Mr. Dickens’ compensation during the first quarter of 2020, and 250,000 shares shall be recognized as
Mr. Dickens’ compensation during the second quarter of 2020. The final tranche of 250,000 shares will be issued during the
3rd quarter, 2020. The shares were valued at $1.12 per share or $280,000 based on the market price at the grant date.
On
January 3, 2020, 650,000 shares of restricted common stock were cancelled in connection with the four exchange agreements, dated
April 12, 2019 (see “Note 2 - Organization, Ownership and Business”), pursuant to which 5,900,000 shares of common
stock were to be cancelled in exchange for four long-term notes totaling $350,000. 4,250,000 shares were returned to treasury
and cancelled in 2019, and the remaining 1,000,000 shares were cancelled in the second quarter of 2020.
On
January 13, 2020, the Company executed a Data Delivery and Ancillary Services Agreement with a third party, pursuant to which
the Company issued 357,142 shares of the Company’s restricted common stock to the third party in exchange of sector-specific
consumer records and data to be utilized for marketing purposes provided by the third party and the ancillary advisory services
such as data cleaning, data emailing, lead generation campaigns, social media management. The shares were valued at $0.56 per
share or $200,000 based on the market price at the grant date.
On
January 17, 2020, the Company issued 62,500 shares of restricted common stock to an investor in exchange for $25,000 in cash and
$25,000 of principal and interest due under that certain convertible promissory note between the Company and the investor dated
August 26, 2019. The Company received cash of $25,000 on November 26, 2019 which was recorded as common stock payable as of December
31, 2019. The shares issued to the investor are part of the 10,000,000 shares qualified and registered in connection with the
Offering Statement.
On
February 28, 2020, the Company issued 160,000 common shares to an investor in exchange for $46,500 in cash, net of offering costs,
and $30,000 of principal and interest due under that certain convertible promissory note between the Company and the investor
dated August 26, 2019. The shares issued to the investor are part of the 10,000,000 Shares offered and registered by the Company
under the Offering Statement.
Note
14 – Going Concern
These
consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates
the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
reflected in the accompanying financial statements, the Company has a net loss of $129,912 for the three months ended March
31, 2020, and an accumulated deficit of $3,349,680 as of March 31, 2020. The ability to continue as a going concern is
dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they come due. These financials do not include
any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications
of liabilities that might result from this uncertainty. There can be no assurance that the
Company will become commercially viable without additional financing, the availability and terms of which are uncertain. If the
Company cannot secure necessary capital when needed on commercially reasonable terms, its business, condition (financial and otherwise)
and commercial viability may be harmed. Although management believes that it will be able to successfully execute its business
plan, which includes third party financing and the raising of capital to meet the Company’s future liquidity needs, there
can be no assurances in this regard. These matters raise substantial doubt about the Company’s ability to continue as a
going concern.
Note
15 – Uncertainties
In
the ordinary course of business, the Company may become a party to lawsuits involving various matters. The impact and outcome
of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm its business. The Company believes the ultimate resolution of any such current proceeding will not have
a material adverse effect on our continued financial position, results of operations or cash flows.
Robert
Holden vs AMIH
On
October 14, 2019, Robert Holden, the Company’s former CEO, filed a Petition and Application for Temporary Restraining Order
in the District Court of Harris County, Texas against the Company stating that the Company is blocking Mr. Holden’s legal
right to trade his shares in the open market and further attempting to stake his claim that he maintains his rights to the 3,800,000
shares he received in connection with his acceptance as CEO of the Company on or around May 31, 2018. The Company is maintaining
the position that Mr. Holden does not have the right to those shares as he was in breach of his obligation to convey a digital
marketing business to the Company and subsequently resigned from the Company shortly thereafter, on or around August 15, 2018
and that he procured the shares through fraud. On November 11, 2019, the Company issued a response with a Motion to Dismiss Under
the Texas Citizen’s Participation Act (TCPA) citing that any declaratory judgment and breach of contract claims be dismissed
unless Mr. Holden can, through “clear and specific evidence”, establish a prima facie case for each essential element
of his claims. After an attempt to remand the
case to federal court, the Company filed an amended notice of submission for its TCPA motion for submission on May 18, 2020, whereby
Holden failed to respond to the motion in a timely manner. On May 18, 2020, the Company filed a response in support of its motion
to dismiss under the TCPA, which was denied on June 3, 2020. Immediately thereafter, on June 4, 2020, the Company filed a notice
of accelerated interlocutory appeal to appeal the denial of the motion to dismiss under the TCPA and the trial court’s failure
to rule on the Company’s objection to the timeliness of Holden’s response. The outcome of this action, and the ultimate
outcome of the lawsuit is currently unknown at this time, provided that the Company intends to vehemently defend itself against
the claims made in the lawsuit.
AMIH
vs. Winfred Fields
On
November 11, 2019, the Company filed an original petition and jury demand against Winfred Fields, a shareholder, in the 458th
Judicial District Court of Fort Bend County seeking damages related to breach of contract and fraud related charges. The
Company executed an exchange agreement with Mr. Fields on or around April 12, 2019 whereby Mr. Fields was required to tender to
the Company a total of 650,000 of the 750,000 shares of the Company’s common stock that Mr. Fields then owned (the “Exchanged
Shares”) in exchange for a promissory note with a maturity date of April 12, 2021 payable in the amount of $42,500 (the
“Fields Note”) (see also “Note 2 - Organization, Ownership and Business”). The Exchange Agreement
required that Mr. Fields immediately return the stock certificates for the Exchanged Shares to the Company or its designated agent
for immediate cancellation and for Mr. Fields to retain the remaining 100,000 shares. Mr. Fields agreed in the Exchange Agreement
that these shares would not become unrestricted until such time as Mr. Fields received an opinion of counsel satisfactory to the
Company that the shares were not restricted for trade under SEC regulations. After executing the Exchange Agreement, Mr. Fields—rather
than return the Exchanged Shares or obtain said opinion of counsel—attempted to deposit and trade the Exchanged Shares and
the restricted shares, which was a direct violation of the Exchange Agreement. The Company asserts that Mr. Fields knowingly,
willingly and fraudulently attempted to deposit and trade the Exchanged Shares and is seeking damages and equitable relief. Upon
several attempts to serve Mr. Fields, service was perfected on or around February 3, 2020. On March 2, 2020, Mr. Fields filed
a response generally denying all claims. On May 22, 2020, the Company filed its first request for production and request for disclosure
and discovery insisting that Mr. Fields produce all documentation related to the fraudulent transaction and is awaiting a response
to these requested discovery items. The outcome of this action is currently unknown at this time. In November 2019, the Company
recovered 650,000 shares from Mr. Fields which were cancelled.
Note
16 – Subsequent Events
On
April 1, 2020, the Company issued 40,000 shares of common stock to an investor in exchange for $20,000 of principal and interest
due under that certain convertible promissory note between the Company and the investor dated October 10, 2019.
On
April 20, 2020, the Company entered into a Securities Purchase Agreement with Geneva Roth Remark Holdings, Inc., an accredited
investor (“Geneva Roth”), pursuant to which the Company sold Geneva Roth a convertible promissory note in the principal
amount of $88,000 (the “Geneva Roth Note #1”). The Geneva Roth Note #1 accrues interest at a rate of 8% per annum
(22% upon the occurrence of an event of default) and has a maturity date of April 20, 2021.
On
April 30, 2020, the Company entered into a Securities Purchase Agreement with FirstFire Global Opportunities Fund, LLC, an accredited
investor (“FirstFire”), pursuant to which the Company sold FirstFire a convertible promissory note in the principal
amount of $105,000, representing a purchase price of $100,000 and an original issue discount of $5,000 (the “FirstFire Note”).
The FirstFire Note accrues interest at a rate of 8% per annum (15% upon the occurrence of an event of default) and has a maturity
date of April 30, 2021.
On
May 13, 2020, the Company provided Novo MedSpa Addison Corporation (“NMAC”) with notice to terminate the June 27,
2019 License Agreement in pursuit of the Company’s desire to establish and develop its own brand and have the flexibilities
to offer additional products and services that are not currently available at Novopelle branded locations. Effective on May 13,
2020, the License Agreement was terminated.
On
May 15, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with Global Career Networks Inc,
a Delaware corporation (the “GCN”), the sole owner of Life Guru, Inc., a Delaware corporation (“Life Guru”).
Pursuant to the SPA, the Company acquired a 51% interest in Life Guru from GCN. As consideration for the purchase of the 51% ownership
interest in Life Guru, the Company issued to GCN 500,000 shares of its newly designated Series B Convertible Preferred Stock,
which had an agreed upon value of $500,000 ($1.00 per share), and agreed to issue GCN up to an additional 1,500,000 shares of
Series B Convertible Preferred Stock (with an agreed upon value of $1,500,000) upon reaching certain milestones.
On
May 19, 2020, the Company entered into a Securities Purchase Agreement with Geneva Roth, pursuant to which the Company sold Geneva
Roth a convertible promissory note in the principal amount of $53,000 (the “Geneva Roth Note #2”). The Geneva Roth
Note #2 accrues interest at a rate of 8% per annum (22% upon the occurrence of an event of default) and has a maturity date of
May 19, 2021.
On
May 20, 2020, the Company issued one share of its newly designated shares of Series A Preferred Stock to each of the three members
of its then Board of Directors, (1) Jacob D. Cohen, (2) Esteban Alexander and (3) Luis Alan Hernandez, in consideration for services
rendered to the Company as members of the Board of Directors. Such shares of Series A Preferred Stock vote in aggregate sixty
percent (60%) of the total vote on all shareholder matters, voting separately as a class. Notwithstanding such voting rights,
no change in control of the Company was deemed to have occurred in connection with the issuance since Messrs. Cohen, Alexander
and Hernandez, own in aggregate 68% of the Company’s outstanding common stock and therefore controlled the Company prior
to such issuance.
On
May 22, 2020, the Company issued 3,000,000 shares of common stock to Jacob Cohen, the Company’s Director and CEO, as a bonus
for services rendered. The shares were valued at $0.26 per share or $780,000.
On
May 22, 2020, the Company issued 3,000,000 shares of common stock to Esteban Alexander, the Company’s Director and COO,
as a bonus for services rendered. The shares were valued at $0.26 per share or $780,000.
On
May 27, 2020, the Company issued 20,000 shares of the Company’s common stock to eligible persons under the Plan. The shares
were valued at $0.26 per share or $5,200.
On
June 2, 2020, the Company issued 2,083,333 shares of the Company’s restricted common stock to GCN in connection with the
conversion of 500,000 shares of Series B Convertible Preferred stock into common stock. The shares were valued at $0.24 per share
or $500,000.
On
June 4, 2020, the Company issued 50,000 common shares to an investor in exchange for $6,600 of principal and interest due under
that certain convertible promissory note between the Company and the investor dated October 28, 2019.
On
June 8, 2020, the Company issued 125,000 shares of the Company’s common stock to eligible persons under the Plan. The shares
were valued at $0.27 per share or $33,750.
On
June 8, 2020, 1,000,000 shares were cancelled, representing the last tranche of shares in connection with the four exchanges agreements,
dated April 12, 2019 (see “Note 2 - Organization, Ownership and Business”), pursuant to which 5,900,000 shares of
common stock were to be cancelled in exchange for four long-term notes totaling $350,000.
Management
has evaluated all subsequent events from March 31, 2020 through the issuance date of the financial statements for subsequent event
disclosure consideration. No change to the financial statements for the three months ended March, 31, 2020 is deemed necessary
as a result of this evaluation.