UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2020

 

OR

 

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

 

For the transition period from                    to                  

 

Commission file number: 000-50912

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

Nevada		88-0225318
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
3990 Vitruvian Way, Suite 1152, Addison, Texas		75001
(Address of Principal Executive Offices)		(ZIP Code)

 

Registrant’s Telephone Number, Including Area Code: (972) 803-5337

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 every Interactive Data File required to be submitted 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 such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]		Accelerated filer [  ]
Non-accelerated filer [X]		Smaller reporting company [X]
		Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The number of shares outstanding of each of the issuer’s classes of equity as of August 19, 2020 is 38,975,757 shares of common stock.

 

 

 

TABLE OF CONTENTS

 

Item		Description		Page
		PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements		3
		Consolidated Balance Sheets — as of June 30, 2020 (unaudited) and December 31, 2019		3
		Consolidated Statements of Operations — Three and Six Months Ended June 30, 2020 and 2019 (unaudited)		4
		Consolidated Statements of Changes in Stockholders’ Deficit — Six Months Ended June 30, 2020 and 2019 (unaudited)		5
		Consolidated Statements of Cash Flows — Six Months Ended June 30, 2020 and 2019 (unaudited)		6
		Notes to Consolidated Financial Statements (unaudited)		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		30
Item 4.		Controls and Procedures		30
		PART II— OTHER INFORMATION
Item 1.		Legal Proceedings		31
Item 1A.		Risk Factors		31
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3.		Defaults Upon Senior Securities		34
Item 4.		Mine Safety Disclosures		35
Item 5.		Other Information		35
Item 6.		Exhibits		36

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Balance Sheets

(Unaudited)

 

		June 30, 2020				December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	599,147			$	1,258,710
Inventory			34,199				16,484
Prepayment and deposits			675,750				365,520
TOTAL CURRNET ASSETS			1,309,096				1,640,714
INTANGIBLE ASSETS
Licenses			-				95,000
Goodwill			29,689				29,689
NET INTANGIBLE ASSETS			29,689				124,689
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $43,208 and $19,744			244,897				154,815
Right-of-use asset - operating lease			532,956				267,482
Rent deposits			31,670				4,777
Other assets			605,488				-
NET NON-CURRENT ASSETS			1,415,011				427,074
TOTAL ASSETS		$	2,753,796			$	2,192,477
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	74,974			$	63,315
Accrued interest payable			85,616				42,564
Accrued compensation - related parties			130,500				58,500
Right-of-use liability - operating lease			137,886				80,629
Capital lease			20,773				-
Convertible notes payable, net of debt discount of $497,373 and $282,144			204,584				144,106
Loans payable			148,728				98,500
Loans payable to related parties, net of discount of $19,399 and $69,126			479,953				133,854
Derivative liabilities			828,778				458,745
Billing in excess of costs and estimated earnings			100,686				1,657,998
TOTAL CURRENT LIABILITIES			2,212,478				2,738,211
LONG-TERM LIABILITIES
Right-of-use liability - operating lease			406,210				200,074
Long-term capital lease			17,793				-
Long-term convertible notes payable, net of debt discount of $51,221 and $0			1,779				-
Long-term debt			2,948				-
Long-term debt - related parties			-				363,125
TOTAL LONG-TERM LIABILITIES			428,730				563,199
TOTAL LIABILITIES		$	2,641,208			$	3,301,410
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock ($0.0001 par value, 5,000,000 shares authorized, 3 shares of Series A Preferred Stock issued and outstanding as of June 30, 2020)		$	-			$	-
Common stock ($0.0001 par value, 195,000,000 shares authorized, of which 35,456,331 and 27,208,356 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively)			3,545				2,721
Treasury stock, at cost; 410 shares			(3,894	)			(103,537	)
Common stock payable			-				25,000
Additional paid in capital			5,406,036				2,186,651
Retained earnings (deficit)			(5,293,099	)			(3,219,768	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)			112,588				(1,108,933	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	2,753,796			$	2,192,477

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Statements of Operations

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		June 30, 2020				June 30, 2019				June 30, 2020				June 30, 2019
Revenues
Revenues		$	1,890,837			$	75,706			$	5,300,852			$	90,947
Cost of revenues			1,213,030				23,059				3,417,648				35,715
Gross profit			677,807				52,647				1,883,204				55,232
Operating expenses
General and administrative expenses			2,388,197				119,191				3,601,626				140,392
Total operating expenses			2,388,197				119,191				3,601,626				140,392
Income (Loss) from Operations			(1,710,390	)			(66,544	)			(1,718,422	)			(85,160	)
Other income (expenses)
Interest expenses			(28,289	)			(10,073	)			(54,364	)			(15,267	)
Amortization of debt discount			(112,108	)			-				(181,276	)			-
Change in derivative liabilities			2,368				-				(24,569	)			-
Impairment loss			(95,000	)			-				(95,000	)			-
Other income			-				-				300				-
Total other income (expenses)			(233,029	)			(10,073	)			(354,909	)			(15,267	)
Income (loss) before income taxes			(1,943,419	)			(76,617	)			(2,073,331	)			(100,427	)
Income taxes			-				-				-				-
Net Income (Loss)		$	(1,943,419	)		$	(76,617	)		$	(2,073,331	)		$	(100,427	)
Earnings (loss) per share
Basic		$	(0.06	)		$	(0.00	)		$	(0.07	)		$	(0.01	)
Dilutive		$	(0.06	)		$	(0.00	)		$	(0.07	)		$	(0.01	)
Weighted average number of shares outstanding
Basic			30,572,284				21,514,674				29,183,188				16,253,245
Dilutive			30,572,284				21,514,674				29,183,188				16,253,245

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

 

		Preferred Stock								Common Stock								Additional Paid-in				Common Stock				Retained Earnings				Treasury				Total Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				(Deficit)				Stock				(Deficit)
Balance, December 31, 2018			-			$	-				18,000,000			$	1,800			$	336			$	-			$	(7,520	)		$	-			$	(5,384	)
Effect of Reverse Merger 4/12/2019			-				-				10,933,356				1,093				(15,885	)											(3,894	)			(18,686	)
Imputed interest			-				-												2,026																2,026
Issuance of common shares under private placement			-				-				100,000				10				9,990																10,000
Cancellation of common shares for long-term debt			-				-				(5,900,000	)			(590	)			590												(350,000	)			(350,000	)
Issuance of common shares for discount on loan			-				-				50,000				5				4,995																5,000
Issuance of common shares for licensing agreement			-				-				250,000				25				24,975																25,000
Net (loss)																											(100,427	)							(100,427	)
Balance, June 30, 2019			-			$	-				23,433,356			$	2,343			$	27,027			$	-			$	(107,947	)		$	(353,894	)		$	(432,471	)

 

		Preferred Stock								Common Stock								Additional Paid-in				Common Stock				Retained Earnings				Treasury				Total Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				(Deficit)				Stock				(Deficit)
Balance, December 31, 2019			-			$	-				27,208,356			$	2,721			$	2,186,651			$	25,000			$	(3,219,768	)		$	(103,537	)		$	(1,108,933	)
Imputed interest			-				-												2,279																2,279
Reclassification of derivative liabilities due to note conversion			-				-												40,035																40,035
Issuance of Series B preferred shares for investment			500,000				50				-				-				605,438																605,488
Issuance of common shares under private placement			-				-				131,250				13				71,487				(25,000	)											46,500
Cancellation of common shares for long-term debt			-				-				(1,650,000	)			(165	)			(99,478	)											99,643				-
Issuance of common shares for note conversion			-				-				181,250				18				81,582																81,600
Issuance of shares for services - related parties			3				-				6,000,000				600				1,559,400																1,560,000
Issuance of shares for services			-				-				1,502,142				150				958,800																958,950
Issuance of common shares for Series B preferred shares conversion			(500,000	)			(50	)			2,083,333				208				(158	)															-
Net (loss)																											(2,073,331	)							(2,073,331	)
Balance, June 30, 2020			3			$	-				35,456,331			$	3,545			$	5,406,036			$	-			$	(5,293,099	)		$	(3,894	)		$	112,588

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Statements of Cash Flows

(Unaudited)

 

		For the Six Months Ended
		June 30, 2020				June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(2,073,331	)		$	(100,427	)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation			23,464				7,286
Amortization of debt discount			181,276				-
Change in derivative liabilities			24,569				-
Impairment loss			95,000				-
Stock issued for services rendered			2,518,950				-
Imputed interest expense			2,279				2,026
(Increase) decrease in operating assets:
Inventory			(17,715	)			-
Prepaid expenses			(310,230	)			8,866
Operating lease right-of-use asset, net			82,805				(260,431	)
Licensing agreement			-				(40,000	)
Other asset - deposit			-				4,433
(Decrease) increase in operating liabilities:
Accounts payable			11,659				4,559
Accrued interest payable			49,859				7,574
Accrued compensation - related parties			72,000				58,500
Deferred lease liability			-				(7,650	)
Operating lease right-of-use liability, net			(84,886	)			268,779
Rent Deposit			(26,893	)			-
Billing in excess of costs and estimated earnings			(1,557,312	)			-
NET CASH (USED IN) OPERATING ACTIVITIES			(1,008,506	)			(46,485	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment			(72,290	)			(17,034	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			(72,290	)			(17,034	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - related parties			-				18,808
(Repayment) to borrowings - related parties			(40,000	)			(31,633	)
Proceeds from borrowings			421,000				60,000
(Repayment) to borrowings			(6,267	)			(942	)
Proceeds from sales of stock			46,500				10,000
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			421,233				56,233
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(659,563	)			(7,286	)
CASH AND CASH EQUIVALENTS:
Beginning of period			1,258,710				18,796
End of period		$	599,147			$	11,510
Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	-			$	-
Cash paid for interest		$	2,408			$	10,073
Non-cash transactions:
Capital lease		$	41,256			$	37,027
Common shares issued for notes conversion		$	26,600			$	350,000
Common shares issued for notes settlement		$	55,000			$	-
Stock payable		$	25,000			$	-
Common shares issued for intangible assets		$	-			$	25,000
Discounts on convertible notes		$	398,000			$	-
Lease Inception		$	348,279			$	-
Cancellation of common shares		$	99,643			$	-
Common shares issued for debt inducement		$	40,035			$	5,000
Common shares issued for reverse acquisition		$	-			$	1,800
Issuance of Series B for investment		$	605,488			$	-

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Notes to Consolidated Financial Statements

Three and Six Months Ended June 30, 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 and six months ended June 30, 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 reopened effective August 8, 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.

 

On April 28, 2020, the Company incorporated a wholly owned subsidiary, ZipDoctor, Inc. (“ZipDoctor”) in the State of Texas. ZipDoctor plans to provide its customers with unlimited, 24/7 access to board certified physicians and licensed mental and behavioral health counselors and therapists via a newly developed, monthly subscription based online telemedicine platform.

 

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.

 

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., Capitol City Solutions USA, Inc. and ZipDoctor, Inc., and its majority owned subsidiary, Life Guru, 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 Company did not enter into any new leases during the second quarter of 2020.

 

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 January 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

 

 

Note 4 – Property and Equipment

 

Property and equipment was as follows at June 30, 2020 and December 31, 2019:

 

		June 30,				December 31,
		2020				2019
Leasehold improvements		$	133,210			$	102,264
Furniture & fixtures			44,480				23,115
Equipment			110,415				49,180
			288,105				174,559
Less accumulated depreciation and amortization			43,208				19,744
Net property and equipment		$	244,897			$	154,815

 

During the six months ended June 30, 2020, the Company’s fixed assets increased by $113,546, including leasehold improvements of $30,946, furniture & fixtures of $21,365 and equipment of $61,235, of which $72,290 was paid by cash and $41,256 was financed for a term of 2 years with monthly payment of $1,819. The balance of the loan was $38,566 as of June 30, 2020.

 

Depreciation and amortization expense for the six months ended June 30, 2020 and 2019 was $23,464 and $7,286, respectively.

 

Note 5 – Goodwill

 

As of June 30, 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 – Licensing Agreement

 

On June 27^th, 2019, the Company executed an exclusive license agreement with Novo MedSpa Addison Corp (“Novo Medspa”) providing the Company with the exclusive rights to the Novopelle brand and to establish new Novopelle branded MedSpa locations on a worldwide basis (the “Exclusive License”). In consideration for the Exclusive License, the Company paid Novo MedSpa a one-time cash payment of $40,000 and issued to Novo MedSpa 250,000 shares of the Company’s common stock. The 250,000 shares of the Company’s common stock were valued at $0.10 per share or $25,000.

 

During the fourth quarter of 2019, the Company opened a new MedSpa location and paid Novo MedSpa a one-time cash payment of $30,000 as a new location fee pursuant to the exclusive license agreement.

 

On May 13, 2020, the Company provided Novo Medspa 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 flexibility to offer additional products and services that are not currently available at Novopelle branded locations, which was effective immediately. Accordingly, the license of $95,000 was impaired in full during the three months ended June 30, 2020.

 

 

Note 7 – Other assets

 

On May 15, 2020, the Company executed a securities purchase agreement with Global Career Networks Inc, a Delaware corporation (the “Seller”), the sole owner of Life Guru, pursuant to which the Company purchased from the Seller, a 51% interest in the capital stock of Life Guru, representing an aggregate of 2,040 shares of Life Guru’s common stock. LifeGuru owns and operates the LifeGuru.me website which is currently in development and is anticipated to be fully launched in the fourth quarter of 2020. In consideration for the purchase, the Company agreed to issue the Seller 500,000 shares of the Company’s Series B Preferred Stock at closing, which occurred on May 15, 2020. An additional up to 1,500,000 Series B Preferred Stock shares will be issuable to the Seller upon the following milestones, provided that such milestones are met prior to the earlier of (i) one (1) year after closing; and (ii) thirty (30) days after the Company has provided the Seller written notice of a breach by the Seller of any provision of the SPA, which breach has not been reasonably cured within such thirty (30) day period (such earlier date of (i) and (ii), the “Milestone Termination Date”):

 

(a) 500,000 Series B Preferred Stock shares upon completion of the fully operational LifeGuru.me website;

 

(b) 500,000 Series B Preferred Stock shares upon such time as 300 coaches have signed up at LifeGuru.me; and

 

(c) 500,000 Series B Preferred Stock shares upon such time as 1,000 coaches have signed up at LifeGuru.me.

 

The fair value of 500,000 shares of the Company’s Series B Preferred Stock issued at closing, valued on such grant date was $605,488, which equaled the market price per common share on the grant multiplied by the equivalent number of common shares which would be issuable upon conversion of Series B Preferred Stock.

The Company did not recognize any liabilities related to the milestone shares due to the uncertainty surrounding such milestones.

 

The 51% owned subsidiary is a consolidated entity which requires the presentation of noncontrolling interest in the consolidated statements of operations for the three and six months ended June 30, 2020. As there was no activity for the entity as of June 30, 2020, no assets, liabilities or noncontrolling interest were presented at the period ended June 30, 2020.

 

Note 8 – Capital lease

 

On June 17, 2020, the Company entered into an agreement with a vendor to purchase equipment used in its spa operation. Pursuant to the agreement, the Company agreed to pay total amount of $44,722 in 24 installments, or $1,819 per month plus tax. The outstanding balance of this capital lease was $38,566 as of June 30, 2020.

 

The following is a schedule, by year, of maturities of capital lease liabilities as of June 30, 2020:

 

2020			10,914
2021			21,828
2022			9,275
Total undiscounted cash flows			42,017
Less imputed interest (8%)			(3,451	)
Present value of lease liability		$	38,566

 

Note 9 – 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 June 30, 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 of $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 June 30, 2020:

 

2020			27,033
2021			54,951
2022			55,854
2023			56,776
2024			57,715
2025			53,828
Total undiscounted cash flows			306,157
Less imputed interest (8%)			(86,741	)
Present value of lease liability		$	219,416

 

 

Total rental expense related to this location for the three and six months ended June 30, 2020 was $13,965 and $27,931, respectively. The operating lease right-of-use asset net balance at June 30, 2020 related to this location was $209,943.

 

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 June 30, 2020:

 

2020			18,542
Total undiscounted cash flows			18,542
Less imputed interest (8%)			(2,467	)
Present value of lease liability		$	16,075

 

Total rental expense related to this location for the three and six months ended June 30, 2020 was $9,331 and $18,542, respectively. The operating lease right-of-use asset net balance at June 30, 2020 related to this location was $16,075.

 

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 June 30, 2020:

 

2020			26,960
2021			55,540
2022			57,206
2023			58,922
2024			60,690
Total undiscounted cash flows			259,318
Less imputed interest (8%)			(51,176	)
Present value of lease liability		$	208,142

 

Total rental expense related to this location for the three and six months ended June 30, 2020 was $14,314 and $28,628, respectively. The operating lease right-of-use asset net balance at June 30, 2020 related to this location was $206,475.

 

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 June 30, 2020:

 

2020			13,644
2021			27,288
2022			27,288
2023			27,288
2024			27,288
2025			2,274
Total undiscounted cash flows			125,070
Less imputed interest (8%)			(24,607	)
Present value of lease liability		$	100,463

 

 

Total rental expense related to this location for the three and six months ended June 30, 2020 was $6,822 and $13,644, respectively. The operating lease right-of-use asset net balance at June 30, 2020 related to this location was $100,463.

 

Note 10 – Accrued Compensation for Related Parties

 

At June 30, 2020, accrued compensation was $130,500, representing cash compensation due to the Company’s executive officers for services rendered.

 

Note 11 – Notes Payable

 

Notes payable represents the following at June 30, 2020:

 

Note payable to an unrelated 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. The Note is currently past due.			75,000
Less: partial conversion			(17,123	)
			57,877	(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
Less: partial conversion			(6,600	)
			72,150	(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 (October 18, 2020).			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 $512 and $847 on imputed interest expense due to related party borrowing during the three and six months ended June 30, 2020, respectively. The outstanding balance of this note was $25,676 as of June 30, 2020.			25,676	(10)
Note payable of $88,000 to an unrelated party dated April 20, 2020 for cash of $88,000, with interest at 8% per annum and due on April 20, 2021. The annual interest rate will increase to 22% if in default. The Note is a convertible promissory note. The conversion price equals 61% of the lowest daily volume weighted average price (VWAP) for the common stock during the ten (10) trading day period prior to the conversion date, representing a discount rate of 39%.			88,000	(11)
Note payable of $105,000 to an unrelated party dated April 30, 2020 for cash of $100,000, net of original issue discount of $5,000, with interest at 8% per annum and due on April 30, 2021. The annual interest rate will increase to 15% if in default. The Note is a convertible promissory note. The conversion price equals the lower of $0.50 per share or 60% of the lowest daily volume weighted average price (VWAP) for the common stock during the ten (10) trading day period prior to the conversion date, representing a discount rate of 40%.			105,000	(12)
Note payable of $53,000 to an unrelated party dated May 19, 2020 for cash of $53,000, with interest at 8% per annum and due on August 19, 2021. The annual interest rate will increase to 22% if in default. The Note is a convertible promissory note. The conversion price equals 61% of the lowest daily volume weighted average price (VWAP) for the common stock during the ten (10) trading day period prior to the conversion date, representing a discount rate of 39%.			53,000	(13)
Note payable to an unrelated party dated June 24, 2020 for $30,000, with interest at 5% per annum and due on September 24, 2020. The Note is unsecured.		$	30,000	(14)
		$	906,633
Less: unamortized discount			(548,594	)
Total		$	358,039
Short term convertible notes, net of discount of $497,373		$	204,584
Long-term convertible notes, net of discount of $51,221		$	1,779
Short-term non-convertible notes		$	148,728
Long-term non-convertible notes		$	2,948

 

 

The maturities of long-term debt are as follows:

 

Year		Amounts
2021			55,948
Total		$	55,948

 

Note 12 – Loans from Related Parties

 

As of June 30, 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 as a discount on the note.			100,000
As of June 30, 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 and $1,430, respectively, on imputed interest expense due to related party borrowing during the three and six months ended June 30, 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 $8,725 and $17,546 on these notes during the three and six months ended June 30, 2020. The accrued interest on these notes was $42,762 as of June 30, 2020.			350,000
		$	499,352
Less: unamortized discount			(19,399	)
			479,953

 

 

Note 13 – 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 $754,750, 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 June 30, 2020 as set forth in the table below.

 

Derivative liabilities as of December 31, 2019		$	458,745
Initial derivative liabilities at new note issuance			404,543
Initial loss			(19,044	)
Conversion			(40,035	)
Mark to market changes			24,569
Derivative liabilities as of June 30, 2020		$	828,778

 

As of June 30, 2020, the Company had derivative liabilities of $828,778, and recorded changes in derivative liabilities in the amount of $24,569 during the six months ended June 30, 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 183% through 390% 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 14 – Billing in Excess of Costs and Estimated Earnings

 

The Company has two long-term contracts in progress during the six months ended June 30, 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 six months ended June 30, 2020			329,201				2,932,142			$	3,261,343
Total actual COGS			528,683				4,376,539
Percentage of completion (POC)			100	%			89	%
Revenues – POC			640,998				6,139,108
less: previously recognized			(220,886	)			(1,496,680	)
recognized in six months ended June 30, 2020			420,112				4,642,428			$	5,062,540
Bill to Date		$	640,998			$	6,239,794			$	6,880,792
Billing in excess of costs and estimated earnings		$	-			$	100,686			$	100,686

 

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable contracts), which was $0 as of June 30, 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 $100,686 as of June 30, 2020. The Company recognized revenue of $5,062,540 during the six months ended June 30, 2020 in connection with such contract assets. The Company anticipates that substantially all incurred costs associated with contract assets as of June 30, 2020 will be billed and collected within one year.

 

Note 15 – Income Taxes

 

The Company has current net operating loss carryforwards in excess of $41,189 as of June 30, 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:

 

June 30, 2020
Deferred Tax Asset:
Net Operating Loss		$	8,650
Valuation Allowance			(8,650	)
Net Deferred Asset		$	—

 

At June 30, 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 16 – 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 June 30, 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.

 

On May 15, 2020, the Company entered into a Securities Purchase Agreement with GCN as described in greater detail in “Note 7 – Other assets”. Pursuant to the SPA, the Company acquired a 51% interest in Life Guru from GCN in consideration for 500,000 shares of 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. The fair value of the first 500,000 shares of the Company’s Series B Preferred Stock at grant date was $605,488, a result of market price per common share at the grant date times the equivalent number of common shares after the conversion of Series B Preferred Stock. Such 500,000 initial shares of Series B Preferred Stock were subsequently converted to common stock in June 2020, as discussed below.

 

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.

 

As of June 30, 2020, there was 3 shares of Series A Preferred Stock and no share of Series B Preferred Stock issued and outstanding. There were no shares of preferred stock issued and outstanding as of December 31, 2019.

 

 

The Company is authorized to issue up to 195,000,000 shares of common stock, $0.0001 par value, of which 35,456,331 shares were issued and outstanding at June 30, 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. During the six months ended June 30, 2020, the Company issued a total of 645,000 shares to eligible persons under the Plan and recorded $198,950 as Stock Based Compensation against these issuances based on the market prices at the grant date. As of June 30, 2020, the number of shares under the Plan available for future issuance was 7,690,000 shares.

 

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 quarter ended September 30, 2020. The shares were valued at $1.12 per share based on the market price at the grant date. Accordingly, the Company recorded stock based compensation of $280,000 and $560,000 for the three and six months ended June 30, 2020, respectively.

 

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 returned to treasury 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, and social media management. The shares were valued at $0.56 per share or $200,000 in aggregate, 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.

 

On April 2, 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. The shares issued to the investor are part of the 10,000,000 Shares offered and registered by the Company under the Offering Statement.

 

 

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 in aggregate, based on the market price at the grant date, and recorded as stock-based compensation to related parties.

 

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 in aggregate, based on the market price at the grant date, and recorded as stock-based compensation to related parties.

 

On June 2, 2020, the 500,000 shares of Series B Convertible Preferred stock were converted into 2,083,333 shares of the Company’s restricted common stock per GCN’s request.

 

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.

 

Note 17 – 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 $1,943,419 and $2,073,331 for the three and six months ended June 30, 2020, and an accumulated deficit of $5,293,099 as of June 30, 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 18 – 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 458^th 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 in 2019.

 

Note 19 – Subsequent Events

 

On July 27, 2020, the Company issued 1,030,808 restricted common shares to an investor in exchange for $77,929 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Fourth Man, LLC dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On July 27, 2020, the Company issued 1,119,309 restricted common shares to an investor in exchange for $84,620 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Armada Capital Partners, LLC dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On July 27, 2020, the Company issued 1,119,309 restricted common shares to an investor in exchange for $84,620 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to BHP Capital NY, Inc. dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On August 5, 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 #3”). The Geneva Roth Note #3 accrues interest at a rate of 8% per annum (22% upon the occurrence of an event of default) and has a maturity date of November 5, 2021.

 

On August 8, 2020, the Company issued Jesse J. Dickens, CEO of the Company’s wholly-owned subsidiary, Capitol City Solutions USA, Inc. (“CCS”), 250,000 shares of restricted common stock pursuant to an employment agreement entered into on October 1, 2019. This issuance represents the fourth and final tranche of shares owed to Mr. Dickens pursuant to his employment agreement. The shares were valued at $1.12 per share or $280,000, based on the market price at the grant date.

 

On August 11, 2020, the Company entered into a Convertible Promissory Note with LGH Investments, LLC (“LGH”), pursuant to which the Company issued to LGH 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 “LGH Note”). The LGH Note accrues interest at a rate of 8% per annum and has a maturity date of May 11, 2021.

 

Management has evaluated all subsequent events from June 30, 2020 through the issuance date of the financial statements for subsequent event disclosure consideration. No change to the financial statements for the six months ended June 30, 2020 is deemed necessary as a result of this evaluation.

 

 

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

 

Introduction

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

 

	●	Recent Events Relating to Our Business.
	●	Results of Operations.
	●	Liquidity and Capital Resource.
	●	Critical Accounting Estimates.

 

The following discussion should be read in conjunction with the American International Holdings Corp. financial statements and accompanying notes included elsewhere in this report.

 

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:

 

	●	estimates of our expenses, future revenue, capital requirements and our needs for additional financing;
	●	our ability to develop, acquire, and advance services and products for our customer base;
	●	the implementation of our business model and strategic plans for our business;
	●	the terms of future licensing, operational or management arrangements, and whether we can enter into such arrangements at all;
	●	timing and receipt of revenues, if any;
	●	the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business without infringing on the intellectual property rights of others;
	●	regulatory developments in the United States;
	●	our ability to maintain and establish collaborations or obtain additional funding;
	●	our financial performance;
	●	the effects of COVID-19 and other epidemics and pandemics on our ability to operate, our ability to generate revenues, and the local, U.S. and global economies in general;
	●	developments and projections relating to our competitors and our industry; and
	●	other risks described below under, and incorporated by reference in, “Item 1A. Risk Factors”, below.

 

 

You should read the matters described in, and incorporated by reference in, “Item 1A. Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

 

All references to years relate to the fiscal year ended December 31 of the particular year.

 

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on June 26, 2020 (the “Annual Report”).

 

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “Part I - Financial Information - Item 1. Financial Statements”.

 

Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under, and incorporated by reference in, the section entitled “Risk Factors”, below. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to American International Holdings Corp., is also based on our good faith estimates.

 

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “American International”, “AMIH” and “American International Holdings Corp.” refer specifically to American International Holdings Corp. and its consolidated subsidiaries.

 

In addition, unless the context otherwise requires and for the purposes of this Report only:

 

	●	“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
	●	“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
	●	“Securities Act” refers to the Securities Act of 1933, as amended.

 

 

Where You Can Find Other Information

 

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov and are available for download, free of charge, soon after such reports are filed with or furnished to the SEC, on our website at https://amihcorp.com/investors/. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is https://amihcorp.com. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.

 

Business of the Company

 

A description of the Company’s business operations, assets and divisions can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on June 26, 2020, under the heading “Item 1. Business”. Except as set forth below under “Recent Events” such information as set forth in the Form 10-K remains accurate and current.

 

Recent Events

 

COVID-19 Outlook

 

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 prohibit 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 reopened effective August 8, 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.

 

While conditions started to improve during the second quarter of 2020, as the state of Texas and various local governments began relaxing “stay-at-home” and similar public health mandates that were implemented in response to the COVID-19 pandemic, Texas has recently seen a significant increase in the number of COVID-19 positive patients. It is currently unknown whether the state or local governments (if they are legally able) will implement further “stay-at-home” and similar orders. Any such “stay-at-home” or similar orders would likely require us to once again close our medical spas and may further negatively impact our construction, nutritional store and other services.

 

Notwithstanding the above, as the economy continues to recover from the severe impacts of the pandemic and related COVID-19 control responses which were put in place during the early part of 2020, we expect employment, consumer confidence and other fundamental business factors to also improve. However, the speed, trajectory and strength of any such recovery remains highly uncertain, and could be slowed or reversed by a number of factors, including a possible widespread resurgence in COVID-19 infections during the remaining months of 2020 without the availability of generally effective therapeutics or a vaccine for the disease.

 

 

We currently anticipate experiencing ongoing disruptions to our ability to open and operate our medical spas and potentially our nutrition store and provide construction services, and overall declines in the demand for our medical spas and the number of customers we expect for our medical spas and nutrition store throughout the remainder of 2020 (and possibly beyond) as Texas, and the U.S. in general, continues to deal with the COVID-19 pandemic. Any prolonged disruption to our operations, work force available, or ability to keep our med spas open for business, is likely to have a significant adverse effect on our results of operations, cash flows and ability to meet continuing debt service requirements.

 

Other Recent Material Events

 

On April 28, 2020, the Company incorporated a wholly owned subsidiary, ZipDoctor, Inc. (“ZipDoctor”) in the State of Texas. ZipDoctor plans to provide its customers with unlimited, 24/7 access to board certified physicians and licensed mental and behavioral health counselors and therapists via a newly developed, monthly subscription based online telemedicine platform. ZipDoctor’s online telemedicine platform is available to customers across the United States and offers bilingual coverage (both English and Spanish), with virtual visits taking place either via the phone or through a secured video chat platform. Zip Doctor’s telemedicine platform does not require the customer to have an existing insurance plan and does not demand or require any additional copays. ZipDoctor customers subscribe through the website and are only required to pay a low monthly fee, which is determined based on if they are an individual, a couple, or a family. There were no significant activities in ZipDoctor as of June 30, 2020. The Company intends to launch the platform in the third quarter of 2020 and is expected to begin generating revenue during the fourth quarter of 2020.

 

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. Accordingly, the Company recognized an impairment loss of $95,000 during the six months ended June 30, 2020.

 

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 15, 2020, the Company executed a securities purchase agreement with Global Career Networks Inc, a Delaware corporation (the “Seller”), the sole owner of Life Guru, Inc., a Delaware corporation (the “Life Guru”), pursuant to which the Company will purchase from the Seller, a 51% interest in the capital stock of Life Guru, representing an aggregate of 2,040 shares of Life Guru’s common stock. In consideration for the purchase, the Company agreed to issue the Seller 500,000 shares of the Company’s Series B Preferred Stock at closing on May 15, 2020. An additional up to 1,500,000 Series B Preferred Stock shares will be issuable to the Seller upon the following milestones, provided that such milestones are met prior to the earlier of (i) one (1) year after closing; and (ii) thirty (30) days after the Company has provided the Seller written notice of a breach by the Seller of any provision of the SPA:

 

(a) 500,000 Series B Preferred Stock shares upon completion of the fully operational LifeGuru.me website;

 

(b) 500,000 Series B Preferred Stock shares upon such time as 300 coaches have signed up at LifeGuru.me; and

 

(c) 500,000 Series B Preferred Stock shares upon such time as 1,000 coaches have signed up at LifeGuru.me.

 

 

The fair value of 500,000 shares of the Company’s Series B Preferred Stock at grant date was $605,488, a result of market price per common share at the grant date times the equivalent number of common shares after the conversion of Series B Preferred Stock.

 

The Company did not recognize any liabilities related to the milestone shares due to the uncertainty of such shares being issuable.

 

Results of Operations

 

Revenues

 

We had revenues of $1,890,837 and $5,300,852 for the three and six months ended June 30, 2020, respectively, compared to revenues of $75,706 and $90,947 for the three and six months ended June 30, 2019, respectively. The significant increase in revenues in 2020 was due primarily to two construction contracts for an apartment and clubhouse rebuild at Gateway Village, Texas and the replacement of a roof replacement at Port Arthur, Texas. The total contract revenues totalled $7,333,264.

 

We recognized revenues in accordance with Accounting Standards Codification (ASC) Topic 606. A five-step process has been designed for the individual or pool of contracts to keep financial statements focused on this principle. Revenues from fixed-price and cost-plus contracts are recognized on the percentage of completion method, whereby revenues on long-term contracts were recorded on the basis of the Company’s estimates of the percentage of completion of contracts based on the ratio of actual cost incurred to total estimated costs. This cost-to-cost method was used because management considered it to be the best available measure of progress on these contacts. Revenues from cost-plus-fee contracts were recognized on the basis of costs incurred during the period plus the fee earned, measured on the cost-to-cost method. Revenues from time-and-material and rate chart contracts were recognized currently as work is performed. During the three and six months ended June 30, 2020, we recognized revenues of $1,789,789 and $5,062,540, respectively, in connection with these two construction contracts. The revenues in the three and six months ended June 30, 2019 were primarily generated from our medical spa facility located in McKinney, Texas.

 

Cost of Revenues

 

We had cost of revenues of $1,213,030 and $3,417,648 for the three and six months ended June 30, 2020, compared to cost of revenues of $23,059 and $35,715 for the three and six months ended June 30, 2019. Cost of revenues include all direct material, sub-contractor, labor and certain other direct costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. Claims for additional contract revenue are recognized when realization of the claim is probable and the amount can be reasonably determined.

 

The cost of revenues in the three and six months ended June 30, 2019 were primarily attributable to our medical spa facility located in McKinney, Texas.

 

Cost of revenues as a percentage of revenues was 64.2% and 64.5% for the three and six months ended June 30, 2020, respectively, compared to 30.5% and 39.3% for the three and six months ended June 30, 2019, respectively. Cost of revenues as a percentage of revenue increased for the three and six months ended June 30, 2020, compared to the prior periods in 2019, due primarily to the two construction contracts for an apartment and clubhouse rebuild at Gateway Village, Texas and the replacement of a roof in Port Arthur, Texas.

 

 

Operating Expenses

 

General and administrative expenses were $2,388,197 and $3,601,626 for the three and six months ended June 30, 2020, respectively, compared to general and administrative expenses of $119,191 and $140,392 for the three and six months ended June 30, 2019, respectively. The significant increase in 2020 was due primarily to stock-based compensation in the amount of $1,878,950 and $2,518,950 during the three and six months ended June 30, 2020, respectively, and professional expenses incurred because of being a public company (for legal, financial reporting, accounting and auditing compliance). General and administrative expenses incurred during the three and six months ended June 30, 2019 were in connection with the operation of our medical spa facility located in McKinney, Texas.

 

Other Expenses

 

During the three and six months ended June 30, 2020, we incurred interest expense of $28,289 and $54,364, respectively, of which $1,228 and $2,279, respectively, were recorded as imputed interest in connection with related party loans. Comparatively, during the three and six months ended June 30, 2019, we incurred interest expense of $10,073 and $15,267, respectively, of which $0 and $2,026, respectively, were recorded as imputed interest in connection with related party loans. The amortization of debt discount was $112,108 and $181,276 during the three and six months ended June 30, 2020, respectively, compared to $0 for the three and six months ended June 30, 2019. We had a gain of $2,368 and a loss of $24,569 due to change in derivative liabilities during the three and six months ended June 30, 2020, respectively. There was no amortization of debt discount and gain/loss due to change in derivative liabilities in the same periods of 2019. We also had $300 of other income in the six months ended June 30, 2020, compared to no other income during the same period in 2019.

 

Net Loss

 

We had a net loss of $1,943,419, or $0.06 per share, for the three months ended June 30, 2020 and a net loss of $2,073,331, or $0.07 per share, for the six months ended June 30, 2020, compared to a net loss of $76,617, or $0.00 per share, and $100,427, or $0.01 per share, for the three and six months ended June 30, 2019, respectively. The increase in net loss in the three and six months ended June 30, 2020 was primarily attributable to non-cash expenses in connection with stock-based compensation, amortization of debt discount, and the change in derivative values associated with outstanding convertible debt, offset by the increase in gross profit, each as discussed above. 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 reopened effective August 8, 2020. We did not have non-cash expenses in the same periods ended June 30, 2019.

 

Liquidity and Capital Resources

 

As of June 30, 2020 and December 31, 2019, the Company had total assets of $2,753,796 and $2,192,477, respectively.

 

As of June 30, 2020, the Company had total liabilities of $2,641,208, which consisted of accounts payable, accrued interest and accrued compensation in the amount of $291,090, rights-of-use liability of $544,096, capital lease of $38,566, notes payable and loans payable to related parties and non-related parties in the amount of $837,992, net of debt discount of $567,993, derivative liabilities of $828,778 and billing in excess of costs and estimated earnings in amount of $100,686. The Company had total stockholders’ equity of $112,588 as of June 30, 2020.

 

During the six months ended June 30, 2020 and 2019, net cash used in operating activities was $1,008,506 and $46,485, respectively. Negative cash flows during the six months ended June 30, 2020 were due primarily to the net loss of $2,073,331, plus the increase in inventory and prepaid expenses of $17,715 and $310,230, respectively, and the decrease in billing in excess of costs and estimated earnings of $1,557,312, partially offset by non-cash expenses, including stock-based compensation of $2,518,950, amortization of debt discount of $181,276, and changes in derivative liabilities by $24,569. Comparatively, cash used in operating activities for the six months ended June 30, 2019 was due primarily to the net loss of $100,427, plus the increase in operating lease right-of-use of $260,431 and licensing agreement of $40,000, partially offset by the decrease in prepaid expenses of $8,866, the increase in accounts payable, accrued interest payable and accrued compensation totaling $70,633, and the increase in operating lease right-of-use liabilities of $268,779.

 

 

During the six months ended June 30, 2020 and 2019, we had cash used in investing activities of $72,290 and $17,034, respectively, solely attributable to capital expenditures for property and equipment.

 

During the six months ended June 30, 2020 and 2019, net cash flows provided by financing activities were $421,233 and $56,233, respectively, primarily attributable to the proceeds from notes payable to related parties and non-related parties during the respective periods. We had proceeds of $0 from related party borrowings and proceeds of $421,000 from non-related party borrowings in the six months ended June 30, 2020, compared to proceeds of $18,808 and $60,000, respectively, in the same period ended June 30, 2019. We made repayments of $40,000 to related party borrowings and repayments of $6,267 to non-related party borrowings in the six months ended June 30, 2020, compared to repayments of $31,633 and $942, respectively, in the same period ended June 30, 2019. We had proceeds of $46,500 from sales of stock in 2020 (which shares of stock were sold in connection with our Regulation A offering (discussed below)), which was $10,000 in the same period ended June 30, 2019.

 

We had cash of $599,147 and a working capital deficit of $903,382, as of June 30, 2020. On the short-term basis, we will be required to raise a significant amount of additional funds over the next 12 months to sustain operations and pay outstanding liabilities. On the long-term basis, we will potentially need to raise capital to grow and develop our business.

 

To date we sold have sold (a) 231,250 shares of our common stock in consideration for $81,500 in cash; and (b) 131,250 shares of our common stock in exchange for the conversion of $75,000 in debt, pursuant to our on-going Regulation A offering, which relates to the sale of up to 10,800,000 shares of our common stock at a price of $0.50 per share.

 

It is likely that we will require significant additional financing within the next 12 months and if we are unable to raise the needed funds on an acceptable basis, we may be forced to cease or curtail operations.

 

Additional information regarding the Company’s (a) accrued compensation for related parties can be found in “Note 10 – Accrued Compensation for Related Parties”; (b) notes payable can be found in “Note 11 – Notes Payable”; (c) related party loans can be found in “Note 12 – Loans from Related Parties”; derivative liabilities can be found in “Note 13 – Derivative Liabilities”; billings in excess of costs and estimated earnings can be found in “Note 14 – Billing in Excess of Costs and Estimated Earnings”, under “Part I - Item 1. Financial Statements” in the Notes to Consolidated Financial Statements.

 

Critical Accounting Policies

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606. The underlying principle is that the Company recognize revenue to depict the transfer of promised goods and services to customers in an amount that they expect to be entitled to in the exchange for goods and services provided. A five-step process has been designed for the individual or pools of contracts to keep financial statements focused on this principle.

 

Revenues from fixed-price and cost-plus contracts are recognized on the percentage of completion method, whereby revenues on long-term contracts are recorded on the basis of the Company’s estimates of the percentage of completion of contracts based on the ratio of actual cost incurred to total estimated costs. This cost-to-cost method is used because management considers it to be the best available measure of progress on these contacts. Revenues from cost-plus-fee contracts are recognized on the basis of costs incurred during the period plus the fee earned, measured on the cost-to-cost method.

 

Revenues from time-and-material and rate chart contracts are recognized currently as work is performed.

 

 

Revenues from maintenance service contracts are recognized on a straight-line basis over the life of the contract once the Company has an agreement, service has begun, the price is fixed or determinable and collectability is reasonably assumed.

 

Cost of revenues include all direct material, sub-contractor, labor and certain other direct costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. Claims for additional contract revenue are recognized when realization of the claim is probable and the amount can be reasonably determined.

 

The asset, “cost and estimated earnings in excess of billings on uncompleted contract” represents revenues recognized in excess of amounts billed, which was $0 as of June 30, 2020. The liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized, which was $100,686 as of June 30, 2020.

 

Fair value of financial instruments

 

The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Our financial instruments include cash, accounts receivable, other receivable, inventories, accounts payable, accrued liabilities, convertible note payable, and derivative liabilities.

 

The carrying values of the Company’s cash, accounts receivable, other receivable, inventories, accounts payable, accrued liabilities approximate their fair value due to their short-term nature.

 

The Company’s convertible note payable are measured at amortized cost.

 

The derivative liabilities are stated at their fair value as a level 3 measurement. The Company used the Lattice Model to determine the fair values of these derivative liabilities. See “Note 12 – Derivative Liabilities” of the unaudited financial statements included herein under “Part I - Item 1. Financial Statements”, for the Company’s assumptions used in determining the fair value of these financial instruments.

 

 

Convertible note payable

 

The Company accounts for convertible note payables in accordance with the Under Financial Accounting Standard Board (“FASB”) Accounting Standards Codification No. 815, Derivatives and Hedging, since the conversion feature is not indexed to the Company’s stock and can’t be classified in equity. The Company allocates the proceeds received from convertible note payable between the liability component and conversion feature component. The conversion feature that is considered embedded derivative liabilities has been recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company has also recorded the resulting discount on debt related to the conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments.

 

Derivative liabilities

 

The Company accounts for derivative liabilities in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires companies to recognize all derivative liabilities in the balance sheet at fair value, and marks it to market at each reporting date with the resulting gains or losses shown in the Statement of Operations.

 

Stock based compensation

 

The Company recognizes compensation costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

On July 27, 2018, the inception date, the Company adopted ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer/principal financial/accounting officer), to allow timely decisions regarding required disclosures.

 

Management, with the participation of our Chief Executive Officer (principal executive officer/principal financial/accounting officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. As of June 30, 2020, based on the evaluation of these disclosure controls and procedures, and in light of the material weakness we found in our internal controls over financial reporting as of December 31, 2019 (as described in greater detail in our annual report on Form 10-K for the year ended December 31, 2019), our Chief Executive Officer (principal executive officer/principal financial/accounting officer) has concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded properly, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer/principal financial/accounting officer), as appropriate, to allow timely decisions regarding required disclosures.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

 

Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “Item 1. Legal Proceedings” of this Form 10-Q from, “Part I - Item 1. Financial Statements” in the Notes to Consolidated Financial Statements under “Note 17 – Uncertainties”. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

 

Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Commission on June 26, 2020 (the “Form 10-K”), under the heading “Risk Factors”, except as set forth below, and investors should review the risks provided in the Form 10-K and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2019, under “Risk Factors”, and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

 

The risk factor entitled “The COVID-19 pandemic has negatively affected, and is likely to continue to negatively affect, our operations, results of operations and cash flow.” from the Form 10-K is replaced and superseded by the following:

 

Our business has been materially and adversely disrupted by COVID-19, and the control response measures that state and local governments have implemented to address it, and may be impacted by other epidemics or pandemics in the future.

 

An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our consolidated financial statements.

 

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several states and municipalities have declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

 

 

 

The COVID-19 pandemic, and related social distancing requirements, travel bans, stay-at-home orders and closures have limited access to our spas and store and forced us to close our spas and store during the first quarter of 2020 and into the second quarter of 2020. These, in turn, have not only negatively impacted our operations, financial condition and demand for our services, but our overall ability to react timely to mitigate the impact of this event. We anticipate that our second and third quarter 2020 financial results, at a minimum, will be significantly negatively affected by COVID-19; however, the full effect on our business and operation is currently unknown, and we currently project our financial results for at least the remainder of fiscal 2020 being negatively impacted by the pandemic. The outbreak of COVID-19 has caused significant disruptions to the Company’s ability to generate revenues and cash flows, and uncertainty regarding the length of the disruption may adversely impact our ability to raise additional capital.

 

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 reopened effective August 8, 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.

 

The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows will depend on our ability to have sufficient liquidity until such time as our stores can again generate revenue capable of supporting our ongoing operations, all of which remain highly uncertain at this time.

 

While conditions started to improve during the second quarter of 2020 as the state of Texas and various local governments began relaxing “stay-at-home” and similar public health mandates that were implemented in response to the COVID-19 pandemic, Texas has recently seen a significant increase in the number of COVID-19 positive patients. It is currently unknown whether the state or local governments (if they are legally able) will implement further “stay-at-home” and similar orders. Any such “stay-at-home” or similar orders would likely require us to close our medical spas and potentially our nutrition supplement store, but will at a minimum further decrease traffic to such stores, and may further impact our construction services.

 

Notwithstanding the above, as the economy continues to recover from the severe impacts of the pandemic and related COVID-19 control responses which were put in place in the first part of the year, we expect employment, consumer confidence and other fundamental business factors to also improve. However, the speed, trajectory and strength of any such recovery remains highly uncertain, and could be slowed or reversed by a number of factors, including a possible widespread resurgence in COVID-19 infections during the remaining months of 2020 without the availability of generally effective therapeutics or a vaccine for the disease.

 

We currently anticipate experiencing ongoing disruptions to our ability to keep open, staff and operate spas and our nutrition store, and provide construction services, throughout the remainder of 2020 (and possibly beyond) as the U.S. continues to deal with the COVID-19 pandemic. Any prolonged disruption to our operations is likely to have a significant adverse effect on our results of operations, cash flows and ability to meet continuing debt service requirements.

 

Even though our spas have reopened and our vitamin store did not have to close, we do not expect our med spas or vitamin store customers to return to re-pandemic levels for some time, if at all. Additionally, the pandemic could also negatively impact our results of operations by continuing to weaken demand for our products and services and/or by disrupting our supply chain. As events are rapidly changing, we are unable to accurately predict the impact that COVID-19 will have on our results of operations due to uncertainties including, but not limited to, the future duration of the closing of our stores, the duration of quarantines, shelter-in-place and other travel restrictions within the U.S. and other affected countries, the severity of the virus, the duration of the outbreak, and the public’s response to the outbreak and its eventual aftermath.

 

 

The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, also makes it more challenging for our management to estimate the future performance of our business and develop strategies to generate growth. Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, significant decreases in our revenues and increases in net loss, as we did during our 2020 first and second quarters, and such impacts could continue be material to our consolidated financial statements in the third quarter and beyond. In addition, should the COVID-19 public health effort intensify to such an extent that we once again cannot operate, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; or service our outstanding debt. Such a circumstance could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do.

 

Our business may suffer from the severity or longevity of the Coronavirus/COVID-19 Global Outbreak.

 

The demand for our services relies upon, among other things, (a) customers being able to, and being willing to, visit our health, wellness and beauty medical spas and vitamin store and our ability to keep our medical spas and vitamin store open for business, and (b) our ability to perform construction services for construction clients. The inability due to state and local social distancing orders, or unwillingness of, individuals to congregate in large groups, visit retail business or travel outside of their homes will, and has to date, had a negative effect on our operations. Additionally, 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. Loss of available employees due to health concerns in the future may also limit our ability to operate. 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. All of the above may in the future cause, and have to date caused, a material adverse effect on our operating results.

 

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

 

There have been no sales of unregistered securities during the quarter ended June 30, 2020 and from the period from April 1, 2020 to the filing date of this report, which have not previously been disclosed in our prior Annual Report on Form 10-K or a Current Report on Form 8-K, except as set forth below:

 

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. During the six months ended June 30, 2020, the Company issued a total of 645,000 shares to eligible persons under the Plan and recorded $198,950 as Stock Based Compensation against these issuances based on the market prices at the grant date. As of June 30, 2020, the number of shares under the Plan available for future issuance was 7,690,000 shares.

 

To the extent such issuances described above are deemed “sold or offered” (and not issued under a no-sale theory), we claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, for such issuances, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and we paid no underwriting discounts or commissions. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

 

On June 2, 2020, 500,000 shares of Series B Convertible Preferred stock were converted into 2,083,333 shares of the Company’s restricted common stock per GCN’s request.

 

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 July 27, 2020, the Company issued 1,030,808 restricted common shares to an investor in exchange for $77,929 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Fourth Man, LLC dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On July 27, 2020, the Company issued 1,119,319 restricted common shares to an investor in exchange for $84,620 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Armada Capital Partners, LLC dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On July 27, 2020, the Company issued 1,119,319 restricted common shares to an investor in exchange for $84,620 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to BHP Capital NY, Inc. dated October 28, 2019. After this conversion, the balance owed under the convertible note is $0.

 

On August 8, 2020, the Company issued Jesse J. Dickens, CEO of CCS, 250,000 shares of restricted common stock pursuant to an employment agreement entered into on October 1, 2019. This issuance represents the fourth and final tranche of shares owed to Mr. Dickens pursuant to his employment agreement. The shares were valued at $0.20 per share or $50,000.

 

As described below under “Item 5. Other Information”, on August 5, 2020 we sold the $53,000 Genova Roth Note #3 and on August 11, 2020 we sold the $105,000 LGH Convertible Note, which are convertible into our common stock pursuant to their terms.

 

We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the transactions above did not involve a public offering, the recipients were “accredited investors”, and/or had information about the Company similar to what would be included in a registration statement under the Securities Act. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

We claim an exemption from registration provided by Section 3(a)(9) of the Securities Act for such issuances upon conversion of our convertible securities, as the securities were exchanged by us with our existing security holders in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

On August 5, 2020, we 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 $53,000 (the “Geneva Roth Note #3”). The Geneva Roth Note #3 accrues interest at a rate of 8% per annum (22% upon the occurrence of an event of default) and has a maturity date of November 5, 2021.

 

The Company has the right to prepay the Geneva Roth Note #3 at any time during the first six months the note is outstanding at the rate of (a) 120% of the unpaid principal amount of the note plus interest, during the first 90 days the note is outstanding, (b) 125% of the unpaid principal amount of the note plus interest between days 91 and 120 after the issuance date of the note, (c) 130% of the unpaid principal amount of the note plus interest between days 121 and 150 after the issuance date of the note, and (d) 134% of the unpaid principal amount of the note plus interest between days 151 and 180 after the issuance date of the note. The Geneva Roth Note #3 may not be prepaid after the 180^th day following the issuance date.

 

Geneva Roth may in its option, at any time beginning 180 days after the date of the note, convert the outstanding principal and interest on the Geneva Roth Note #3 into shares of our common stock at a conversion price per share equal to 61% of the lowest daily volume weighted average price (“VWAP”) of our common stock during the 10 days trading days prior to the date of conversion. We agreed to reserve a number of shares of our common stock equal to the number of shares of common stock which may be issuable upon conversion of the Geneva Roth Note #3 at all times.

 

The Geneva Roth Note #3 provides for standard and customary events of default such as failing to timely make payments under the Geneva Roth Note #3 when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and the failure to maintain a listing on the OTC Markets. The Geneva Roth Note #3 also contains customary positive and negative covenants. The Geneva Roth Note #3 includes penalties and damages payable to Geneva Roth in the event we do not comply with the terms of such note, including in the event we do not issue shares of common stock to Geneva Roth upon conversion of the note within the time periods set forth therein. Additionally, upon the occurrence of certain defaults, as described in the Geneva Roth Note #3, we are required to pay Geneva Roth liquidated damages in addition to the amount owed under the Geneva Roth Note #3 (including in some cases up to 200% of the amount of the note and in other cases the value of the shares which Geneva Roth could have been issued upon the full conversion of the note after including default fees equal to 150% of the amount of such note).

 

The Geneva Roth Note #3 includes a most favored nations provision which allows Geneva Roth the right to modify the Geneva Roth Note #3 to provide for any more favorable terms offered in any future financing transaction, subject to certain limited exceptions.

 

At no time may the Geneva Roth Note #3 be converted into shares of our common stock if such conversion would result in Geneva Roth and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.

 

We hope to repay the Geneva Roth Note #3 prior to any conversion. In the event that the Geneva Roth Note #3 is not repaid in cash in its entirety, Company shareholders may suffer significant dilution if, and to the extent that, the balance of the Geneva Roth Note #3 is converted into common stock.

 

On August 11, 2020, we sold LGH Investments, LLC (“LGH”) a convertible promissory note in the principal amount of $105,000 (the “LGH Note”). The LGH Note included a $5,000 originally issuance discount. The LGH Note 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 11, 2021.

 

 

The Company has the right to prepay the LGH Note at any time during the first six months the note is outstanding at the rate of (a) 115% of the unpaid principal amount of the note plus interest, during the first 60 days the note is outstanding, (b) 125% of the unpaid principal amount of the note plus interest between days 61 and 120 after the issuance date of the note, and (c) 135% of the unpaid principal amount of the note plus interest between days 121 and 180 after the issuance date of the note. The LGH Note may not be prepaid after the 180^th day following the issuance date.

 

LGH may in its option, at any time convert the outstanding principal and interest on the LGH Note into shares of our common stock at a conversion price per share equal to the lesser of (a) $0.50 per share; and (b) 60% of the lowest daily volume weighted average price of the Company’s common stock on the ten trading days prior to the date of conversion. We agreed to reserve a number of shares of our common stock equal to three times the number of shares of common stock which may be issuable upon conversion of the LGH Note at all times.

 

The LGH Note provides for standard and customary events of default such as failing to timely make payments under the LGH Note when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and the failure to maintain a listing on the OTC Markets. The LGH Note also contains customary positive and negative covenants. The LGH Note includes penalties and damages payable to LGH in the event we do not comply with the terms of such note, including in the event we do not issue shares of common stock to LGH upon conversion of the note within the time periods set forth therein. Additionally, upon the occurrence of certain defaults, as described in the LGH Note, we are required to pay LGH liquidated damages in addition to the amount owed under the LGH Note including 135% of the amount of the note, plus daily penalties of $500 until the default is remedied.

 

The LGH Note includes piggyback registration rights requiring us to include the shares issuable upon conversion of the LGH Note on any registration statement we file in the future, subject to liquidation damages of 15% of the outstanding balance of the note, but not less than $25,000. The LGH Note includes a most favored nations provision which allows LGH the right to modify the LGH Note to provide for any more favorable terms offered in any future financing transaction, subject to certain limited exceptions.

 

At no time may the LGH Note be converted into shares of our common stock if such conversion would result in LGH and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock, provided that such percentage automatically increases to 9.99% if our market capitalization falls below $2.5 million.

 

We hope to repay the LGH Note prior to any conversion. In the event that the LGH Note is not repaid in cash in its entirety, Company shareholders may suffer significant dilution if, and to the extent that, the balance of the LGH Note is converted into common stock.

 

ITEM 6. EXHIBITS

 

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

American International Holdings Corp.
By	/s/ Jacob D. Cohen
	Jacob D. Cohen
	Chief Executive Officer, President and Director (Principal Executive Officer and Principal Financial/Accounting Officer)
	August 19, 2020

 

 

EXHIBIT INDEX

 

				Incorporated by Reference
Exhibit No.		Description		Form		File No.		Exhibit		Filing Date		Filed Herewith
2.1		Securities Purchase Agreement dated May 15, 2020, by and between American International Holdings Corp., as purchaser and Global Career Networks Inc, as seller, relating to the sale of 51% of Life Guru, Inc.		8-K		000-50912		2.1		05/21/20
3.1		Articles of Incorporation, as amended		10-K		000-50912		3.1		06/26/20
3.2		Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock of International American Technologies, Inc.		SB-2		333-138902		4(iii)1		11/22/06
3.3		Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock of International American Technologies, Inc.		SB-2		333-138902		4(iii)2		11/22/06
3.4		Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible Preferred Stock of Hammons Industries, Inc.		8-K		000-50912		4(iii)3		9/26/07
3.5		Amended and Restated Certificate of Designations of American International Holdings Corp. Establishing the Designations, Preferences, Limitations and Relative Rights of Its Series a Preferred Stock, filed with the Secretary of State of Nevada on May 18, 2020		8-K		000-50912		3.1		05/21/20
3.6		Amended and Restated Certificate of Designation of American International Holdings Corp. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series B Convertible Preferred Stock, filed with the Secretary of State of Nevada on May 18, 2020		8-K		000-50912		3.2		05/21/20
3.7		Certificate of Withdrawal of Certificate of Designation of Series C Convertible Preferred Stock filed with the Secretary of State of Nevada on May 18, 2020		8-K		000-50912		3.3		05/21/20
3.8		Bylaws of Unlimited Coatings Corporation		10-SB/12G		000-50912		3(ii)		08/18/04
10.1		Form of Subscription Agreement for the Company’s Regulation A Offering		1-A		024-11080		4.1		09/23/19
10.2		Securities Purchase Agreement between Adar Alef, LLC and American International Holdings Corp., dated February 24, 2020		8-K		000-50912		10.1		03/04/20
10.3		Convertible Promissory Note between Adar Alef, LLC and American International Holdings Corp., dated February 24, 2020		8-K		000-50912		10.2		03/04/20
10.4		Securities Purchase Agreement between Geneva Roth Remark Holdings, Inc. and American International Holdings Corp., dated April 20, 2020		8-K		000-50912		10.1		05/18/20

 

 

10.5

$88,000 Convertible Promissory Note between Geneva Roth Remark Holdings, Inc. and American International Holdings Corp., dated April 20, 2020

8-K

000-50912

10.2

05/18/20

10.6

Securities Purchase Agreement between FirstFire Global Opportunities Fund LLC and American International Holdings Corp., dated April 30, 2020

8-K

000-50912

10.3

05/18/20

10.7

$105,000 Convertible Promissory Note between FirstFire Global Opportunities Fund LLC and American International Holdings Corp., dated April 30, 2020

8-K

000-50912

10.4

05/18/20

10.8

Data Delivery and Ancillary Services Agreement between American International Holdings Corp. and Cicero Transact Group, Inc., dated January 13, 2020

10-Q

000-50912

10.4

07/24/20

10.9*

Securities Purchase Agreement between Geneva Roth Remark Holdings, Inc. and American International Holdings Corp., dated August 5, 2020

X

10.10*

$53,000 Convertible Promissory Note between Geneva Roth Remark Holdings, Inc. and American International Holdings Corp., dated August 5, 2020

X

10.11*

$105,000 Convertible Promissory Note between LGH Investments, LLC and American International Holdings Corp., dated August 11, 2020

X

31.1*

Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act*

X

32.1**

Certification of Principal Executive Officer and of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act**

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.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Presentation Document

X

 

*	Filed herewith.

 

**	Furnished herewith.