UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 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

 

 

(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, TX		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

 

Securities Registered Pursuant to Section 12(g) of the Act:

 

Common Stock, $0.0001 Par Value Per Share

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

 

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

 

As of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $6,284,708, based on the closing sale price of $0.20 on such closed trading date as reported on the OTCQB. For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 5% or greater stockholders. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 5% or greater stockholders are, in fact, affiliates of our company, or that there are not other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors and principal stockholders is included in Part III, Item 12 of this Annual Report on Form 10-K.

 

The number of shares outstanding of each of the issuer’s classes of equity as of April 15, 2021 is 73,473,127 shares of common stock.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

TABLE OF CONTENTS

 

Item		Description		Page
		Cautionary Statement Regarding Forward-Looking Information		3
		PART I
Item 1.		Business		4
Item 1A.		Risk Factors		14
Item 1B.		Unresolved Staff Comments		33
Item 2.		Properties		33
Item 3.		Legal Proceedings		36
Item 4.		Mine Safety Disclosures		36
		PART II
Item 5.		Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities		37
Item 6.		Selected Financial Data		45
Item 7.		Management’s Discussion and Analysis of Financial Conditions and Results of Operations		45
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		51
Item 8.		Financial Statements and Supplementary Data		51
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		82
Item 9A.		Controls and Procedures		82
Item 9B.		Other Information		82
		PART III
Item 10.		Directors, Executive Officers and Corporate Governance		83
Item 11.		Executive Compensation		87
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		92
Item 13.		Certain Relationships and Related Transactions; and Director Independence		94
Item 14.		Principal Accounting Fees and Services		98
		PART IV
Item 15.		Exhibit and Financial Statement Schedules		99
Item 16.		Form 10-K Summary		102

 

 

Cautionary Statement regarding Forward-Looking Statements

 

This Annual Report on Form 10-K (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 “Risk Factors”.

 

You should read the matters described in “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.

 

 

PART I

 

ITEM 1. BUSINESS

 

Introduction

 

The information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplemental Data” of this Report.

 

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 the section entitled “Risk Factors” beginning on page 14 of this Report. 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.

 

 

Corporate History

 

American International Holdings Corp.

 

American International Holdings Corp. was organized in 1986 and is incorporated in Nevada. The Company has undergone several name changes and changes of control since its incorporation; however, from 2012 until April 2019, the Company had no operations and nominal assets.

 

Prior to May 31, 2018, the Company was a 93.2% owned subsidiary of American International Industries, Inc. (“American”, “AMIN”), a company whose securities are traded on the OTCQB market maintained by OTC Markets under the symbol “AMIN”.

 

Effective on May 31, 2018, the Company issued (a) 4,300,000 shares of restricted common stock to Mr. Daniel Dror (the Company’s former Chief Executive Officer and President (who resigned from such positions effective on May 31, 2018)); (b) 3,800,000 shares of restricted common stock to Mr. Robert Holden (who was appointed President, Chief Executive Officer and Director of the Company on May 31, 2018 and resigned on August 20, 2018); (c) 750,000 shares of restricted common stock to Mr. Everett Bassie (who was appointed as Chief Financial Officer, Secretary, Treasurer and a member of the board of directors of the Company on May 31, 2018, and who has since resigned from all positions with the Company); (d) 750,000 shares of restricted common stock to Mr. Winfred Fields (a consultant to the Company); and (e) 500,000 shares of restricted common stock to Mr. Charles R. Zeller (a then director of the Company), each in consideration for services rendered to the Company.

 

As a result of the issuance of the shares in May 2018 as discussed above, a change in control occurred. American International Industries, Inc. ownership decreased from 93.2% to 6.4%.

 

On April 12, 2019, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Novopelle Diamond, LLC, a Texas limited liability company (“Novopelle Diamond” and “Novopelle”) and certain unitholders of Novopelle Diamond. Pursuant to the terms of the Share Exchange Agreement, the Company acquired 100% of the issued and outstanding membership interests of Novopelle Diamond by means of a share exchange with the Novopelle Members in exchange for 18,000,000 newly issued shares of the common stock of the Company (the “Share Exchange”). As a result of the Share Exchange, Novopelle became a 100% owned subsidiary of the Company. The closing of the Share Exchange occurred concurrently with the entry into the Share Exchange Agreement and resulted in a change of control of the Company. As a result of the Share Exchange, the Company acquired the business of Novopelle Diamond and all of its assets. Novopelle Diamond is a physician supervised, medical spa and wellness clinic that offers a full menu of wellness services including anti-aging, weight loss and skin rejuvenation treatments.

 

The three unitholders of Novopelle Diamond who received shares pursuant to the Share Exchange Agreement were (1) Jacob D. Cohen; (2) Esteban Alexander; and (3) Luis Alan Hernandez, who each received six million shares pursuant to the Share Exchange.

 

Concurrent with the Share Exchange, 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 4,900,000 shares of their Company common stock for individual promissory notes with an aggregate principal amount of $350,000 (the “Promissory Notes”). The Promissory Notes had a term of two years and accrue interest at the rate of 10% per annum (payable at maturity) until paid in full by the Company. The current principal balance of the Promissory Notes is approximately $110,000 as of the date of this filing.

 

As a result of the issuance of the shares in the Share Exchange and the cancellation of the shares held by the AMIH Shareholders, control of the Company changed to (1) Jacob D. Cohen; (2) Esteban Alexander; and (3) Alan Hernandez, who each owned 26% of the Company’s common stock following such transactions.

 

Also effective on April 12, 2019, the directors of the Company changed to Mr. Jacob D. Cohen; Mr. Esteban Alexander; and Mr. Alan Hernandez, who were also each appointed as the Chief Executive Officer and President of the Company (Mr. Cohen); the Chief Operating Officer and Treasurer (Mr. Alexander); and the Chief Marketing Officer and Secretary (Mr. Hernandez). Mr. Bassie resigned as a member of the board of directors of the Company and as the Secretary and Treasurer on April 12, 2019, but remained as the Company’s Chief Financial Officer until his passing on May 21, 2020.

 

 

On October 2, 2020, Jacob D. Cohen, the Chief Executive Officer and member of the board of directors of the Company entered into Stock Purchase Agreements with each of (a) Esteban Alexander, the Chief Operating Officer and member of the board of directors of the Company, and (b) Luis Alan Hernandez, the Chief Marketing Officer and member of the board of directors of the Company (collectively, the “Preferred Holders” and the “Stock Purchase Agreements”).

 

Pursuant to the Stock Purchase Agreements, Mr. Alexander agreed to sell 7,000,000 shares of common stock of the Company which he held to Mr. Cohen, which rights to such shares were assigned by Mr. Cohen to Cohen Enterprises, Inc., which entity he controls (“Cohen Enterprises”), in consideration for an aggregate of $1,500 as well as for the amount of services provided by Mr. Cohen to the Company; and Mr. Hernandez agreed to sell 4,000,000 shares of common stock of the Company which he held to Cohen Enterprises, in consideration for an aggregate of $1,000 as well as for the amount of services provided by Mr. Cohen to the Company. The sales closed on November 5, 2020.

 

One of the reasons that Mr. Alexander and Mr. Hernandez agreed to the terms of the Stock Purchase Agreements (including the sale of the shares of common stock of the Company at below market value), is because (a) each of Mr. Cohen, Mr. Alexander, and Mr. Hernandez were all appointed as officers and directors of the Company at the same time in April 2019, with the intention that such persons would provide a relatively equal amount of services to the Company in the roles as officers and directors thereof; (b) since such appointment date Mr. Cohen has been required to provide a disproportionate amount of services to the Company; and (c) each of Mr. Alexander and Mr. Hernandez desired to provide additional consideration to Mr. Cohen for such disproportionate level of service.

 

A condition to the Stock Purchase Agreements was that each of Mr. Alexander and Mr. Hernandez resign as a member of the board of directors of the Company by no later than January 15, 2021, which resignations were effective December 15, 2020.

 

A further requirement to the terms of the Stock Purchase Agreements was that each of Mr. Alexander and Mr. Hernandez take such actions necessary and which may be requested from time to time by Mr. Cohen, to affect the cancellation of the one share of Series A Preferred Stock of the Company held by each of them, for no consideration (including, but not limited to, without the required payment by the Company of the $1 redemption price described in the designation of such Series A Preferred Stock).

 

The shares of Series A Preferred Stock held by Mr. Alexander and Mr. Hernandez were canceled on November 6, 2020. The common shares were also transferred to Mr. Cohen on November 6, 2020, and as such, a change of control occurred on such date, with Mr. Cohen taking over voting control of the Company, and serving since December 15, 2020, as the sole officer and director of the Company.

 

The Company is headquartered in Addison, Texas and operates as a holding company dedicated to acquiring, managing and operating subsidiaries in (a) the health, wellness, and auxiliary industries across the United States and abroad; (b) general contracting and construction services; and (c) life coaching industry. The Company seeks opportunities to acquire and grow businesses that possess strong brand values and that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders.

 

The Company currently is the parent to seven wholly-owned subsidiaries and one majority-owned subsidiary.

 

 

MEDICAL SPA AND WELLNESS

 

The Company currently owns three wholly-owned subsidiaries that were in the Medical Spa and Wellness Sector (collectively hereinafter referred to as “MedSpa”, or “VISSIA”), which MedSpas the Company discontinued operations in October 2020. They are:

 

1. VISSIA MCKINNEY, LLC (F/K/A NOVOPELLE DIAMOND, LLC) – 100% OWNED

 

As described above, on April 12, 2019, the Company entered into the Share Exchange Agreement with Novopelle and acquired 100% of the issued and outstanding membership interests of Novopelle Diamond by means of a share exchange with the Novopelle Members in exchange for 18,000,000 newly issued shares of the common stock of the Company. As a result of the Share Exchange, VISSIA McKinney became a 100% owned subsidiary of the Company. As a result of the Share Exchange, the Company acquired the business of VISSIA McKinney and all of its assets. VISSIA McKinney is a physician supervised, medical spa and wellness clinic that offers a full menu of wellness services including anti-aging, weight loss and skin rejuvenation treatments located at 5000 Collin McKinney Parkway, Suite 150, McKinney, Texas 75070.

 

On June 27, 2019, the Company entered into an Exclusive License Agreement with Novo MedSpa Addison Corporation (“NMAC”) granting the Company the exclusive rights to the Novopelle intellectual property, including copyrights and trademarks, proprietary technology, and other assets necessary or desirable to operate Novopelle branded MedSpa locations and the right to open additional Novopelle branded MedSpa locations. The agreement provides the Company with an exclusive worldwide, unrestricted, perpetual, irrevocable, and royalty-bearing license.

 

Upon the execution of the License Agreement, the Company made a one-time cash payment in the amount of Forty Thousand Dollars ($40,000) and issued to NMAC a one-time stock issuance of 250,000 shares of the Company’s common stock. In addition, the Company has agreed to compensate NMAC with a one-time payment of Thirty Thousand Dollars ($30,000) per new Novopelle location as established by the Company and provide NMAC with an ongoing royalty payment equal to six percent (6%) of the newly established location’s total gross monthly revenues.

 

On May 13, 2020, the Company provided NMAC with its notice to terminate the 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. As a result, on May 19, 2020, Novopelle Diamond, LLC was officially renamed to VISSIA McKinney, LLC. Effective on May 13, 2020 the License Agreement was terminated. The Company decided to discontinue operations in October 2020.

 

2. VISSIA WATERWAY, INC. (F/K/A NOVOPELLE WATERWAY, INC.) – 100% OWNED

 

On September 11, 2019, the Company formed and organized Novopelle Waterway, Inc., in the State of Texas to establish a Novopelle branded med spa located in the Waterway section of the Woodlands, Texas. As a result of the termination of the License Agreement with NMAC, Novopelle Waterway, Inc. was officially renamed to VISSIA Waterway, Inc. on May 19, 2020.

 

On November 6, 2019, VISSIA Waterway, Inc. entered into a Lease Agreement with 20 & 25 Waterway Holdings, LLC to lease and occupy approximately 1,254 square feet of commercial retail space located at 25 Waterway, Suite 150, The Woodlands, Texas and officially opened its doors for service at the end of February 2020. The Company decided to discontinue operations in October 2020.

 

3. NOVOPELLE TYLER, INC. – 100% OWNED

 

On December 3, 2019, the Company formed and organized Novopelle Tyler, Inc. in the State of Texas with the plan to come to terms on a retail location for a newly established Novopelle branded med spa to be located in Tyler, Texas.

 

On January 6, 2020, Novopelle Tyler, Inc. entered into a Lease Agreement with Asher Park, LLC to lease and occupy approximately 1,900 square feet of commercial retail space located in Tyler, Texas to operate a planned new Novopelle MedSpa location. As of the date of this Report, and due to issues and delays related to COVID-19, Novopelle Tyler has canceled the lease agreement in August 2020 as the current market and economic conditions continue to worsen due to unforeseen circumstances related to COVID-19. As such, Novopelle Tyler has not effectuated the name change to VISSIA with the State of Texas and no longer intends to open this location. No further activity has been performed under Novopelle Tyler to date and the Company decided to discontinue operations in October 2020.

 

* * * * *

 

 

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 then operational 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. However, 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. Notwithstanding the re-openings, customer traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations failed to rebound to pre-closure levels due to COVID-19 and the pandemic’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective on October 25, 2020, we discontinued operations of both our VISSIA Waterway, Inc. and VISSIA McKinney locations. Our former MedSpa operations and assets are included under discontinued operations in the statement of operations and balance sheet included herein in “Item 8. Financial Statements and Supplementary Data”.

 

VISSIA Service Offerings

 

Our VISSIA med spas were Texas based, physician-supervised medical spa & wellness clinics. When operational, VISSIA offered the following products and services:

 

●	Stem Cell Therapy	●	Acne & Acne Scar Reduction
●	Laser Hair Removal	●	Testosterone Replacement Therapy
●	PRP Facial (Vampire Facial)	●	Hair Restoration
●	Novo Lipo (Body Contouring)	●	Botox & Fillers
●	Laser Vein Removal	●	Facials & Peels
●	Cellulite Reduction	●	Weight Loss Solutions
●	Stretch Mark Reduction	●	IV Therapies

 

Medical Spa Marketing Strategy

 

When operational, VISSIA marketed its products and services to both men and women that are conscience about fitness, health, wellness and aesthetics.

 

When operational, VISSIA deployed unique, proven marketing strategies through social media with both sponsored and paid advertisements as well as the use of local brand ambassadors and influencers. VISSIA experienced a lot of success by placing marketing materials in nearby retail establishments and utilizing cross marketing relationships with other vendors and retailers that market to similar demographics.

 

Competition

 

The health, wellness, fashion and medical spa industries are highly competitive with new locations, brands and facilities being established on a frequent basis. The industries continue to expand and evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we have. Some of these competitors and potential competitors have more experience than we have in the development of health and wellness services and products. In addition, our services and products compete with service and product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have.

 

 

Specifically, and as it relates to medical spas, there are both many independently operated locations as well as doctor’s offices that provide some or all of the services that we provide. At the same time, the demand and the number of individuals – both men and women – that are seeking medical spas for a variety of health, wellness and cosmetic/aesthetic type treatments and solutions has increased dramatically over the past several years. With medical spa treatments, such as laser hair removal and Botox injections, becoming more available, desirable, and affordable, demand for these services has dramatically increased.

 

CAPITOL CITY SOLUTIONS, USA, INC. – 100% OWNED

 

On September 17, 2019, the Company formed and organized Capitol City Solutions USA, Inc. (“CCS”) in the State of Texas to act as a general contracting and construction company focused on the remodeling, general construction and interior finish of both the Company’s newly established med spa locations as well as to market to other commercial real estate projects within the United States.

 

Service Offerings

 

CCS currently offers a variety of general contracting services to oversee the entirety of commercial construction projects and manage all phases of construction. These areas can range from permitting, roofing and exterior construction or remodeling, to interior finish out, including but not limited to cabinetry, drywall, plumbing and electrical. CCS primarily utilizes the services of its sub-contractors in order to perform its services and in some instances will perform various construction related tasks with its own work force in order to improve its project specific margins and profitability.

 

Marketing Strategy

 

CCS has primarily relied on word of mouth and existing relationships in order to market and secure its services and obtain access to viable projects. Additional strategies include the utilization of search engine optimization (SEO) marketing on its website at www.capitolcitysolutionsusa.com (which includes information the Company does not desire to incorporate by reference into this Report) and other social media outlets to reach out to both commercial developers and multi-family property owners and developers to solicit additional projects. Due to its current resources, CCS is currently limiting its marketing initiatives for projects located within the State of Texas.

 

Competition

 

The general contracting and construction industry is highly competitive with many larger, more established construction companies vying and marketing for the same projects as CCS. Many of these competitors and potential competitors have substantially greater financial, technological, managerial, technical and development resources and experience than we have. Some of these competitors and potential competitors have more experience than we have in all aspects of construction from both a new construction development and commercial remodeling.

 

LEGEND NUTRITION, INC. – 100% OWNED

 

On September 23, 2019, the Company formed and organized Legend Nutrition, Inc. (“Legend Nutrition”) in the State of Texas to act as a new brand of retail vitamin and supplement stores to be branded and marketed as Legend Nutrition.

 

October 18, 2019, Legend entered into an Asset Purchase Agreement to acquire all of the assets associated with and related to a retail vitamin, supplements and nutrition store located in McKinney, Texas and previously identified and doing business as “Ideal Nutrition.” 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.

 

Product and Service Offerings

 

Legend Nutrition operated a 1,500 square foot retail store offering a variety of vitamin & nutritional supplements as well as nutritional and weight loss plans through a consultative approach with each and every customer. Legend Nutrition’s products include, but are not limited to, a variety of workout related supplements such as vitamins, protein powders, pre-workout powders, and post-workout supplements that focus on muscle and overall health recovery. Legend Nutrition was located at 2851 Craig Drive, Suite #204, McKinney, TX 75070.

 

 

Legend Nutrition sold, marketed and catered to an audience of health conscience and minded individuals including, but not limited to, athletes, sports enthusiasts and bodybuilders. Legend Nutrition deployed a number of marketing strategies in order to attract local customers to its retail store. The most effective marketing strategy was the use of promotional marketing materials, such as Legend Nutrition branded t-shirts, which were distributed to its customers free of charge. Customers would wear these t-shirts when they work out at their local gym and were encouraged to post pictures and tag Legend Nutrition on various social media applications. Legend Nutrition also set up displays at local gyms and other local retail establishments to promote its various products and services.

 

The MedSpas were forced to close during the second and third quarters of 2020, and the Company discontinued such operations during the fourth quarter of 2020. 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 are willing to venture out to brick and mortar establishments. Legend Nutrition’s lease was up January 31, 2021, and the Company chose not to renew the lease, closed the store, and will not continue in this line of business moving forward. Our former Legend Nutrition operations and assets are included under discontinued operations in the statement of operations and balance sheet included herein in “Item 8. Financial Statements and Supplementary Data”.

 

LIFE GURU, INC. – 51% OWNED

 

On May 15, 2020, the Company acquired a 51% interest in Life Guru, Inc., a Delaware corporation. Life Guru owns the website www.LifeGuru.me – a website dedicated to providing an online platform to connect consumers to a variety of mentors, professionals, life coaches and career coaches (which includes information the Company does not desire to incorporate by reference into this Report). The LifeGuru.me website is currently in development and is anticipated to be fully launched on or before March 31, 2021. For the year ended December 31, 2020, we had an impairment loss of $670,488 primarily attributable to the investment in LifeGuru, which was impaired due to limited activities to date and uncertain future cash flows.

 

ZIPDOCTOR, INC. – 100% OWNED

 

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. 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. ZipDoctor is currently being sold on a direct-to-consumer basis with an emphasis on digital marketing and advertising. The Company intends to shift the business model to focus on offering ZipDoctor’s services to small to medium size companies to provide its telemedicine services to their employees as an employment health benefit. The Company launched the platform in the third quarter of 2020 and has generated nominal revenues to date.

 

EPIQ MD, INC. – 100% OWNED

 

On October 23, 2020, the Company incorporated a wholly-owned subsidiary, EPIQ MD, Inc. (“EPIQ MD”) in the State of Nevada. EPIQ MD is planned to be a direct to consumer, telemedicine and healthcare company targeting the over approximately 76 million Americans who are uninsured or underinsured; this includes, but is not limited to the working class, middle income and upper middle-income demographics. The EPIQ MD service offering is planned to be a convergence of primary care telemedicine, preventative care services and wellness programs – under one brand and on one platform. The EPIQ MD services are planned to be sold directly to consumers using a direct sales model and utilizing brand ambassadors. EPIQ MD is currently in development mode and anticipates a soft launch in the 2^nd quarter of 2021.

 

* * * * * *

 

 

The Company intends to continue to grow its business both organically and through identifying acquisition targets over the next 12 months in the telemedicine, life coaching, and wellness space. As these opportunities arise, the Company will determine the best method for financing its growth which may include the issuance of additional debt instruments, common stock, preferred stock, or a combination thereof, any one or more of which may cause significant dilution to existing shareholders.

 

Organizational Structure

 

 

Recent Events:

 

On January 6, 2021 (the “First Closing Date”), we closed the transactions contemplated by a Securities Purchase Agreement dated January 6, 2021 (the “Purchase Agreement”), which was entered into with a group of accredited institutional investors (collectively, the “Investors”), for the sale of convertible promissory notes.

 

Pursuant to the Purchase Agreement, the Company agreed to sell 6% Original Issue Discount Senior Secured Convertible Promissory Notes in an aggregate principal amount of $1,450,000 (the “Notes”) and warrants to purchase up to an aggregate of 6,750,000 shares of the Company’s common stock (the “Warrants”) to the Investors and entered into a Security Agreement, a Guaranty Agreement, a Pledge Agreement, and a Registration Rights Agreement (the foregoing, collectively with the Purchase Agreement, Notes and Warrant, the “Transaction Documents”). The Purchase Agreement includes indemnification obligations of the Company, requirements for the Company to reserve three times the number of shares of common stock issuable upon conversion of the Notes and exercise of the Warrants, the right of the Investors to participate up to 30% in any future equity or debt offering made by the Company in the 12 months after the First Closing Date, a prohibition on the Company selling any shares of common stock or common stock equivalents until 30 days after the First Closing Date, subject to certain exceptions, a one year prohibition on the Company entering into any equity line transaction or variable rate transaction (including convertible notes with adjustable conversion prices), and a one year prohibition, without the approval of the Investors, of a reverse or forward stock split.

 

A total of $850,000 in Notes (the “First Tranche Notes”) were sold on the First Closing Date, and a total of $600,000 in Notes (the “Second Tranche Notes”), were sold on March 30, 2021 (the “Second Closing Date”). In connection with the sale of the First Tranche Notes, the Company paid $25,000 of the Investors’ legal fees and certain other amounts in expense reimbursements.

 

Network 1 Financial Securities, Inc. acted as the placement agent for the Notes and the Company paid Network 1 Financial Services, Inc. a total of $51,000 in placement fees in connection with the sale of the First Tranche Notes and $36,000 in placement fees in connection with the sale of the Second Tranche Notes.

 

The Company plans to use a portion of the proceeds from the sale of the Notes to repay existing variable priced convertible promissory notes and for general working capital.

 

The First Tranche Notes mature on January 7, 2022 and the Second Tranche Notes mature on March 30, 2022, and accrue interest at a rate of 6% per annum (15% upon the occurrence of an event of default) payable to the Investors in cash on a calendar quarterly basis (which changes to monthly upon the occurrence of an event of default). Each of the Notes contained a 6% original issue discount.

 

 

The First Tranche Notes are convertible into shares of the Company’s common stock at any time, at a rate equal to the lesser of (i) $0.50 per share and (ii) 75% of the lowest daily volume-weighted average price (VWAP) of the Company’s common stock during the seven consecutive trading days prior to the delivery of a conversion notice (the “Market Price”), but not less than 75% of the VWAP on the First Closing Date. The Second Tranche Notes are convertible into shares of the Company’s common stock at a rate equal to the lesser of (1) the VWAP on the Second Closing date ($0.2437) or (2) the Market Price, but not less than 75% of the VWAP on the Second Tranche closing date. However, if while any Notes are outstanding and the daily VWAP on any of seven consecutive trading days is less than the applicable floor price(s), such floor price(s) are reduced (but not increased) to 75% of the VWAP on the seventh trading day.

 

The conversion price of the Notes may be adjusted upon the occurrence of certain events and the Notes may be declared immediately due and payable by the Investors in the event the Company defaults on any terms of the Notes or the other Transaction Documents. Additionally, at the option of the Investors, upon the occurrence of any event of default, the Investors can elect to convert the Notes at the lower of the stated conversion price and a conversion price equal to 70% of the lowest closing bid price of the common stock during the 10 consecutive trading day period ending and including the date of delivery or deemed delivery of any applicable conversion notice (the “Alternative Conversion Price”). The Notes contain penalties for the Company’s failure to timely deliver shares due upon conversion thereof. The Notes contain provisions limiting each Investor’s ability to convert any portion of its individual Note if such conversion would cause the Investor’s (or any affiliate of any such Investor) holdings in the Company to exceed 9.99% of the Company’s issued and outstanding shares of common stock. The Notes contain customary events of default, which include any default of $30,000 of more of indebtedness of the Company, final judgements equal to or greater than $75,000 rendered against the Company, and the Company’s failure to comply with the reporting obligations of the Exchange Act. Upon the occurrence of an event of default, at the option of the holder thereof, the amount of the Note increases by 110% (including principal and accrued interest) (plus 2% additional for each event of default that occurs thereafter). The Notes contain certain rights of the holders thereof upon the occurrence of a change of control or fundamental transaction, each as described in greater detail therein.

 

The Warrants are exercisable at various prices with (i) Warrants to purchase 2,250,000 shares of common stock exercisable at $0.20 per share, (ii) Warrants to purchase 2,250,000 shares of common stock exercisable at $0.35 per share, and (iii) Warrants to purchase 2,250,000 shares of common stock exercisable at $0.50 per share. All of the Warrants may be exercised via cashless exercise in the event that the shares underlying the Warrants are not registered within 180 days of the closing of the transaction. The Warrants, if not exercised by such date, terminate on January 7, 2026. The Warrants contain provisions limiting each Investor’s ability to exercise the Warrants if such exercise would cause the Investor’s (or any affiliate of any such Investor) holdings in the Company to exceed 9.99% of the Company’s issued and outstanding shares of common stock. We may prepay the Notes (provided we treat all Note holders equally) by paying 110% of the principal and interest thereon at any time (provided we are required to provide the holders 15 days prior written notice of such repayment, and during which time period the holder may convert the Note into common stock). Unless the Company’s common stock is listed on the NYSE, the NYSE American, the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select, at any time the Company issues common stock or common stock equivalents, subject to certain exceptions, below the then exercise price, the exercise price of the Warrants reset to the lower of such dilutive issuance or the VWAP on the next trading day following the first public disclosure of such dilutive issuance. Upon an event of default, the exercise price of the Warrants, at the option of the Investors, is the Alternative Conversion Price. If the Company undertakes a fundamental transaction and the successor entity is not a publicly-traded company, the holders of the Warrants have the right to require the Company to pay the greater of (a) the Black Scholes Value of the warrants; and (b) the positive difference between the consideration payable in such fundamental transaction minus the exercise price.

 

Pursuant to the Security Agreement, the Company and each of its subsidiaries provided the Investors a first priority security interest in substantially all of their assets to secure the repayment of the Notes.

 

The Subsidiary Guaranty, signed by each of the Company’s subsidiaries, provides for joint and several guaranties of the obligations set forth in the Notes by each of the Company’s subsidiaries. Each future subsidiary of the Company is required to enter into a joinder to the agreement as well.

 

 

Pursuant to the Pledge Agreement, we pledged all of the outstanding securities of each of our subsidiaries to the collateral agent of the Investors in order to secure amounts payable pursuant to the Notes.

 

In connection with the Registration Rights Agreement, we provided the Investors registration rights in connection with the Notes and Warrants, and agreed to (1) file a Registration Statement on Form S-1 within 21 days after the First Closing Date to register the common stock to be acquired by the Investors pursuant to the conversion of the Notes and exercise of the Warrants and any other shares of common stock subsequently acquired by the Investors, which was timely filed, and has been declared effective, and granted the Investors piggy-back registration rights. We also agreed to indemnify the Investors in connection with any liability in connection with the registration of such securities.

 

The Transaction Documents contain other representations, warranties, covenants and restrictions common with this type of transaction, including but not limited to, most favored nations provisions (which apply to the conversion price of the Notes, the terms of the Notes and the terms of the Warrants) and future participation clauses, and prohibitions on further borrowing.

 

On March 8, 2021, we entered into a Consulting Agreement with KBHS, LLC (“KBHS”), whose Chief Executive Officer is Mr. Kevin Harrington, who was appointed as the sole member of our newly formed Advisory Committee.

 

Pursuant to the Consulting Agreement, KBHS agreed to provide consulting services to the Company as the Company’s Brand Ambassador, including providing endorsement services and advising on marketing, promotions, acquisitions, licensing and business development. KBHS also agreed to up to four webinar appearances on behalf of the Company per year to support the Company’s direct sales efforts. The Consulting Agreement has a term of two years, and can be terminated with ten days prior written notice (subject to applicable cure rights set forth in the Consulting Agreement), in the event we or KBHS breach any term of the agreement, or we fail to pay any amounts due, become subject to any government regulatory investigation, certain lawsuits, claims, actions or take certain other actions during the term of the Consulting Agreement.

 

As consideration for providing the services under the Consulting Agreement, we agreed to issue KBHS 1.5 million shares of restricted common stock, which vest immediately upon issuance, to pay KBHS $10,000 per month, and agreed to pay KBHS a 5% finder’s fee on any new business introduced or developed by KBHS and 7.5% of the value of any acquisition or merger created or developed exclusively by KBHS, undertaken by the Company, subject to applicable laws. In the event we fail to pay any consideration due under the Consulting Agreement, such amount accrues interest at the rate of 1.5% per month until paid in full.

 

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 end of 2020, and into 2021. 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. As discussed above, we made the decision to discontinue operations of our VISSIA Waterway, Inc. and VISSIA McKinney locations.

 

Additionally, our Legend Nutrition store saw a deep decline in sales due to social distancing orders and decreases in customers who are willing to venture out to brick and mortar establishments. Legend Nutrition’s lease was up January 31, 2021, and the Company chose not to renew the lease, closed the store, and will not continue in this line of business moving forward.

 

 

We currently anticipate experiencing ongoing disruptions to our ability to reopen our medical spas and provide construction services, and provide future planned telehealth services and overall declines in the demand for our other offerings throughout the first half of 2021, at a minimum, as Texas, and the U.S. in general, continues to deal with the COVID-19 pandemic and rollout vaccines. Any prolonged disruption to our operations, work force available, is likely to have a significant adverse effect on our results of operations, cash flows and ability to meet continuing debt service requirements. We have also experienced delays in completing construction projects due to the effects of COVID-19.

 

Employees

 

We currently have a total of six full-time employees and 2 part-time employees. Our compensation programs are designed to align the compensation of our employees with performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure of our compensation programs balances incentives earnings for both short-term and long-term performance such as incentive bonuses and flexible. schedules. The Company believes that its rich culture of inclusion and diversity enables it to create, develop and fully leverage the strength of its workforce to exceed customer expectation and meet its growth objectives. The Company places a high value on diversity and inclusion. We also utilize numerous outside consultants. Our future success will depend partially on our ability to attract, retain and motivate qualified personnel. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages. We consider our relations with our employees to be satisfactory.

 

Government Regulation

 

The health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We will also be subject to regulation regarding sale of our products online and solicitation of clients thereby, as well as through our general contractor business and the licensing and code requirements relating thereto.

 

ITEM 1A. RISK FACTORS

 

Investing in our common stock will provide an investor with an equity ownership interest. Shareholders will be subject to risks inherent in our business. The performance of our shares will reflect the performance of our business relative to, among other things, general economic and industry conditions, market conditions and competition. The value of the investment may increase or decrease and could result in a loss. An investor should carefully consider the following factors as well as other information contained in this Annual Report on Form 10-K.

 

This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties, see also “Cautionary Statement Regarding Forward-Looking Statements”, above. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including the risk factors described below and the other factors described elsewhere in this Form 10-K.

 

Summary Risk Factors

 

Our business is subject to numerous risks and uncertainties, including those in the section entitled “Risk Factors” and elsewhere in this Report. These risks include, but are not limited to, the following:

 

	●	Our limited operating history;
	●	Our need for additional funding to support our operations, repay debt and expand our operations;
	●	The effects of COVID-19 on our operations and prospects, including the recent closures of our MedSpas and nutrition store, and the future effects of COVID-19 on us and our operations;
	●	The fact that our MedSpas and our nutrition store have been shut down and we have discontinued operations;

 

 

	●	Impairments we may be required to assess in connection with our assets and goodwill as a result of such shutdowns and/or otherwise;
	●	Risks associated with our recent launch of a telehealth platform, including liability in connection therewith, funding needed to support such operations and other risks associated with the operations of the telehealth platform;
	●	Disruptions to our operations or liabilities associated with future acquisitions;
	●	Our ability to continue as a going concern;
	●	Our dependence on our sole officer and director, Jacob D. Cohen, including the lack of independent directors, and related party transactions affecting the Company;
	●	Competition we face;
	●	Our ability to maintain our varied operations, and service our indebtedness;
	●	Material weaknesses in our controls and procedures;
	●	Our ability to obtain and maintain adequate insurance;
	●	Legal challenges and litigation;
	●	Liability associated with our contracting operations;
	●	The terms of Mr. Cohen’s employment agreement;
	●	Dilution caused by the conversion of outstanding notes, conversion of preferred stock, exercise of outstanding warrants, and future fund-raising activities;
	●	The price of, volatility in, and lack of robust trading market for, our common stock; and
	●	The fact that Mr. Cohen has voting control over the Company.

 

Risks Related to our Business

 

Since we have a limited operating history it is difficult for potential investors to evaluate our business.

 

Our short operating history in the health and wellness industry, construction industry and mentoring/life coach industry may hinder our ability to successfully meet our objectives and makes it difficult for potential investors to evaluate our business or prospective operations. As an early-stage company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business. Accordingly, our business and success face risks from uncertainties faced by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.

 

We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our service locations and product development programs or commercialization efforts and could cause our business to fail.

 

We expect to need substantial additional funding to pursue additional service locations and product development and commercialize our products and services. There are no assurances that future funding will be available on favorable terms or at all. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our expansion of spa locations and development programs or any future commercialization efforts. Any of these events could significantly harm our business, financial condition and prospects.

 

 

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. We have been forced to close our MedSpas and made the decision to close our nutrition store.

 

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 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. 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. However, 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. Notwithstanding the re-openings, customer traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations failed to rebound to pre-closure levels due to COVID-19 and the pandemic’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective in October 2020, we made the decision to discontinue operations of our VISSIA Waterway, Inc. and VISSIA McKinney locations. Such locations remain closed through the date of this Report.

 

Our MedSpas were forced to close during the second and third quarters. 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 are willing to venture out to brick and mortar establishments. Legend Nutrition’s lease was up January 31, 2021, and the Company chose not to renew the lease, closed the store, and will not continue in this line of business moving forward.

 

All of the above has in turn, 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. To date, our second through fourth quarter 2020 financial results have been, and we anticipate our financial results for the first half of 2021, at a minimum, will be, significantly negatively affected by COVID-19 and the closure of our med spas in connection therewith (both due to governmental orders and separately due to our lack of operating funds); however, the full effect on our business and operation is currently unknown. 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.

 

 

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 we are able to re-open our stores and until our stores can again generate revenue capable of supporting our ongoing operations, if at all, all of which remain highly uncertain at this time.

 

We currently anticipate experiencing ongoing disruptions to our ability to provide construction services, throughout 2021 (and likely 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.

 

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, second, third and fourth quarters, and such impacts are likely to continue be material to our consolidated financial statements in the fourth quarter and beyond. In addition, should the COVID-19 public health effort intensify to such an extent that we 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 (all of which are now closed, pending our receipt of further funding and/or entry into partnerships to operate such medical spas) and/or our ability to re-open our medical spas, (b) our ability to perform construction services for construction clients, and (c) the ability of our telemedicine platform to provide telemedicine services. 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 (all of which are currently closed) 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.

 

We have decided to shut down our MedSpas and are subject to continuing losses while such businesses are shut down. We also decided to close our nutrition store and leave that business.

 

Customer traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations which were re-opened after mandatory closures associated with COVID-19 in June and August 2020, respectively, failed to rebound to pre-closure levels due to COVID-19 and the pandemic’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective in October 2020, we made the decision to close both our VISSIA Waterway, Inc. and VISSIA McKinney locations and discontinue operations. While such locations are closed, they are not generating any revenue; however, we are still required to pay the rent and utilities for each location. Such continuing expenses, without corresponding revenues, may have a significant negative affect on our results of operations and cash flows. Separately, legend Nutrition’s lease was up January 31, 2021, and the Company chose not to renew the lease, closed the store, and not continue in that line of business moving forward.

 

 

We may owe significant amounts to a consultant under the terms of a consulting agreement.

 

On March 8, 2021, we entered into a Consulting Agreement with KBHS, LLC (“KBHS”), whose Chief Executive Officer is Mr. Kevin Harrington, who was appointed the sole member of our newly formed Advisory Committee. Pursuant to the Consulting Agreement, KBHS agreed to provide consulting services to the Company as the Company’s Brand Ambassador, including providing endorsement services and advising on marketing, promotions, acquisitions, licensing and business development. KBHS also agreed to up to four webinar appearances on behalf of the Company per year to support the Company’s direct sales efforts. The Consulting Agreement has a term of two years, and can be terminated with ten days prior written notice (subject to applicable cure rights set forth in the Consulting Agreement), in the event we or KBHS breach any term of the agreement, or we fail to pay any amounts due, become subject to any government regulatory investigation, certain lawsuits, claims, actions or take certain other actions during the term of the Consulting Agreement. As consideration for providing the services under the Consulting Agreement, we agreed to issue KBHS 1.5 million shares of restricted common stock, which vest immediately upon issuance, to pay KBHS $10,000 per month, and agreed to pay KBHS a 5% finder’s fee on any new business introduced or developed by KBHS and 7.5% of the value of any acquisition or merger created or developed exclusively by KBHS, undertaken by the Company, subject to applicable laws. In the event we fail to pay any consideration due under the Consulting Agreement, such amount accrues interest at the rate of 1.5% per month until paid in full.

 

The requirement to pay the finder’s fees and/or acquisition/merger fee under the agreement could significantly decrease any margin we would otherwise obtain on any transaction, decrease our cash flows, and could prevent us from completing certain transactions in the future, all of which could have a material adverse effect on the Company and its securities.

 

We have previous suffered impairment losses and if our assets and equipment (including our VISSIA MedSpa assets, equipment and goodwill) and may be required to record significant additional charge to earnings.

 

We have assets, goodwill and equipment on our balance sheet relating to our VISSIA MedSpa operations. Due to COVID-19’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective on October 25, 2020, we made the decision to close both locations. Such locations remain closed through the date of this Report.

 

In accordance with the Generally Accepted Accounting Principles of the United States of America (“GAAP”), we review our assets for impairment when events or changes in circumstances indicate the carrying value of the asset may not be recoverable. For example, we also had an impairment loss of $605,488 primarily attributable to the investment in LifeGuru, and settlement loss of $1,041,445 in connection with the common shares issued for note settlements in 2020. We had no impairment loss nor settlement loss in 2019. Goodwill of $29,689 associated with Legend Nutrition was impaired in full during the fourth quarter of 2020. Such impairments may have a significant negative effect on our balance sheet, results of operations and financial results, and could cause the value of our common stock to decline in value or become worthless.

 

 

We face numerous risks associated with our telehealth planform which only recently commenced operations.

 

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 December 31, 2020. The Company launched the platform in August 2020, and has generated nominal revenues through this soft launch period. There is no significant operating history upon which to base any assumption as to the likelihood that our telemedicine platform will prove successful, and we may never achieve operations or profitable operations. Our telehealth platform also faces the following risks, any one of which may significantly negatively affect our operations, results of operations, and cash flows and could cause the value of our common stock to decline in value:

 

● Our telehealth platform could be adversely affected by legal challenges or by actions restricting our ability of our health providers to provide services in certain jurisdictions;

● We will be dependent on the relationships of our partners with health care professionals;

● Evolving government regulations may require increased costs or adversely affect our results of operations;

● The market for telehealth services is new and if it does not develop as we forecast or develops more slowly than we expect our growth may be harmed;

● The market for telehealth services is competitive and we compete with multiple competitors which have more resources and funding than we have and a more well-known brand name;

● Economic uncertainty or downturns, particularly as it impacts particular industries, could adversely affect our business and operating results; and

● We will be entirely dependent on the infrastructure and operations of our partner to operate our telehealth platform and such infrastructure and operations are completely outside of our control.

 

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

 

Our historical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report on our financial statements for the years ended December 31, 2020 and 2019, that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, if adequate funds are not available to us when we need it, we will be required to curtail our operations which would, in turn, further raise substantial doubt about our ability to continue as a going concern. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in the Company.

 

We depend heavily on our Chief Executive Officer, and the loss of his services could harm our business.

 

Our future business and results of operations depend in significant part upon the continued contributions of our senior management personnel, which currently consists solely of our Chief Executive Officer, Jacob D. Cohen. If we lose his services or if he fails to perform in his current position, or if we are not able to attract and retain skilled personnel as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key personnel in managing the operations of our medical spas, product development, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.

 

Because we do not have an audit or compensation committee, shareholders will have to rely on the entire board of directors to perform these functions.

 

We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee, nor any independent directors. These functions are performed by the board of directors as a whole (currently consisting solely of Jacob D. Cohen, our sole director). Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions. Such conflicts of interest will be exacerbated until such time as we appoint additional directors, and during such period that Jacob D. Cohen serves as our sole director.

 

 

We expect to face intense competition, often from companies with greater resources and experience than we have.

The health, wellness, construction, and mentoring/life coach industries are highly competitive and subject to rapid change. The industries continue to expand and evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we have. Some of these competitors and potential competitors have more experience than we have in the development of health and wellness services and products. In addition, our services and products compete with service and product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have. If we are unable to compete successfully, we may be unable to grow and sustain our revenue.

 

We are growing the size of our organization, and we may experience difficulties in managing any growth we may achieve.

 

As of the date of this Report, we have six full-time employees. As our development and commercialization plans and strategies develop, we expect to need additional development, managerial, operational, sales, marketing, financial, accounting, legal, and other resources. Future growth would impose significant added responsibilities on members of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth, if any, and successfully growing our company.

 

We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.

 

We have entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operational services, as detailed herein. Such transactions may not have been entered into on an arm’s-length basis, and we may have achieved more or less favorable terms because such transactions were entered into with our related parties. This could have a material effect on our business, results of operations and financial condition. The details of certain of these transactions are set forth under “Certain Relationships and Related Transactions”. Such conflicts could cause an individual in our management to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. Such conflicts of interest will likely be greater until such time as we are able to appoint new directors, as we currently have only one member of our board of directors, Jacob D. Cohen.

 

We operate our business through many locations, and if we are unable to effectively oversee all of these locations, our business reputation and operating results could be materially adversely affected.

 

Because we operate at various different locations throughout Texas, we are subject to risks related to our ability to oversee these locations. If in the future we are unable to effectively oversee our locations, our results of operations could be materially adversely affected, we could lose customers, we could lose control of inventory and other assets, and our business could be materially adversely affected.

 

 

We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

 

Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. As reported under “Controls and Procedures”, as of December 31, 2020 we determined that our disclosure controls and procedures were not effective. Separately, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 and determined that such internal control over financial reporting was not effective as a result of such assessment.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

 

Maintaining effective disclosure controls and procedures and effective internal control over financial reporting are necessary for us to produce reliable financial statements and the Company is committed to remediating its material weaknesses in such controls as promptly as possible. However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock, and/or result in litigation against us or our management. In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or our periodic reports filed with the SEC.

 

We could be adversely affected if any of our significant customers default in their obligations to us.

 

Defaults by any of our customers could have a significant adverse effect on our revenues, profitability and cash flow. Our customers may in the future default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons deriving from the current general economic environment. If a customer defaults on its obligations to us, it could have a material adverse effect on our business, financial condition, results of operations or cash flows.

 

The employment agreement of Mr. Jacob Cohen, our sole officer and director, provides for him to receive profits directly from medical spas which he manages, on top of his annual salary, and provide for the payment of certain severance payments upon termination.

 

Mr. Jacob D. Cohen’s employment agreement provides for him to receive 25% of the net profits from each medical spa managed by him. “Net profits” means all gross sales of a medical spa, less all expenses paid during the corresponding period. The payment of the net profits as discussed above may reduce the funds available for the Company’s other initiatives and/or create a situation where such executive/manager is incentive to drive up net profits at the expense of long-term growth.

 

If Mr. Cohen’s employment agreement is terminated during the term of such agreement by the Company without cause (as defined in the agreement) or by Mr. Cohen for good reason (as defined in the agreement), Mr. Cohen is due a severance payment. That severance payment is equal to the compensation (including bonus) earned through the date of termination and three times (one time if less than one year remains on the employment agreement)(the “multiplier”) the base salary in effect on the date of the termination plus the average bonus received by Mr. Cohen over the prior two years and Mr. Cohen is also to be paid any bonus which he would have earned at the end of the fiscal year during which the employment is terminated (pro-rated for days worked), and is to be paid health insurance for Mr. Cohen and his family for 18 months from the date of termination (the “Severance Payments”). Also, all equity compensation due to vest in the following 12 months vests immediately. If Mr. Cohen dies while the employment agreement is in place, or the agreement is terminated due to Mr. Cohen’s disability, the Company is required to pay Mr. Cohen’s salary to his beneficiaries for a period of one year following such death, pay the pro-rated amount of any bonus due, and pay 18 months of health insurance. If a change in control (as defined in the agreement) occurs and Mr. Cohen is terminated up to one year after such change in control, Mr. Cohen is due the Severance Payments (based on a 3x multiplier) and all unvested equity awards vest immediately. The payment of severance fees could have a material adverse effect on our cash flows and results of operations.

 

 

Risks Relating to Our Construction Services

 

Products supplied to us and work done by subcontractors can expose us to risks that may adversely affect our business.

 

We plan to rely on subcontractors to perform the actual construction work associated with our construction services, and in many cases, to select and obtain building materials. Despite detailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials. Defective products can result in the need to perform extensive repairs. The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers. We may also suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving things that are not within our control.

 

A significant amount of our revenues is due to only a small number of customers, and if we were to lose any of those customers, our results of operations would be adversely affected.

 

For the year ended December 31, 2020, approximately 99.9% of the Company’s revenues from continuing operations were derived from two major customers in connection with the construction contracts. For the year ended December 31, 2019, 89.7% of the Company’s revenues were derived from two major customers in connection with the construction contracts.

 

As a result, the majority of our revenues have historically been due to only a small number of customers, and we anticipate this trend continuing moving forward in the near term. As a result, in the event our customers do not pay us amounts owed, terminate work in progress or we are unable to find new customers moving forward, it could have a materially adverse effect on our results of operations and could force us to curtail or abandon our current business operations.

 

Natural disasters and severe weather conditions could delay our construction services and increase costs.

 

Our construction operations are conducted in areas that are subject to natural disasters, including hurricanes, earthquakes, droughts, floods, wildfires and severe weather. The occurrence of natural disasters or severe weather conditions may delay construction activities, increase costs by damaging inventories and lead to shortages of labor and materials in areas affected by the disasters. Any natural disasters or similar events effecting our construction operations may have a material adverse effect on our results of operations.

 

We are subject to warranty and construction defect claims arising in the ordinary course of business, which may lead to additional reserves or expenses.

 

Warranty and construction defect claims are common in the construction industry and can be costly. Certain claims may not be covered by insurance or may exceed applicable coverage limits, which could be material to our financial results.

 

Risks relating to our telehealth operations

 

Our telehealth business could be adversely affected by ongoing legal challenges to our business model or by new state actions restricting our ability to provide the full range of our services in certain states.

 

Our ability to conduct planned business operations in each state is dependent upon the state’s treatment of medical spas under such state’s laws, and rules and policies governing the practice of physician supervised services, which are subject to changing political, regulatory and other influences.

 

 

We may become subject to medical liability claims, which could cause us to incur significant expenses and may require us to pay significant damages if not covered by insurance.

 

Our wellness business entails the risk of medical liability claims. Successful medical liability claims could result in substantial damage awards that exceed the limits of our insurance coverage. Any claims made against us that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and our physicians from our operations, which could have a material adverse effect on our business, financial condition and results of operations. In addition, any claims may adversely affect our business or reputation.

 

Our use and disclosure of personally identifiable information, including health information, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, a material adverse effect on our client base and revenue.

 

Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability and integrity of personally identifiable information, or PII, including protected health information, or PHI. These laws and regulations include the Health Information Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations (referred to collectively as HIPAA). HIPAA establishes a set of basic national privacy and security standards for the protection of PHI. HIPAA requires us to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information. HIPAA imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations start at $100 per violation and are not to exceed $50,000 per violation, subject to a cap of $1.5 million for violations of the same standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI. In addition, HIPAA mandates that the Secretary of Health and Human Services, or HHS, conduct periodic compliance audits of HIPAA covered entities or business associates for compliance with the HIPAA Privacy and Security Standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator. HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

 

Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional expense, adverse publicity and liability.

 

Because of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important. If our security measures are breached or fail, unauthorized persons may be able to obtain access to sensitive client data, including HIPAA-regulated PHI. As a result, our reputation could be severely damaged, adversely affecting client confidence. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant costs for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to clients in an effort to maintain our business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants.

 

 

Our failure to attract and retain physicians and nurse practitioners in a competitive labor market could limit our ability to execute our growth strategy, resulting in a slower rate of growth.

 

Our wellness business depends on our ability to continue to recruit and retain a sufficient number of qualified licensed doctors and nurses. Although we believe we have an effective recruitment process, there is no assurance that we will be able to secure arrangements with sufficient numbers of licensed doctors and nurses or retain the services of such practitioners. If we experience delays or shortages in obtaining access to qualified physicians and nurses, we would be unable to expand our services and operations, resulting in reduced revenues.

 

If our physicians develop a poor reputation, our operations and revenues would suffer.

 

The success of our wellness business is dependent upon quality medical services being rendered by our physicians. As the patient-physician relationship involves inherent trust and confidence, any negative publicity, whether from civil litigation, allegations of criminal misconduct, or forfeiture of medical licenses, with respect to any of our physicians and/or our facilities could adversely affect our results of operations.

 

If we fail to comply with government laws and regulations it could have a materially adverse effect on our business.

 

The health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We exercise care in structuring our arrangements with physicians and other referral sources to comply in all material respects with applicable laws. We will also take such laws into account when planning future centers, marketing and other activities, and expect that our operations will be in compliance with applicable law. The laws, rules and regulations described above are complex and subject to interpretation. In the event of a determination that we are in violation of such laws, rules or regulations, or if further changes in the regulatory framework occur, any such determination or changes could have a material adverse effect on our business. There can be no assurance however that we will not be found in noncompliance in any particular situation.

 

Regulatory and Reporting Risks

 

We are subject to the reporting requirements of federal securities laws, which are expensive and subject us to potential liability.

 

We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders causes our expenses to be higher than they would be if we remained a privately-held company. We could also be subject to sanctions or deregistration if we fail to keep up with or run afoul of our reporting obligations.

 

Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls is time consuming, difficult and costly.

 

Because we are a reporting company with the SEC, we must comply with Sarbanes-Oxley Act and SEC rules concerning internal controls. It is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. In order to expand our operations, we will need to hire additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures.

 

 

Risks Relating to Our Common Stock and Securities

 

Shareholders who hold unregistered shares of our common stock will be subject to resale restrictions pursuant to Rule 144, if and when available, due to the fact that we are deemed to be a former “shell company”.

 

Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. While we do not believe that we are currently a “shell company”, we were previously a “shell company” and as such are deemed to be a former “shell company” pursuant to Rule 144, and as such, sales of our securities pursuant to Rule 144 may not be able to be made if we are not subject to Section 13 or 15(d) of the Exchange Act, and have filed all of our required periodic reports for at least the previous one year period prior to any sale pursuant to Rule 144; and a period of at least twelve months has elapsed from the date “Form 10 information” has been filed with the Commission reflecting the Company’s status as a non-”shell company” (which Form 10 information was filed by the Company in August 2019). Although to date we have complied with the requirement of Rule 144 as related to “shell companies”, our status as a former “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions in the future (although none are currently planned).

 

We have various outstanding convertible notes which are convertible into shares of our common stock at a discount to market.

 

As of December 31, 2020, we owed approximately $529,250 under various convertible promissory notes. The conversion prices of the convertible notes initially vary from between [60% to 61%] of the market value of our common stock, subject in many cases to adjustments to the conversion prices upon defaults and anti-dilution and other rights which may result in such conversion prices declining. As a result, any conversion of the convertible notes and sale of shares of common stock issuable in connection with the conversion thereof may cause the value of our common stock to decline in value, as described in greater detail under the Risk Factors below. Notwithstanding the above, we hope to repay the convertible notes in full before any conversions take place.

 

The issuance and sale of common stock upon conversion of the convertible notes may depress the market price of our common stock.

 

If sequential conversions of the convertible notes and sales of such converted shares take place, the price of our common stock may decline, and as a result, the holders of the convertible notes will be entitled to receive an increasing number of shares in connection with conversions, which shares could then be sold in the market, triggering further price declines and conversions for even larger numbers of shares, to the detriment of our investors. The shares of common stock which the convertible notes are convertible into may be sold without restriction pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.

 

In addition, the common stock issuable upon conversion of the convertible notes may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the share price. The convertible notes will be convertible into shares of our common stock at a discount to market as described above, and such discount to market provides the holders with the ability to sell their common stock at or below market and still make a profit. In the event of such overhang, the note holders will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock cannot absorb the discounted shares, then the value of our common stock will likely decrease. Notwithstanding the above, we hope to repay the convertible notes in full before any conversions take place.

 

The issuance of common stock upon conversion of our outstanding convertible notes will cause immediate and substantial dilution.

 

The issuance of common stock upon conversion of the convertible notes will result in immediate and substantial dilution to the interests of other stockholders since the holders of the convertible notes may ultimately receive and sell the full number of shares issuable in connection with the conversion of such convertible notes. Although certain of the convertible notes may not be converted if such conversion would cause the holders thereof to own more than 4.99% or 9.99% of our outstanding common stock, this restriction does not prevent the holders of the convertible notes subject to such restrictions from converting some of their holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 4.99%/9.99% limit. In this way, the holders of the convertible notes could sell more than any applicable ownership limit while never actually holding more shares than the applicable limits allow. If the holders of the convertible notes choose to do this, it will cause substantial dilution to the then holders of our common stock.

 

 

The continuously adjustable conversion price feature of the convertible notes could require us to issue a substantially greater number of shares, which may adversely affect the market price of our common stock and cause dilution to our existing stockholders.

 

Our existing stockholders will experience substantial dilution upon any conversion of the convertible notes. The convertible notes are convertible into shares of common stock at a conversion price equal to a discount to the market value of our common stock as described above. As a result, the number of shares issuable could prove to be significantly greater in the event of a decrease in the trading price of our common stock, which decrease would cause substantial dilution to our existing stockholders. As sequential conversions and sales take place, the price of our common stock may decline, and if so, the holders of the convertible notes would be entitled to receive an increasing number of shares, which could then be sold, triggering further price declines and conversions for even larger numbers of shares, which would cause additional dilution to our existing stockholders and would likely cause the value of our common stock to decline.

 

We could face significant penalties for our failure to comply with the terms of our outstanding convertible notes.

 

Our various convertible notes contain positive and negative covenants and customary events of default including requiring us in many cases to timely file SEC reports. In the event we fail to timely file our SEC reports in the future, or any other events of defaults occur under the notes, we could face significant penalties and/or liquidated damages and/or the conversion price of such notes could be adjusted downward significantly, all of which could have a material adverse effect on our results of operations and financial condition, or cause any investment in the Company to decline in value or become worthless.

 

The issuance and sale of common stock upon exercise of outstanding warrants may cause substantial dilution to existing stockholders and may also depress the market price of our common stock.

 

We have outstanding warrants to purchase a total of 6,750,000 shares of common stock exercisable at various prices with (i) warrants to purchase 2,250,000 shares of common stock exercisable at $0.20 per share, (ii) warrants to purchase 2,250,000 shares of common stock exercisable at $0.35 per share, and (iii) warrants to purchase 2,250,000 shares of common stock exercisable at $0.50 per share. All of the warrants may be exercised via cashless exercise in the event that the shares underlying the warrants are not registered within 180 days of January 6, 2021, provided that such shares of common stock underlying the warrants are currently registered. The warrants, if not exercised by such date, terminate on January 7, 2026. The warrants contain provisions limiting each Investor’s ability to exercise the warrants if such exercise would cause the Investor’s (or any affiliate of any such Investor) holdings in the Company to exceed 9.99% of the Company’s issued and outstanding shares of common stock. The ownership limitation does not prevent such holder from exercising some of the warrants, selling those shares, and then exercising the rest of the warrants, while still staying below the 9.99% limit. In this way, the holders of the Warrants could sell more than this limit while never actually holding more shares than this limit allows. If the holders of the Warrants choose to do this, it will cause substantial dilution to the then holders of our common stock.

 

If exercises of the warrants and sales of such shares issuable upon exercise thereof take place, the price of our common stock may decline. In addition, the common stock issuable upon exercise of the Warrants may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by the warrant holders, then the value of our common stock will likely decrease.

 

 

The issuance of common stock upon conversion of the 6% Convertible Notes will cause immediate and substantial dilution to existing shareholders.

 

The 6% Convertible Notes (including accrued and unpaid interest and late fees) making up the $850,000 First Tranche Notes are convertible into shares of the Company’s common stock at any time, at a rate equal to the lesser of (i) $0.50 per share and (ii) 75% of the lowest daily volume-weighted average price (VWAP) of the Company’s common stock during the seven consecutive trading days prior to the delivery of a conversion notice (the “Market Price”), but not less than 75% of the VWAP on the First Closing Date ($0.40 per share, making such initial floor price $0.30 per share). The $600,000 in Second Tranche are convertible into shares of the Company’s common stock at a rate equal to the lesser of (1) the VWAP on the Second Closing Date ($0.2437) or (2) the Market Price, but not less than 75% of the VWAP on the Second Tranche closing date. However, if while any 6% Convertible Notes are outstanding and the daily VWAP on any of seven consecutive trading days is less than the applicable floor price(s), such floor price(s) are reduced (but not increased) to 75% of the VWAP on the seventh trading day. Although the 6% Convertible Notes may not be converted by holder if such conversion would cause the holder to own more than 9.99% of our outstanding common stock, this restriction does not prevent such holder from converting some of its holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 9.99% limit. In this way, the holders of the 6% Convertible Notes could sell more than this limit while never actually holding more shares than this limit allows. If the holders of the 6% Convertible Notes choose to do this, it will cause substantial dilution to the then holders of our common stock.

 

The issuance and sale of common stock upon conversion of the 6% Convertible Notes may depress the market price of our common stock.

 

If conversions of the 6% Convertible Notes and sales of such converted shares take place, the price of our common stock may decline. In addition, the common stock issuable upon conversion of the 6% Convertible Notes may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb converted shares sold by the 6% Convertible Notes holders, then the value of our common stock will likely decrease.

 

We currently owe a significant amount of money under our outstanding convertible notes.

 

As of the date of this Report we owe approximately $759,521 under outstanding convertible and non-convertible promissory notes. We do not have sufficient funds to repay such notes and if we are unable to raise additional funds in the future to repay such amounts, which may not be available on favorable terms, if at all, such failure could have a material adverse effect on our financial condition or results of operations and cause any investment in the Company to decline in value or become worthless.

 

The issuance of common stock upon conversion of the Series B Convertible Preferred Stock will cause immediate and substantial dilution.

 

The issuance of common stock upon conversion of the Series B Convertible Preferred Stock will result in immediate and substantial dilution to the interests of other stockholders, which will be exacerbated in the event the 1.5 million shares of Series B Convertible Preferred Stock are issued in the event certain milestones related to LifeGuru.me are met. 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, for the five trading days immediately preceding the date the notice of conversion is received, with any remainder rounded to the hundredths place. Although the Series B Convertible Preferred Stock holder may not receive shares of common stock exceeding 4.999% of our outstanding shares of common stock immediately after affecting such conversion, this restriction does not prevent the holder from receiving shares up to the 4.999% limit, selling those shares, and then receiving the rest of the shares it is due, in one or more tranches, while still staying below the 4.999% limit, and such limit may be increased to 9.999% with 61 days prior written notice. If the holder chooses to do this, it will cause substantial dilution to the then holders of our common stock. Additionally, the continued sale of shares issuable upon successive conversions will likely create significant downward pressure on the price of our common stock as the holder sells material amounts of our common stock over time and/or in a short period of time. This could place further downward pressure on the price of our common stock and in turn result in the holder receiving an ever-increasing number of additional shares of common stock upon conversion of its securities, and adjustments thereof, which in turn will likely lead to further dilution, reductions in the conversion price of the Series B Preferred Stock and even more downward pressure on our common stock, which could lead to our common stock becoming devalued or worthless.

 

 

We have established preferred stock which can be designated by the Company’s board of directors without shareholder approval and the board has established Series A Preferred Stock, which gives the holders majority voting power over the Company.

 

The Company has 5,000,000 shares of preferred stock authorized. The shares of preferred stock of the Company may be issued from time to time in one or more series, each of which shall have a distinctive designation or title as shall be determined by the board of directors of the Company (currently consisting solely of Jacob D. Cohen) prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the board of directors. In May 2020, we designated three shares of Series A Preferred Stock. The Series A Preferred Stock have the right, voting in aggregate, to vote on all shareholder matters equal to sixty percent (60%) of the total vote (the “Super Majority Voting Rights”), so long as such shares are held by directors of the Company. A total of one share of Series A Preferred Stock is currently outstanding and held by Jacob D. Cohen, our sole officer and director, providing him sole voting right over 60% of our voting shares.

 

Because the board of directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company’s shareholders, shareholders of the Company will have no control over what designations and preferences the Company’s preferred stock will have. The issuance of shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our shareholders (similar to the Series A Preferred Stock). As a result, the issuance of shares of preferred stock may cause the value of our securities to decrease.

 

Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.

 

We have no committed source of financing. Wherever possible, our board of directors (currently consisting solely of Mr. Jacob D. Cohen) will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our board of directors have authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued shares of common stock and designate series of preferred stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock (or convertible securities), possibly at a discount to market. These actions will result in dilution of the ownership interests of existing stockholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.

 

Our stock price may be volatile, which may result in losses to our stockholders.

 

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the OTC Markets’ OTCQB Market, where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:

 

●

variations in our operating results;

 

 

	●	changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
	●	changes in operating and stock price performance of other companies in our industry;
	●	additions or departures of key personnel; and
	●	future sales of our common stock.

 

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.

 

Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

 

We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of revenues or profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

 

Our common stock is likely to be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

 

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

 

 

Our Chief Executive Officer and sole director holds majority voting control over the Company.

 

Our sole officer and director Jacob D. Cohen, beneficially owns approximately 27.8% of our outstanding common stock and also have the ability to vote in aggregate, a separate 60% of our voting stock pursuant to his ownership of the one outstanding share of Series A Preferred Stock, which gives him control over 71.1% of our voting securities. As a result, Mr. Cohen has the ability to influence matters affecting our stockholders and will therefore exercise control in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Any investor who purchases shares will be a minority stockholder and as such will have little to no say in the direction of the Company and the election of directors. Additionally, it will be difficult if not impossible for investors to remove Mr. Cohen as a director, which will mean he will remain in control of who serves as officers of the Company as well as whether any changes are made in the board of directors. As a potential investor in the Company, you should keep in mind that even if you own shares of the Company’s common stock and wish to vote them at annual or special stockholder meetings, your shares will likely have little effect on the outcome of corporate decisions. Because Mr. Cohen controls such vote, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Additionally, the interests of Mr. Cohen may differ from the interests of the other stockholders and thus result in corporate decisions that are averse to other stockholders.

 

General Risk Factors

 

Our acquisitions may expose us to unknown liabilities.

 

Because we have acquired, and expect generally to acquire, all (or a majority of) the outstanding securities of certain of our acquisition targets, our investment in those companies is or will be subject to all of their liabilities other than their respective debts which we paid or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our business could be materially affected. We may also experience issues relating to internal controls over financial reporting that could affect our ability to comply with the Sarbanes-Oxley Act, or that could affect our ability to comply with other applicable laws.

 

We may have difficulty obtaining future funding sources, if needed, and we may have to accept terms that would adversely affect stockholders.

 

We will need to raise funds from additional financing in the future to complete our business plan and may need to raise additional funding in the future to support our operations. We have no commitments for any financing and any financing commitments may result in dilution to our existing stockholders. We may have difficulty obtaining additional funding, and we may have to accept terms that would adversely affect our stockholders. For example, the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct our business. Additionally, we may raise funding by issuing additional convertible notes, which if converted into shares of our common stock would dilute our then stockholders’ interests. Lending institutions or private investors may impose restrictions on a future decision by us to make capital expenditures, acquisitions or significant asset sales. If we are unable to raise additional funds, we may be forced to curtail or even abandon our business plan.

 

If we make any acquisitions, they may disrupt or have a negative impact on our business.

 

If we make acquisitions in the future, funding permitting, which may not be available on favorable terms, if at all, we could have difficulty integrating the acquired company’s assets, personnel and operations with our own. We do not anticipate that any acquisitions or mergers we may enter into in the future would result in a change of control of the Company. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:

 

●

the difficulty of integrating acquired products, services or operations;

 

 

	●	the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
	●	difficulties in maintaining uniform standards, controls, procedures and policies;
	●	the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
	●	the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
	●	the effect of any government regulations which relate to the business acquired;
	●	potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or operations, or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition; and
	●	potential expenses under the labor, environmental and other laws of various jurisdictions.

 

Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

 

Current global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity and financial condition.

 

Current global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition.

 

We may expend our limited resources to pursue particular products, services or locations and may fail to capitalize on products, locations or services that may be more profitable or for which there is a greater likelihood of success.

 

Because we have limited financial and managerial resources, we must focus our efforts on particular service programs, products and locations. As a result, we may forego or delay pursuit of opportunities with other services, products or locations that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Any such failure could result in missed opportunities and/or our focus on products, services or locations with low market potential, which would harm our business and financial condition.

 

Our ability to service our indebtedness will depend on our ability to generate cash in the future.

 

Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.

 

 

Our potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects, and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment and could harm our business, financial condition, results of operations and cash flow.

 

Our entry into the rapidly growing health, wellness, construction and mentoring/life coaching market may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our technology significantly increases or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.

 

If we are unable to develop and maintain our brand and reputation for our service and product offerings, our business and prospects could be materially harmed.

 

Our business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets we serve. If problems arise with our products or services, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.

 

We may not maintain sufficient insurance coverage for the risks associated with our business operations.

 

Risks associated with our business and operations include, but are not limited to, claims for wrongful acts committed by our officers, directors, and other representatives, the loss of intellectual property rights, the loss of key personnel, risks posed by natural disasters and risks of lawsuits from customers who are injured from or dissatisfied with our services. Any of these risks may result in significant losses. We cannot provide any assurance that our insurance coverage is sufficient to cover any losses that we may sustain, or that we will be able to successfully claim our losses under our insurance policies on a timely basis or at all. If we incur any loss not covered by our insurance policies, or the compensated amount is significantly less than our actual loss or is not timely paid, our business, financial condition and results of operations could be materially and adversely affected.

 

We do not anticipate paying any cash dividends.

 

We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board of directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

 

Any failure to protect our intellectual property rights could impair our ability to protect our technology and our brand.

 

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights. We rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions, to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

 

 

For all of the foregoing reasons and others set forth herein, an investment in our securities in involves a high degree of risk.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

CORPORATE OFFICE

 

The Company currently utilizes approximately 1,200 square feet of office space located at 3990 Vitruvian Way, Suite 1152, Addison, Texas 75001 (the “Company Headquarters”). The Company executed a short term, one-year lease which expires in July 2021 and pays rent of $2,828 per month in connection with the Company Headquarters. We believe that the Company Headquarters are currently adequate for the purposes of our operations.

 

VISSIA MCKINNEY, LLC

 

On June 11, 2018, VISSIA McKinney, LLC. (f/k/a Novopelle Diamond, LLC) entered into a Lease Agreement with The Shops at Lake Forest, LLC to lease and occupy approximately 1,400 square feet of commercial retail space located at 5000 Collin McKinney Parkway, Suite 150, McKinney, Texas 75070, to operate a MedSpa (the “McKinney Lease Agreement”).

 

Lease Term - The McKinney Lease Agreement has a term of seven (7) years and commenced ninety (90) days from the date of the signing of the McKinney Lease Agreement.

 

Base, Additional and Percentage Rent Expense - The annual base rent is $43,400, or $31 per square foot, and increases at a rate of two percent (2%) per annum until the end of the lease term (the “Base Rent”). In addition to the Base Rent, VISSIA McKinney is required to reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the entire shopping center (the “Additional Rent” or “Triple Net”). At execution of the McKinney Lease Agreement, the Additional Rent was estimated at $6.50 per square foot per year.

 

Security Deposits - Upon the execution of the McKinney Lease Agreement, VISSIA McKinney agreed to prepay the first full month’s Base Rent plus Triple Net charges along with a security deposit equal one (1) month Base Rent plus Triple Net charges paid upon lease execution.

 

Tenant Improvement Allowance - The Landlord provided VISSIA McKinney with a Tenant Improvement Allowance of $27.00 per square foot, or approximately $37,800, towards improvements to the leased premises that are affixed and permanent in nature. The Tenant Improvement Allowance was paid by Landlord to VISSIA McKinney upon the completion of construction work performed and satisfactory inspection of such.

 

Utilities and Maintenance - VISSIA McKinney is responsible for all utility charges as well as all maintenance of the leased premises including, but not limited to, the mechanical, electrical and plumbing systems. The Landlord is responsible for maintenance of the roof, exterior walls and structural integrity of the building, which comprises the leased premises, and the common areas of the Shopping Center including, but not limited to, the parking areas.

 

We are currently in default of the terms of this lease as we failed to make the required payments due thereunder since January 2021.

 

 

VISSIA WATERWAY, INC.

 

On November 6, 2019, VISSIA Waterway, Inc. (f/k/a Novopelle Waterway, Inc.) entered into a Lease Agreement with 20 & 25 Waterway Holdings, LLC to lease and occupy approximately 1,254 square feet of commercial retail space located at 25 Waterway, Suite 150, The Woodlands, Texas to operate a MedSpa (the “Waterway Lease Agreement”).

 

Lease Term - The Waterway Lease Agreement has a term of five (5) years beginning on February 25, 2020.

 

Base, Additional and Percentage Rent Expense - The annual base rent is $53,922, or $43 per square foot, and increases at a rate of three percent (3%) per annum until the end of the lease term (the “Base Rent”). In addition to the Base Rent, VISSIA Waterway is required to reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the entire shopping center (the “Additional Rent” or “Triple Net”). At execution of the Waterway Lease Agreement, the Additional Rent was estimated at $15.59 per square foot per year.

 

In addition to both the Base Rent and Additional Rent, VISSIA Waterway is required to pay to Landlord a percentage rent equal to six percent (6%) of gross sales generated by VISSIA Waterway (the “Percentage Rent”). The Percentage Rent is only required to be paid to the landlord once VISSIA Waterway has exceeded $1,000,000 in gross sales for each calendar year during the term.

 

Security Deposits - Upon the execution of the Waterway Lease Agreement, VISSIA Waterway agreed to prepay the first full month’s Base Rent plus Triple Net charges along with a security deposit equal to the last three (3) months Base Rent plus Triple Net charges paid upon lease execution, provided however, that the landlord has agreed to refund two (2) months of the security deposit back to VISSIA Waterway after the third (3rd) month, which refund is not is not currently due until three consecutive rent payments have been made. Such rent payments have been delayed due to COVID-19 issues.

 

Tenant Improvement Allowance - The Landlord provided VISSIA Waterway with a Tenant Improvement Allowance of $10.00 per square foot, or $12,540, towards improvements to the leased premises.

 

Utilities and Maintenance - VISSIA Waterway is responsible for all utility charges as well as all maintenance of the leased premises including, but not limited to, the mechanical, electrical and plumbing systems. The Landlord is responsible for maintenance of the roof, exterior walls and structural integrity of the building, which comprises the leased premises, and the common areas of the Shopping Center including, but not limited to, the parking areas.

 

We are currently in default of the terms of this lease as we failed to make the required payments due thereunder since November 2020.

 

LEGEND NUTRITION, INC.

 

In connection with the Asset Purchase Agreement dated October 18, 2019, the Company is making lease payments in connection with Legend Nutrition Inc.’s lease. Legend Nutrition, Inc. currently leases and occupies approximately 1,206 square feet of commercial retail space located at 2851 Craig Drive, Suite #204, McKinney, TX 75070 (the “Legend Nutrition Lease Agreement”). The Legend Nutrition Lease Agreement has a term of five (5) years commencing on January 8, 2016 and ends in January, 2021. The annual base rent is $31,959 and Legend Nutrition is required to reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the entire shopping center (the “Additional Rent” or “Triple Net”). Legend Nutrition is responsible for all utility charges as well as all maintenance of the leased premises including, but not limited to, the mechanical, electrical and plumbing systems. The Landlord is responsible for maintenance of the roof, exterior walls and structural integrity of the building, which comprises the leased premises, and the common areas of the Shopping Center including, but not limited to, the parking areas. Legend Nutrition’s lease was up January 31, 2021, and the Company did not renew the lease, closed the store, and will not continue in this line of business moving forward.

 

 

NOVOPELLE TYLER, INC.

 

On January 6, 2020, Novopelle Tyler, Inc. (“Novopelle Tyler”) entered into a Lease Agreement with Asher Park, LLC to lease and occupy approximately 1,900 square feet of commercial retail space located in Tyler, Texas to operate a planned new Novopelle MedSpa location.

 

Lease Term - The Lease Agreement has a term of 60 months (or five (5) years), and commences 120 days from the later of the fully executed Lease Agreement, delivery of premises, and delivery of a construction permit from the City of Tyler, which has not occurred to date. This lease was terminated in August 2020.

 

Base, Additional and Percentage Rent Expense - The annual base rent is $34,200, or $18 per square foot, for the first 36 months and then increases to an annual base rent of $36,100, or $19 per square foot, for the remaining 24 months (the “Base Rent”). In addition to the Base Rent, Novopelle Tyler is required to reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the entire shopping center (the “Additional Rent” or “Triple Net”). At execution of the Lease Agreement, the Additional Rent was estimated at $6.00 per square foot per year.

 

Security Deposits – Upon the execution of the Lease Agreement, Novopelle Tyler agreed to pay a security deposit equal to the full first month’s Base Rent plus Triple Net charges in the amount of $3,800.

 

Tenant Improvement Allowance – The Landlord has agreed to provide Novopelle Tyler with a Tenant Improvement Allowance of up to $70.00 per square foot, or $133,000, towards improvements to the leased premises that are affixed and permanent in nature. The Tenant Improvement Allowance will be paid by Landlord to Novopelle Tyler upon the completion of construction work performed and satisfactory inspection of such, Landlord’s receipt of contractor’s signed lien releases, and Novopelle Tyler’s official opening for business.

 

Utilities and Maintenance – Novopelle Tyler is responsible for all utility charges as well as all maintenance of the leased premises including, but not limited to, the mechanical, electrical and plumbing systems. The Landlord is responsible for maintenance of the roof, exterior walls and structural integrity of the building, which comprises the leased premises, and the common areas of the Shopping Center including, but not limited to, the parking areas.

 

CAPITOL CITY SOLUTIONS USA, INC.

 

On January 3, 2020, Capitol City Solutions USA, Inc. (“CCS”) entered into a Lease Agreement with Asher Park, LLC to lease and occupy approximately 1,516 square feet of commercial office space located in Tyler, Texas to be used for CCS’s corporate offices and headquarters.

 

Lease Term – The Lease Agreement has a term of 60 months ((5) years) and 29 days, commences on January 3, 2020 and ends on January 31, 2025. The property is move in ready and the Lease Agreement does not provide for any tenant improvement allowances.

 

Base, Additional and Percentage Rent Expense – The annual base rent is $27,288, or $18 per square foot, for the term of the Lease Agreement. In addition to the base rent, CCS is required to reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the entire shopping center. At execution of the Lease Agreement, such additional rent was estimated at $6.00 per square foot per year.

 

Security Deposits – Upon the execution of the Lease Agreement, CCS agreed to pay a security deposit equal to the full first month’s base rent plus estimated additional rent charges in the amount of $3,032.

 

Utilities and Maintenance – CCS is responsible for all utility charges as well as all maintenance of the leased premises including, but not limited to, the mechanical, electrical and plumbing systems. The Landlord is responsible for maintenance of the roof, exterior walls and structural integrity of the building, which comprises the leased premises, and the common areas of the Shopping Center including, but not limited to, the parking areas.

 

 

ITEM 3. LEGAL PROCEEDINGS

 

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.

 

Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “Item 3. Legal Proceedings” of this Annual Report on Form 10-K from, “Item 8. Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in “Note 17. Uncertainties”. 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. 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 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock is quoted on the OTCQB Market maintained by OTC Markets Group Inc. under the symbol “AMIH”. Until recently the market for our common stock has been highly illiquid and sporadic. For the periods indicated, the following table sets forth the high and low sales prices per share of our common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

 

		Fiscal 2020								Fiscal 2019
		High				Low				High				Low
First Quarter ended March 31		$	0.75			$	0.13			$	2.40			$	1.00
Second Quarter ended June 30		$	0.39			$	0.12			$	2.00			$	1.00
Third Quarter ended September 30		$	0.33			$	0.12			$	2.00			$	1.00
Fourth Quarter ended December 31		$	0.45			$	0.06			$	2.40			$	0.61

 

As of April 15, 2021, our shares of common stock were held by approximately 253 stockholders of record.

 

Dividends

 

We have never paid any cash dividends on our common stock. We currently anticipate that we will retain all future earnings for use in our business. Consequently, we do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends in the future will depend upon our results of operations, as well as our short-term and long-term cash availability, working capital, working capital needs, and other factors as determined by our board of directors (currently consisting solely of Jacob D. Cohen). Currently, except as may be provided by applicable laws, there are no contractual or other restrictions on our ability to pay dividends if we were to decide to declare and pay them.

 

Description of Capital Stock

 

Our authorized capital stock consists of 195,000,000 shares of common stock with a $0.0001 par value per share, and 5,000,000 shares of preferred stock with a $0.0001 par value per share. As of the date of this Report, we have designated three shares of Series A Preferred Stock (of which one share is outstanding as of the date of this Report) and 2,000,000 shares of Series B Preferred Stock (of which no shares are outstanding as of the date of this Report). The following is a summary of the material provisions of the common stock and preferred stock provided for in our Articles of Incorporation and Bylaws. For additional detail about our capital stock, please refer to our Articles of Incorporation and Bylaws.

 

Common Stock

 

Voting Rights. Each share of our common stock is entitled to one vote on all stockholder matters. Shares of our common stock do not possess any cumulative voting rights.

 

Except for the election of directors, if a quorum is present, an action on a matter is approved if it receives the affirmative vote of the holders of a majority of the voting power of the shares of capital stock present in person or represented by proxy at the meeting and entitled to vote on the matter, unless otherwise required by applicable law, Nevada law, our Articles of Incorporation, as amended or Bylaws, as amended. The election of directors will be determined by a plurality of the votes cast in respect of the shares present in person or represented by proxy at the meeting and entitled to vote, meaning that the nominees with the greatest number of votes cast, even if less than a majority, will be elected. The rights, preferences and privileges of holders of common stock are subject to, and may be impacted by, the rights of the holders of shares of any series of preferred stock that we have designated, or may designate and issue in the future.

 

 

Dividend Rights. Each share of our common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by our board of directors, subject to any preferential or other rights of any outstanding preferred stock.

 

Liquidation and Dissolution Rights. Upon liquidation, dissolution or winding up, our common stock will be entitled to receive pro rata on a share-for-share basis, the assets available for distribution to the stockholders after payment of liabilities and payment of preferential and other amounts, if any, payable on any outstanding preferred stock.

 

Fully Paid Status. All outstanding shares of the Company’s common stock are validly issued, fully paid and non-assessable.

 

Other Matters. No holder of any shares of our common stock has a preemptive right to subscribe for any of our securities, nor are any shares of our common stock subject to redemption or convertible into other securities.

 

Preferred Stock

 

On May 18, 2020, the board of directors of the Company approved the filing of (a) an Amended and Restated Certificate of Designation of the Company’s Series A Preferred Stock (the “Series A Preferred Stock” and the “Series A Designation”); and (b) an Amended and Restated Certificate of Designation of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock” and the “Series B Designation”), with the Secretary of State of Nevada, which designations were filed with, and became effective with, the Secretary of State of Nevada on the same date. The Series A Designation designated three shares of Series A Preferred Stock and the Series B Designation designated 2,000,000 shares of Series B Preferred Stock.

 

Series A Preferred Stock

 

The Series A Designation provides for the Series A Preferred Stock to have the following rights:

 

Dividend Rights. The Series A Preferred Stock do not accrue dividends.

 

Liquidation Preference. The Series A Preferred Stock have no liquidation preference.

 

Conversion Rights. The Series A Preferred Stock have no conversion rights.

 

Voting Rights. For so long as any shares of Series A Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, have the right to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of the Company and upon any action taken by stockholders of the Company with or without a meeting) equal to sixty percent (60%) of the total vote (the “Total Series A Vote” and the “Voting Rights”). For example, if there are 10,000 shares of the Company’s common stock issued and outstanding at the time of a shareholder vote, the holders of the Series A Preferred Stock, voting separately as a class, will have the right to vote an aggregate of 15,000 shares, out of a total number of 25,000 shares voting.

 

Additionally, so long as Series A Preferred Stock is outstanding, the Company shall not, without the affirmative vote of the holders of at least 66-2/3% of all outstanding shares of Series A Preferred Stock, voting separately as a class (i) amend, alter or repeal any provision of the Articles of Incorporation or the Bylaws of the Company so as to adversely affect the designations, preferences, limitations and relative rights of the Series A Preferred Stock, (ii) effect any reclassification of the Series A Preferred Stock, (iii) designate any additional series of preferred stock, the designation of which adversely effects the rights, privileges, preferences or limitations of the Series A Preferred Stock; or (iv) amend, alter or repeal any provision of the Series A Designation (except in connection with certain non-material technical amendments).

 

Notwithstanding the above, no shares of Series A Preferred Stock held by any person who is not a then member of the board of directors of the Company (each a “Non-Director Holder”), shall have any Voting Rights and the Voting Rights of all other shares of Series A Preferred Stock (including, but not limited to the Total Series A Vote) shall be calculated without regard to, and without taking into account, the shares of Series A Preferred Stock held by such Non-Director Holder.

 

 

Redemption Right. The Company has the option in its sole discretion, at any time, with the majority consent or approval of the board of directors of the Company, to redeem any outstanding shares of Series A Preferred Stock of the Company held by any Non-Director Holder, by paying the Non-Director Holder(s) a redemption price of $1.00 per share for each such Series A Preferred Stock shares redeemed (the “Redemption Amount”, and each a “Redemption”). The payment by the Company to the Non-Director Holder (at such Non-Director Holder’s address of record) of the Redemption Amount in connection with a Redemption automatically results in the cancellation, termination and invalidation of any outstanding Series A Preferred Stock held by a Non-Director Holder or his, her or its assigns.

 

Purchase Right. In the event the Company is legally prohibited from exercising the redemption right discussed above, any one or more of the other holders of the Series A Preferred Stock, other than any Non-Director Holder(s) (the “Director Holders”), have the option, exercisable in their sole discretion, to purchase their pro rata share of any shares of Series A Preferred Stock held by any Non-Director Holder(s) for $1.00 per share of Series A Preferred Stock (the “Purchase Amount”, and the “Purchase”). The payment by the Director Holder(s) of the Series A Preferred Stock to the Non-Director Holder of the Purchase Amount automatically, and without any required action by the Director Holder(s) or the Non-Director Holder, results in the transfer of the rights to, and ownership of, such Series A Preferred Stock held by a Non-Director Holder or his, her or its assigns, to the Director Holder(s), pro rata with their payment of the Purchase Amount.

 

Protective Provisions. Subject to the rights of series of preferred stock which may from time to time come into existence, so long as any shares of Series A Preferred Stock are outstanding, the Company cannot without first obtaining the approval (by written consent, as provided by law) of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting together as a class:

 

(a) Issue any additional shares of Series A Preferred Stock after the original issuance of shares of Series A Preferred Stock;

 

(b) Increase or decrease the total number of authorized or designated shares of Series A Preferred Stock;

 

(c) Effect an exchange, reclassification, or cancellation of all or a part of the Series A Preferred Stock;

 

(d) Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A Preferred Stock; or

 

(e) Alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in the Series A Designation.

 

Transfer Restrictions. Each holder of Series A Preferred Stock is prohibited from Transferring any shares of Series A Preferred Stock. “Transfer” means directly or indirectly (a) offering for sale, selling, pledging, hypothecating, transferring, assigning or otherwise disposing of (or enter into any transaction or device that is designed to, or could be expected to, result in the sale, pledge, hypothecation, transfer, assignment or other disposition at any time) (including, without limitation, by operation of law); or (b) entering into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the benefits or risks of ownership of the applicable securities, whether any such transaction is to be settled by delivery of securities or other securities, in cash or otherwise.

 

A total of one share of Series A Preferred Stock is currently outstanding.

 

Series B Convertible Preferred Stock

 

The Series B Designation provides for the Series B Preferred Stock to have the following rights:

 

Dividend Rights. The Series B Preferred Stock does not accrue any dividends, but the Series B Preferred Stock holders are entitled to share in dividends paid to the holders of the Company’s common stock to the same extent that such holders would have received such dividends had they converted the Series B Preferred Stock into common stock pursuant to the conversion rights discussed below.

 

 

Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (each a “Liquidation Event”), the holders of Series B Preferred Stock 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 (which include holders of capital leases, other preferred stock and debt holders, and banks or others, which hold priority liquidation preferences over the assets of the Company), which holders of the senior securities have priority to the distribution of any assets of the Company, an amount per share for each share of Series B Preferred Stock held by them equal to $1.00 per share.

 

Conversion Rights. 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, for the five trading days immediately preceding the date the notice of conversion is received, with any remainder rounded to the hundredths place. Notwithstanding the above, at no time may the Series B Preferred Stock be converted into shares of our common stock by any holder, if such conversion would result in such holder thereof and its affiliates owning an aggregate of in excess of 4.999% of the then outstanding shares of our common stock, which amount may be increased to 9.999% on a per holder basis, upon 61 days’ prior written notice.

 

Voting Rights. The Series B Preferred Stock have no voting rights on general corporate matters, provided that the Series B Designation does contain customary protective provisions restricting the Company’s ability to undertake any of the following without the approval of a majority in interest of such shares of Series B Preferred Stock:

 

(a) Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B Preferred Stock;

 

(b) Re-issue any shares of Series B Preferred Stock converted pursuant to the terms of the Series B Designation;

 

(c) Issue any shares of Series B Preferred Stock other than pursuant to the SPA;

 

(d) Alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares of such series; or

 

(e) Amend or waive any provision of the Company’s Articles of Incorporation or Bylaws relative to the Series B Preferred Stock so as to affect adversely the shares of Series B Preferred Stock in any material respect as compared to holders of other series of shares.

 

Redemption Rights. The Series B Preferred Stock have no redemption rights.

 

No shares of Series B Preferred Stock are currently outstanding.

 

Anti-Takeover Provisions Under the Nevada Revised Statutes

 

Business Combinations

 

Sections 78.411 to 78.444 of the Nevada revised statutes (the “NRS”) prohibit a Nevada corporation from engaging in a “combination” with an “interested stockholder” for three years following the date that such person becomes an interested stockholder and places certain restrictions on such combinations even after the expiration of the three-year period. With certain exceptions, an interested stockholder is a person or group that owns 10% or more of the corporation’s outstanding voting power (including stock with respect to which the person has voting rights and any rights to acquire stock pursuant to an option, warrant, agreement, arrangement, or understanding or upon the exercise of conversion or exchange rights) or is an affiliate or associate of the corporation and was the owner of 10% or more of such voting stock at any time within the previous three years.

 

 

A Nevada corporation may elect not to be governed by Sections 78.411 to 78.444 by a provision in its Articles of Incorporation. We do not have such a provision in our Amended and Restated Articles of Incorporation, as amended, pursuant to which we have elected to opt out of Sections 78.411 to 78.444; therefore, these sections apply to us.

 

Control Shares

 

Nevada law also seeks to impede “unfriendly” corporate takeovers by providing in Sections 78.378 to 78.3793 of the NRS that an “acquiring person” shall only obtain voting rights in the “control shares” purchased by such person to the extent approved by the other stockholders at a meeting. With certain exceptions, an acquiring person is one who acquires or offers to acquire a “controlling interest” in the corporation, defined as one-fifth or more of the voting power. Control shares include not only shares acquired or offered to be acquired in connection with the acquisition of a controlling interest, but also all shares acquired by the acquiring person within the preceding 90 days. The statute covers not only the acquiring person but also any persons acting in association with the acquiring person.

 

A Nevada corporation may elect to opt out of the provisions of Sections 78.378 to 78.3793 of the NRS. We do not have a provision in our Amended and Restated Articles of Incorporation pursuant to which we have elected to opt out of Sections 78.378 to 78.3793; therefore, these sections do apply to us.

 

Removal of Directors

 

Section 78.335 of the NRS provides that 2/3rds of the voting power of the issued and outstanding shares of the Company are required to remove a Director from office. As such, it may be more difficult for stockholders to remove Directors due to the fact the NRS requires greater than majority approval of the stockholders for such removal.

 

Anti-Takeover Effects of Our Articles of Incorporation and Bylaws

 

The following provisions of our Articles of Incorporation and Bylaws could have the effect of delaying or discouraging another party from acquiring control of us and could encourage persons seeking to acquire control of us to first negotiate with our board of directors:

 

	●	no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
	●	the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, with our stockholders only allowed to fill such a vacancy if not filled by the board;
	●	the ability of our board of directors to alter our Bylaws without obtaining stockholder approval; and
	●	the requirement that a special meeting of stockholders may be called only by the board of directors, the Chairman of the Board, the President or a committee of the board of directors duly designated and whose powers and authority include the power to call meetings may call special meetings of the Company.

 

Listing

 

Our common stock is traded on the OTCQB Market under the symbol “AMIH”.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, 6201 15th Ave, Brooklyn, NY 11219. Its telephone number is (800) 937-5449.

 

 

Recent Sales of Unregistered Securities

 

There have been no sales of unregistered securities during the year ended December 31, 2020 and from the period from January 1, 2021 to the filing date of this report, which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K, except as discussed below:

 

On November 22, 2020, the Company issued 480,000 common shares to an investor in exchange for $25,000 of principal and accrued interest owed under the terms and conditions of that certain convertible note as issued to FirstFire Global Opportunities Fund LLC, dated April 30, 2020.

 

On December 2, 2020, the Company entered into a Securities Purchase Agreement with Geneva Roth Remark Holdings, Inc., an accredited investor (“Geneva Roth”), pursuant to which the Company sold Geneva Roth a convertible promissory note in the principal amount of $83,000 (the “Geneva Roth Note #5”). The Geneva Roth Note #5 accrues interest at a rate of 8% per annum (22% upon the occurrence of an event of default) and has a maturity date of March 2, 2022. 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 #5 into shares of our common stock at a conversion price per share equal to 61% of the average of the two lowest daily volume weighted average prices of our common stock during the 10 days trading days prior to the date of conversion. At no time may the Geneva Roth Note #5 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.

 

On December 2, 2020, the Company issued 716,527 common shares to an investor in exchange for $35,769 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to GHS Investments, LLC, dated October 10, 2020.

 

On December 2, 2020, the Company issued 889,054 common shares to an investor in exchange for $40,000 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Adar Alef, LLC, dated February 24, 2020.

 

On December 2, 2020, the Company issued 622,000 common shares to an investor in exchange for $31,100 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to GreenTree Financial Group, Inc., dated August 26, 2019.

 

On December 2, 2020, the Company issued 1,031,000 common shares to an investor in exchange for $84,200 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to FirstFire Global Opportunities Fund LLC, dated April 30, 2020.

 

On December 12, 2020, the Company issued 2,501,378 common shares to an investor in exchange for $195,108 of principal and accrued interest owed under the terms and conditions of that promissory note as issued to Daniel Dror, dated April 12, 2019.

 

On December 12, 2020, the Company issued 412,580 common shares to an investor in exchange for $35,000 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Geneva Roth, dated April 20, 2020.

 

On December 18, 2020, the Company issued 297,900 common shares to an investor in exchange for $25,968 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Geneva Roth, dated April 20, 2020.

 

On December 18, 2020, the Company issued 975,117 common shares to an investor in exchange for $85,000 of principal and accrued interest owed under the terms and conditions of that promissory note as issued to Daniel Dror, dated April 12, 2019.

 

 

On December 18, 2020, the Company issued 500,000 shares of the Company’s common stock in consideration for consulting services. The shares were valued at $0.08 per share, or $40,000 based on the market price on the date of issuance.

 

On December 30, 2020, the Company issued 683,791 common shares to an investor in exchange for $86,217 of principal and accrued interest owed under the terms and conditions of that convertible note as issued to Geneva Roth, dated May 19, 2020.

 

On December 30, 2020, the Company issued 889,979 common shares to an investor in exchange for $72,657 of principal and accrued interest owed under the terms and conditions of that promissory note as issued to David Morales, dated October 18, 2019.

 

On December 30, 2020, the Company issued 376,704 common shares to an investor in exchange for $30,777 of principal and accrued interest owed under the terms and conditions of that promissory note as issued to Asia Pacific Partners, Inc., dated June 24, 2020.

 

On January 12, 2021, the Company issued 708,750 common shares to an investor in exchange for $114,392 of principal and accrued interest owed under the terms and conditions of that promissory note as issued to LGH Investments, LLC., dated August 11, 2020.

 

On January 13, 2021, the Company issued 105,000 shares of the Company’s common stock to eligible persons under the 2019 Stock Option and Incentive Plan (the “Plan”). The shares were valued at $0.40 per share or $40,000.

 

On January 21, 2021, the Company agreed to issue 4,000,000 shares of common stock to Mr. Rodriquez under the terms of his employment agreement, 1,500,000 million shares of common stock to Mr. Bowen under the terms of his employment agreement and 1,000,000 shares to David M. Loev, the managing partner of The Loev Law Firm, PC, the Company’s securities counsel, who is also the brother-in-law of Jacob D. Cohen, the Company’s sole officer and director, under the terms of the reduced fee agreement. The securities issued to the Company’s legal counsel are subject to a two-year lock-up agreement, preventing the sale or transfer of such shares without the written approval of the Company, except to affiliates of the holder, who agree to be bound by the same terms.

 

On January 22, 2021, Mr. Jacob D. Cohen, as the sole member of the board of directors of the Company, approved the issuance to himself, in consideration for services rendered as the sole officer and director of the Company, of 2,500,000 shares of restricted common stock. The securities are subject to a two-year lock-up agreement, preventing the sale or transfer of such shares without the written approval of the Company, except to affiliates of the holder, who agree to be bound by the same terms.

 

On January 22, 2021, the Company issued 400,000 shares of the Company’s common stock in consideration for consulting services. The shares were valued at $0.38 per share, or $152,000 based on the market price on the date of issuance.

 

On January 22, 2021, the Company issued 200,000 common shares to an investor in exchange for $94,500 in cash, net of offering costs. 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 February 8, 2021, the Company issued 217,640 common shares to an investor in exchange for $50,275 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to L1 Capital Global Opportunities Master Fund (“L1 Capital”), dated January 7, 2021.

 

On February 12, 2021, the Company issued 224,921 common shares to an investor in exchange for $50,000 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to Cavalry Fund 1, LP (“Cavalry”), dated January 7, 2021.

 

 

On February 26, 2021, the Company issued 500,000 shares of the Company’s common stock in consideration for consulting services. The shares were valued at $0.08 per share, or $142,600 based on the market price on the date of issuance.

 

On March 5, 2021, the Company issued 409,333 common shares to an investor in exchange for $75,000 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to Cavalry, dated January 7, 2021.

 

On March 8, 2021, the Company issued to GCN an additional 500,000 shares of Series B Convertible Preferred Stock, which had an agreed upon value of $500,000 ($1.00 per share) in connection with milestones achieved pursuant to the SPA as executed with GCN on May 15, 2020. Immediately upon issuance, GCN elected to convert the 500,000 shares of Series B Convertible Preferred Stock into 2,057,613 shares of the Company’s common stock, at a price of $0.24 per share.

 

On March 9, 2021, the Company issued 200,000 shares of the Company’s common stock in consideration for consulting services. The shares were valued at $0.22 per share, or $44,000 based on the market price on the date of issuance.

 

On March 18, 2021, the Company issued 451,060 common shares to an investor in exchange for $75,000 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to Cavalry, dated January 7, 2021.

 

On March 19, 2021, the Company issued 872,270 common shares to an investor in exchange for $151,175 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to L1 Capital, dated January 7, 2021.

 

On March 22, 2021, the Company issued 100,000 shares of the Company’s common stock in consideration for consulting services. The shares were valued at $0.28 per share, or $28,000 based on the market price on the date of issuance.

 

On March 24, 2021, the Company issued 555,324 common shares to an investor in exchange for $100,000 of principal and accrued interest owed under the terms and conditions of that 6% convertible promissory note as issued to Cavalry, dated January 7, 2021.

 

* * * * * * *

 

The issuances and grants described above, except as otherwise disclosed, or set forth below, were exempt from registration pursuant to Section 4(a)(2), Rule 506 of Regulation D and/or Regulation S of the Securities Act, since the foregoing issuances and grants did not involve a public offering, the recipients took the securities for investment and not resale, we took take appropriate measures to restrict transfer, and the recipients were (a) “accredited investors”; (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act; (c) were non U.S. persons; and/or (d) were officers or directors of the Company. 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 afforded by Section 3(a)(9) of the Securities Act, for the above conversions, as the securities were exchanged by the Company with its existing security holders exclusively in transactions where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

 

Issuer Purchases of Equity Securities

 

None.

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

A registrant such as the Company, that qualifies as a smaller reporting company, as defined by §229.10(f)(1), is not required to provide the information required by this Item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION

 

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this Report. The following discussion contains forward-looking statements regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, particularly under “Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year. See also “Cautionary Statement Regarding Forward-Looking Statements”, above. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law.

 

Plan of Operations

 

The Company intends to continue to grow its business both organically and through identifying acquisition targets over the next 12 months in the technology, health and wellness space. Specifically, the Company will continue to make additional and ongoing technology enhancements to its LifeGuru life coaching platform, further develop, market and advertise its telemedicine platform, and identify strategic acquisitions that complement the Company’s vision of bridging the gap between primary care, preventative care and wellness. As these opportunities arise, the Company will determine the best method for financing its growth which may include the issuance of additional debt instruments, common stock, preferred stock, or a combination thereof, all of which may result in significant dilution to existing shareholders.

 

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:

 

	●	Results of Operations.
	●	Liquidity and Capital Resource.
	●	Critical Accounting Estimates.

 

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 consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplemental Data” of this Report.

 

 

Results of Operations

 

Revenues

 

We had revenues of $5,797,629 and $1,699,886 for the years ended December 31, 2020 and 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 revenues generated by such contracts totaled $7,333,264 from the 4^th quarter of 2019 through the end of 2020.

 

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 years ended December 31, 2020 and 2019, we recognized revenues of $5,795,629 and $1,699,886, respectively, in connection with these two construction contracts.

 

Cost of Revenues

 

We had cost of revenues of $4,852,631 and $1,519,941 during the years ended December 31, 2020 and 2019, respectively. 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.

 

Cost of revenues as a percentage of revenues was 83.7% and 89.4% for the years ended December 31, 2020 and 2019, respectively. Cost of revenues as a percentage of revenue in 2020 was approximately the same as 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 $4,329,730 and $3,044,851 during the years ended December 31, 2020 and 2019, respectively. The increase in 2020 was due primarily to stock-based compensation in the amount of $2,860,813, which was $2,303,390 in 2019, and rental expenses of $61,099 (excluding discontinued operations), which was $0 in 2019. The increase in general and administrative expenses in 2020 was also due to a new subsidiary launched in August 2020 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.

 

Other Expenses

 

During the years ended December 31, 2020 and 2019, we incurred interest expense of $219,202 and $60,862, respectively, of which $3,345 and $8,995, respectively, were recorded as imputed interest in connection with related party loans.

 

Amortization of debt discount was $777,964 and $76,230 during the years ended December 31, 2020 and 2019, respectively.

 

 

We had a loss of $107,574 and $147,495, respectively, due to change in derivative liabilities during the years ended December 31, 2020 and 2019. See also “Note 12 – Derivative Liabilities”, to the notes to financial statements included herein.

 

We also had an impairment loss of $670,488 primarily attributable to the investment in Life Guru, an impairment loss of $631,541 attributable to discontinued operations, and settlement loss of $1,155,685 in connection with the common shares issued for notes settlement in 2020. We had neither impairment loss, nor settlement loss in 2019.

 

Discontinued operations

 

Customer traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations which were re-opened after mandatory closures associated with COVID-19 in June and August 2020, respectively, failed to rebound to pre-closure levels due to COVID-19 and the pandemic’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective in October 2020, we made the decision to close both our VISSIA Waterway, Inc. and VISSIA McKinney locations and discontinued such operations. While such locations are closed, they are not generating any revenue; however, we are still required to pay the rent and utilities for each location and are accruing rents of approximately $4,500 and $6,100 per month at our Mckinney, TX and Woodlands, TX Vissia locations, respectively. Such continuing expenses, without corresponding revenues, may have a significant negative affect on our results of operations and cash flows. Separately, Legend Nutrition’s lease was up January 31, 2021, and the Company chose not to renew the lease, closed the store, and not continue in that line of business moving forward.

 

VISSIA Waterway, Inc., VISSIA McKinney LLC and Legend Nutrition (collectively referred to as “Discontinued Subsidiaries”) have been presented as discontinued operations in the accompanying consolidated financial statements.

 

The operating results for Discontinued Subsidiaries have been presented in the accompanying consolidated statement of operations for the years ended December 31, 2020 and 2019, as discontinued operations and are summarized below:

 

		Years Ended December 31,
		2020				2019
Revenue		$	311,672			$	214,101
Cost of revenue			205,742				107,195
Gross Profit			105,930				106,906
Operating expenses			587,580				178,340
Loss from operations			(481,650	)			(71,434	)
Other Expenses			(722,135	)			(9,054	)
Net loss		$	(1,203,785	)		$	(80,488	)

 

		As of
		December 31, 2020				December 31, 2019
Assets of discontinued operations - current		$	10,061			$	96,997
Assets of discontinued operations - intangible			-				59,689
Assets of discontinued operations – non-current			113,645				427,073
Net liabilities of discontinued operations		$	566,552			$	419,680

 

 

Net Loss

 

We had a net loss of $6,185,747, or $0.17 per share from continuing operations and $1,154,142 or $0.03 per share from discontinued operations during the year ended December 31, 2020, totaling an aggregate of $7,339,889 or $0.20 per share in total net loss. We had a net loss of $3,131,760, or $0.12 per share from continuing operations and $80,488 or $0.00 per share from discontinued operations during the year ended December 31, 2019, for a total net loss of $3,212,248. The increase in net loss in 2020 was primarily attributable to non-cash expenses in connection with stock-based compensation, amortization of debt discount, the change in derivative values associated with outstanding convertible debt, impairment loss due to the investment in Life Guru, and settlement loss in connection with the common shares issued for notes settlement, offset by the increase in gross profit, each as discussed above.

 

Liquidity and Capital Resources

 

As of December 31, 2020 and 2019, the Company had total assets of $265,499 and $2,192,476, respectively, including $123,684 and $583,759 of assets of discontinued operations, respectively.

 

As of December 31, 2020 and 2019, the Company had total liabilities of $1,656,505 and $3,301,409, respectively, which consisted of accounts payable, accrued interest and accrued compensation in the amount of $214,697 and $156,534, respectively, rights-of-use liability of $87,653 and $0, respectively, convertible notes payable (net of discount) and loans payable to related parties and non-related parties (net of discount) in the amounts of $79,845, $55,000 and $135,392, respectively, and derivative liabilities of $517,366 and $458,745, respectively. We also had $566,552 of net liabilities related to discontinued operations. The Company had a total stockholders’ deficit of $1,391,006 and $1,108,933 as of December 31, 2020 and 2019, respectively.

 

During the year ended December 31, 2020, net cash used in operating activities was $2,134,845, compared to net cash provided by operating activities of $900,435 for the year ended December 31, 2019. Negative cash flows during the year ended December 31, 2020, were due primarily to the net loss of $7,339,889, plus the decrease in billing in excess of costs and estimated earnings by $1,657,998, partially offset by non-cash expenses, including stock-based compensation of $2,860,813, amortization of debt discount of $777,964, loss on loans settlement by $1,041,445, impairment loss of $670,488 and non-cash lease expense of $26,141. Comparatively, positive cash flows during the year ended December 31, 2019, were due primarily to non-cash expenses, including stock based compensation of $2,303,390, amortization of debt discount of $76,230, changes in derivative liabilities of $147,495, plus the increase in billing in excess of costs and estimated earnings of $1,657,998, offset by our net loss of $3,212,248.

 

During the years ended December 31, 2020 and 2019, we had cash used in investing activities of $23,901 and $103,554, respectively. The net cash used in investing activities in 2020 was solely attributable to capital expenditures for property and equipment. We paid $70,000 cash for license in 2019 in addition to the purchase of property and equipment.

 

During the years ended December 31, 2020 and 2019, net cash flows provided by financing activities were $978,669 and $443,033, respectively, primarily attributable to the proceeds from notes payable to related parties and non-related parties during the respective periods. We had proceeds of $11,919 from related party borrowings and proceeds of $960,250 from non-related party borrowings in the year ended December 31, 2020, compared to proceeds of $165,571 and $370,000, respectively, in the year ended December 31, 2019. We made repayments of $40,000 to related party borrowings and repayments of $0 to non-related party borrowings in the year ended December 31, 2020, compared to repayments of $121,038 and $6,500, respectively, in 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 $35,000 in 2019.

 

We had cash of $25,144 and a working capital deficit of $1,439,454, as of December 31, 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 have sold (a) 431,250 shares of our common stock in consideration for $181,500 in cash through our 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; and (b) 18,916,774 shares of our common stock in exchange for the conversion of $2,634,119 in debt.

 

 

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 10 – Notes Payable”; (c) related party loans can be found in “Note 11 – Loans from Related Parties”; derivative liabilities can be found in “Note 12 – Derivative Liabilities”; billings in excess of costs and estimated earnings can be found in “Note 13 – Costs and estimated earnings in excess of billings on uncompleted contract”, in the notes to unconsolidated financial statements included herein.

 

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. The liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized. The Company had no such asset and liability as of December 31, 2020, since the two construction contracts for an apartment and clubhouse rebuild at Gateway Village, Texas and the replacement of a roof in Port Arthur, Texas were completed in 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, and accrued liabilities approximate their fair value due to their short-term nature.

 

The Company’s convertible notes 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 financial statements included herein, for the Company’s assumptions used in determining the fair value of these financial instruments.

 

Convertible note payable

 

The Company accounts for convertible notes payable 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 notes 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 December 31, 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 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

TABLE OF CONTENTS TO FINANCIAL STATEMENTS

 

	Page No.
Report of Independent Registered Public Accounting Firm	52
Financial Statements:
Consolidated Balance Sheets – December 31, 2020 and December 31, 2019	53
Consolidated Statements of Operations – Years Ended December 31, 2020 and 2019	54
Consolidated Statement of Changes in Stockholders’ Deficit –Years Ended December 31, 2020 and 2019	55
Consolidated Statements of Cash Flows – Years Ended December 31, 2020 and 2019	56
Notes to consolidated Financial Statements	57

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of American International Holdings Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of American International Holdings Corp. and its subsidiaries (collectively, the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 16 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 16. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matters communicated below are matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Discontinued Operations

 

As discussed in Note 1 to the financial statements, the Company made a decision to abandon the operations of 3 subsidiaries during the year ended December 31, 2020.

 

Auditing management’s evaluation of discontinued operations takes significant judgment given the fact that managements judgements on whether carrying values of assets exceeds fair value is needed to determine whether an impairment is necessary.

 

To evaluate the appropriateness and accuracy of the impairment determined by management, we examined the age and type of assets as well as the carrying values for each to assess whether the values were reasonably stated.

 

Derivatives

 

As discussed in Note 1 to the financial statements, the Company enters into convertible debt arrangements that have variable conversion rates that are tied to the Company’s equity values.

 

Auditing management’s valuation of the of the fair value of derivative liabilities takes significant judgment, given the fact that the Binomial model uses estimates of future value based multiple scenarios from historical data.

 

To evaluate the appropriateness and accuracy of the fair value determined by management, we examined the historical data and the model used to calculate the fair value of the derivative liabilities.   

 

/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2017.
Houston, Texas
April 15, 2021

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Balance Sheets

 

		December 31, 2020				December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	25,144			$	1,204,411
Prepayment and deposits			3,333				339,306
Assets of discontinued operations			10,061				96,997
TOTAL CURRENT ASSETS			38,538				1,640,714
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $4,238 and $0			18,854				-
Right-of-use asset - operating lease			87,653				-
Rent deposits			6,832				-
Assets of discontinued operations			113,645				551,762
NET NON-CURRENT ASSETS			226,984				551,762
TOTAL ASSETS		$	265,522			$	2,192,477
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	18,026			$	56,211
Accrued interest payable			42,195				41,824
Accrued compensation - related parties			154,500				58,500
Right-of-use liability - operating lease			24,138				-
Convertible notes payable, net of debt discount of $370,923 and $282,144			74,827				144,106
Loans payable			55,000				30,000
Loans payable to related parties, net of discount of $0 and $69,126			25,392				84,346
Derivative liabilities			517,366				458,745
Billing in excess of costs and estimated earnings			-				1,657,998
Net liabilities of discontinued operations			566,552				419,680
TOTAL CURRENT LIABILITIES			1,477,996				2,951,410
LONG-TERM LIABILITIES
Right-of-use liability - operating lease			63,515				-
Convertible notes payable, net of debt discount of $78,482 and $0			5,018				-
Long-term debt - related parties			110,000				350,000
TOTAL LONG-TERM LIABILITIES			178,533				350,000
TOTAL LIABILITIES		$	1,656,529			$	3,301,410
STOCKHOLDERS’ DEFICIT
Preferred stock, (par value $0.0001, 5,000,000 shares authorized, of which 1 and -0- shares issued and outstanding as of December 31, 2020 and 2019, respectively)		$	-			$	-
Common stock (par value $.0001, 195,000,000 shares authorized, of which 55,066,855 and 27,208,356 shares issued and outstanding as of December 31, 2020 and 2019, respectively)			5,507				2,721
Treasury stock, at cost;			(3,894	)			(103,537	)
Common stock payable			-				25,000
Additional paid in capital			9,167,038				2,186,651
Retained deficit			(10,559,658	)			(3,219,768	)
TOTAL STOCKHOLDERS’ DEFICIT			(1,391,007	)			(1,108,933	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	265,522			$	2,192,477

 

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

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Statements of Operations

 

		For the Year Ended December 31, 2020				For the Year Ended December 31, 2019
Revenues
Revenues		$	5,797,629			$	1,699,886
Cost of revenues			4,852,631				1,519,941
Gross profit			944,998				179,945
Operating expenses
General and administrative expenses			4,329,730				3,044,851
Total operating expenses			4,329,730				3,044,851
Income (Loss) from Operations			(3,384,732	)			(2,864,906	)
Other income (expenses)
Interest expenses			(219,202	)			(60,862	)
Amortization of debt discount			(777,964	)			(76,230	)
Change in derivative liabilities			(107,574	)			(147,495	)
Impairment loss			(605,488	)			-
Settlement loss			(1,041,445	)			-
Other income			300				17,733
Total other income (expenses)			(2,751,373	)			(266,854	)
Net (Loss) from continuing operations		$	(6,136,105	)		$	(3,131,760	)
Discontinued operations:
Loss from discontinued operations			(1,203,785	)			(80,488	)
Total discontinued operations			(1,203,785	)			(80,488	)
Net loss			(7,339,890	)			(3,212,248	)
Basic and diluted income (loss) per share
Continuing operations		$	(0.17	)		$	(0.12	)
Discontinued operations		$	(0.03	)		$	(0.00	)
Weighted average number of shares outstanding
Basic and diluted			35,456,109				25,622,733

 

The accompanying notes are an integral part of the financial statements

 

 

AMERICAN INTERNATIONAL HOLDINGS CORP.

Consolidated Statement of Changes in Stockholders’ Deficit

 

																										Additional				Common				Retained								Total
		Preferred Stock A								Preferred Stock B								Common Stock								Paid-in				Stock				Earnings				Treasury				Stockholders’
		Shares				Amount				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			-				-				-				-				-								8,995				-				-				-				8,995
Issuance of common shares under private placement			-				-				-				-				100,000				10				9,990				-				-				-				10,000
Cancellation of common shares for long-term debt			-				-				-				-				(4,250,000	)			(425	)			(249,932	)			-				-				(99,643	)			(350,000	)
Issuance of common shares for discount on loan			-				-				-				-				150,000				15				104,985				-				-				-				105,000
Issuance of common shares for licensing agreement			-				-				-				-				250,000				25				24,975				-				-				-				25,000
Issuance of common shares for note conversion			-				-				-				-				-				-				-				25,000				-				-				25,000
Issuance of common shares for services			-				-				-				-				2,025,000				203				2,303,187				-				-				-				2,303,390
Net (loss)			-				-				-				-				-				-								-				(3,212,248	)			-				(3,212,248	)
Balance, December 31, 2019			-			$	-				-			$	-				27,208,356			$	2,721			$	2,186,651			$	25,000			$	(3,219,768	)		$	(103,537	)		$	(1,108,933	)

 

																										Additional				Common				Retained								Total
		Preferred Stock  A								Preferred Stock B								Common Stock								Paid-in				Stock				Earnings				Treasury				Stockholders’
		Shares				Amount				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			-				-				-				-				-				-				3,345				-				-				-				3,345
Reclassification of derivative liabilities due to note conversion			-				-				-				-				-				-				907,551				-				-				-				907,551
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 treasury stock			-				-				-				-				(1,650,000	)			(165	)			(99,478	)			-				-				99,643				-
Issuance of common shares for note conversion and settlement			-				-				-				-				18,916,774				1,892				2,632,227				-				-				-				2,634,119
Issuance of shares for services - related parties			1				-								-				6,000,000				600				1,559,400				-				-				-				1,560,000
Issuance of shares for services			-				-				-				-				2,377,142				238				1,300,575				-				-				-				1,300,813
Issuance of common shares for Series B preferred shares conversion			-				-				(500,000	)			(50	)			2,083,333				208				(158	)			-				-				-				-
Net (loss)			-				-				-				-				-				-				-				-				(7,339,890	)			-				(7,339,890	)
Balance, December 31, 2020			1				-				-			$