| NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION | (A) Organization and Basis of Presentation Max Sound Corporation (the "Company")
was incorporated in Delaware on December 9, 2005, under the name 43010, Inc. The Company’s business operations are focused
primarily on developing and launching audio technology software. Effective March 1, 2011, the Company filed
with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc.
to Max Sound Corporation. On August 9, 2016, the Company moved a
level down from OTCQB to OTC Pink Current Information where it is within the continued standards and pricing requirements as found
in Section 2 of the OTCQB Eligibility Standards. The Company’s services may re-apply at any time after a price increase to
meet all the OTCQB Eligibility Standards to be moved back to the higher OTCQB marketplace. It is management's opinion, however,
that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the
year. These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and related notes included in our
Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on May 4, 2020. (B) Risks and Uncertainties In December 2019, a novel strain of coronavirus
(COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant
disruptions to its economy, it has now spread to several other countries and infections have been reported globally fiscal first
quarter and potentially beyond. Because COVID-19 infections have been reported
throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations
and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may
be issued in the future. As a result, all of our office locations have been closed effective April 1, 2020. The ultimate impact of the COVID-19 pandemic
on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the
COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may
result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial
impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial
condition and results of operations. The measures taken to date will impact
the Company’s business for the first quarter and potentially beyond. Management expects that all of its business
segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak
on the Company’s business and the duration for which it may have an impact cannot be determined at this time. (C) Use of Estimates In preparing financial statements in conformity
with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reported period. Actual results could differ from those estimates. (D) Cash and Cash Equivalents For purposes of the cash flow statements, the Company
considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
As of March 31, 2020 and December 31, 2019, the Company had no (E) Property and Equipment Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the
estimated useful life of three to five years. (F) Research and Development The Company has adopted the provisions
of FASB Accounting Standards Codification No. 350, Intangibles - Goodwill & Other . (G) Concentration of Credit Risk The Company at times has had cash in banks
in excess of FDIC insurance limits. The Company had $ 0 (H) Revenue Recognition Effective January 1, 2018, the Company
adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial
sales of products, licensing agreements and contracts by applying the following steps: (1) identify the contract with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price
to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the
comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under
ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance
of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and
determinable; and (4) the collectability of the fee is reasonably assured. (I) Loss Per Share In accordance with accounting guidance
now codified as FASB ASC Topic 260, “Earnings per Share,” The computation of basic and diluted loss per share
for the three months ended March 31, 2020 and 2019, excludes the common stock equivalents of the following potentially dilutive
securities because their inclusion would be anti-dilutive:
March 31, March 31,
2020 2019
Stock Warrants (Exercise price -$ 0.25 .52 — 1,000,000
Stock Options (Exercise price - $ 0.00250 95,332,500 95,332,500
Convertible Debt (Exercise price - $ 0.0001 .00006 117,980,324,264 86,731,320,317
Series A Convertible Preferred Shares ($ 0.01 250,000,000 250,000,000
Total
118,325,656,764 87,077,652,817 The Company’s obligations to issue
shares upon conversion of its outstanding convertible notes, the exercise of stock options and warrants and conversion of its preferred
stock (the “Convertible Instruments”) at current market prices for its common stock exceeds by the 114,909,509,587 (J) Income Taxes The Company accounts for income taxes under
FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date. (K) Business Segments The Company operates in one segment and therefore no segment information
is not presented. (L) Recent Accounting Pronouncements In February 2016, the FASB issued ASU No.
2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters
into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle
of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in
the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing
its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for
fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted the new standard
effective January 1, 2019. The adoption of this guidance did not have a material impact on our financial statements. All other newly issued accounting pronouncements but not yet effective
have been deemed either immaterial or not applicable. (M) Fair Value of Financial Instruments The carrying amounts on the Company’s
financial instruments including accounts payable, derivative liability, convertible note payable, and note payable, approximate
fair value due to the relatively short period to maturity for these instruments. We adopted accounting guidance for financial
and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial
position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new
fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.
This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such
as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost
approach (cost to replace the service capacity of an asset or replacement cost). The guidance 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 developed using estimates and assumptions developed by
us, which reflect those that a market participant would use. The following are the major categories
of liabilities measured at fair value on a recurring basis: as of March 31, 2020 and December 31, 2019, using quoted prices in
active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable
inputs (Level 3):
March
31, 2020 December
31, 2019
Fair
Value Measurement Using Fair
Value Measurement Using
Level
1 Level
2 Level
3 Total Level
1 Level
2 Level
3 Total
Derivative Liabilities — — — — — — — — On December 20, 2019, the Company removed
the variable component and penalties related to its convertible debt and made it a fixed price. Therefore, as of March 31, 2020
there is no longer an existing derivative liability. (N) Stock-Based Compensation In December 2004, the FASB issued FASB
Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No.
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, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans. 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. The Company applies this statement
prospectively. Equity instruments (“instruments”)
issued to other than employees are recorded based on the fair value of the instruments, as required by FASB Accounting Standards
Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement
date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment,
as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The
measured value related to the instruments is recognized over a period based on the facts and circumstances of each grant as defined
in the FASB Accounting Standards Codification. (O) Reclassification Certain amounts from prior periods have
been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss
or cash flows. (P) Derivative Financial Instruments Fair value accounting requires bifurcation
of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their
fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing
model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional
convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered
conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments. Once determined, derivative liabilities
are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded
in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative
instruments such as warrants, are also valued using the Black-Scholes option-pricing model. (Q) Original Issue Discount For certain convertible debt issued, the
Company provides the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing
the face amount of the note and is amortized to interest expense over the life of the debt. (R) Debt Issue Costs and Debt Discount The Company may pay debt issue costs, and
record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized to interest
expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts
is immediately expensed. |
