| Organization and Summary of Significant Accounting Policies | Note 1 – Organization and Summary of Significant Accounting
Policies Nature
of Business New
You, Inc., formerly known as The Radiant Creations Group, Inc. (the “Company”) was incorporated in Nevada on December
29, 2005. From inception, the Company's principal business activity was the acquisition and exploration of mineral resources. On
June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, the Company changed
its principal business to the development and marketing of cosmetics and over-the-counter personal enhancement products and devices.
After a change in control on July 11, 2018, the Company changed its principal business to selling cannabidiol (“CBD”)
hemp oil-based products through independent business owners (called “Brand Partners”). The
Company, through its wholly owned subsidiary New You LLC, markets and sells its products through a multi-level marketing sales
opportunity. Basis
of Presentation The unaudited condensed consolidated
financial statements include the operations of New You, Inc. and its wholly-owned subsidiary, New You LLC. These unaudited condensed
consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) for interim financial information and with Article 10 of Securities and Exchange Commission (SEC)
Regulation S-X for Interim Reporting. All intercompany transactions, accounts and profits, if any, have been eliminated in the
unaudited condensed consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair
statement have been included. These unaudited condensed consolidated
financial statements do not include all disclosures required by GAAP. Therefore, these unaudited condensed consolidated financial
statements should be read in conjunction with the more detailed audited financial statements of New You, Inc. for the year ended
December 31, 2019, which are included in the Company’s Annual Report on Form 10-K. The results for the nine months ended
September 30, 2020 and 2019 are not necessarily indicative of results to be expected for a full year, any other interim periods,
or any future year or period. Risks and Uncertainties In March 2020, the World Health Organization
declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. We
are currently negatively impacted through a reduction in sales by the outbreak of COVID-19 and the related business and travel
restrictions and changes to behavior intended to reduce its spread, and continue to monitor its impact on operations, financial
position, cash flows, customer purchasing trends, and the industry in general, in addition to the impact on our employees. We have
concluded that while it is reasonably possible that the virus could continue to have a negative impact on the results of operations,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. Use of Estimates The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. The Company’s significant estimates include estimates for future charge-backs and allowance for slow moving or
obsolete inventory. Cash and
Cash Equivalents The Company
considers all highly liquid investments with an original term of three months or less to be cash equivalents. As of September 30,
2020, the Company had no cash equivalents. Credit Card
Receivables Credit card
receivable consists of only the amount due from the credit card processing companies. There is no need for an allowance for doubtful
accounts, since the system and processor makes sure that the transaction is successful prior to the sale being finalized. Accordingly,
no allowance was recorded as of September 30, 2020. Inventory Inventory consists
of finished goods and is valued at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO)
method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and
future sales forecasts. Prepaid
Expenses Prepaid expenses
consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid
expenses primarily consist of deposits on inventory yet to be delivered or shipped. Property
and Equipment Property and
equipment are stated at cost, net of depreciation provided by use of a straight-line method over the estimated useful lives of
the assets, which is five years. The Company reviews property and equipment for potential impairment whenever events or changes
in circumstances indicate that the carrying amounts of assets may not be recoverable. Impairment
of Long-Lived Assets We evaluate
the recoverability of long-lived assets in accordance with authoritative guidance on accounting for the impairment or disposal
of long-lived assets. We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable. Such impairment is recognized in the event the net book value of such assets
exceeds their fair value. No impairment of long-lived assets occurred in the periods presented. Revenue Recognition Revenue is
recognized in accordance with ASC 606, Contracts with Customers, by analyzing exchanges with the Company’s customers and
Brand Partners using a five-step analysis that includes identifying performance obligations in the contract, estimating the amount
of variable consideration to include in the transaction price and allocating the transaction price to each separate performance
obligation. The Company
recognizes revenue when the customer receives the promised good and all performance obligations are met. Revenue is recognized
at an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. The Company
records sales of finished products once the customer or Brand Partner places and pays for the order and the product is shipped.
Delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is upon shipment of
the product. The Company treats shipping expenses as costs to fulfill a contract, so that revenue is recognized gross of shipping
expenses. The Company recognizes revenue net of sales taxes. The Company
and its Brand Partners agree to provide customers with a 100% satisfaction guaranteed policy that allows the customer sixty days
from the sales transaction to return the product and receive a 100% refund, and one year for a Brand Partner to get a 90% refund,
as long as the product remains in saleable condition and the Brand Partner or the Company have not cancelled the Brand Partner
agreement. The Company records an estimate for provisions of returns and other adjustments for each shipment, which is netted with
gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. The Company
has determined that the population of contracts with the Company’s customers and Brand Partners tends to be homogenous, so
that review of the contracts and estimate of various revenue related adjustments can be applied to the entire population. The Company
had customer returns of approximately $50,065 for the nine months ended September 30, 2020 and approximately $55,675 for the nine
months ended September 30, 2019. The Company has not recorded a reserve for returns at September 30, 2020 or December 31, 2019
since it does not believe such returns will be material. As of September
30, 2020, the Company did not have any in-process or prepaid sales orders or transactions that would require the recognition of
a contract liability. Cost of
Revenue Amounts recorded
as cost of revenue relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded as incurred.
Our cost of revenue consists primarily of the cost of product, and the cost of product samples. Commission Expense and Contract Acquisition
Costs The Company markets and sells its products
through a direct sales opportunity afforded to Brand Partners through a multi-level marketing sales platform. Commissions are earned
on product sales to Brand Partners and customers at a rate of 10% for every transaction plus a specified spread on recurring sales.
Brand Partners earn a 5% commission on sales by other team members at lower levels up to nine levels below the Brand Partner. Brand
Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 for each time their team bonus
volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus for qualifying customer purchases
in the Brand Partners’ first 30 days of 20% of the transaction value. The Company expenses commissions in
accordance with ASC 606, Contracts with Customers. Commissions are accrued upon shipment of the product to either the Brand Partner
or the customer. Advertising Expenses The Company expenses advertising costs
as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses totaled
$8,480 for the nine months ending September 30, 2020 and $12,051 for the nine months ended September 30, 2019. Operating Lease A lease
provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Right
of use (ROU) assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities
represent the Company's obligation to make lease payments arising from the lease. The Company determines if an arrangement is a
lease at inception. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease
payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing
market conditions. The lease term used to calculate the ROU asset includes renewal periods or periods subject to termination when
it is reasonably certain that the Company will lease the assets in such periods. The discount
rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when
that is not readily determinable, the estimated incremental secured borrowing rate. ROU assets include any lease payments required
to be made prior to commencement and exclude lease incentives. Both ROU assets and lease liabilities exclude variable payments
not based on an index or rate, which are treated as period costs. The Company's lease agreements do not contain significant residual
value guarantees, restrictions or covenants. Critical Accounting Estimates The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments,
assumptions and estimates that have a significant impact on the results that we report in our financial statements. Some of our
accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding
matters that are inherently uncertain. Certain of these significant accounting policies require us to make critical accounting
estimates, as defined below. A critical accounting estimate is defined as
one that is both material to the presentation of our financial statements and requires management to make difficult, subjective
or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes:
• we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and
• different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations. Many of our financial instruments are issued
in conjunction with the issuance of debt. At the time of issuance, we allocate the proceeds received to the various financial instruments
and this involves the determination of fair value. From time to time, the fair value of these financial instruments exceeds the
proceeds received. When this occurs, we critically evaluate the validity of the fair value computation. Financial Instruments The Company’s balance sheets include
the following financial instruments: cash, accrued expenses, notes payable and payables to a stockholder. The carrying amounts
of current assets and current liabilities approximate their fair value because of the relatively short period of time between the
origination of these instruments and their expected realization. The carrying values of the notes payable and amounts due
to stockholder approximates fair value based on borrowing rates currently available to the Company for instruments with similar
terms and remaining maturities. FASB Accounting Standards Codification (ASC)
topic, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy
that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs that are both significant
to the fair value measurement and defined as 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. Beneficial Conversion Features ASC 470-20 applies to convertible securities
with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation
in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as
the difference between the conversion price and the fair market value of the common stock into which the security is convertible,
multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized
over the life of the debt. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument. Stock
Compensation Expense ASC
718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions.
Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such
as employee stock ownership plans and stock appreciation rights. Share-based payments to employees and non-employees, including
grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values
at the grant date. That expense is recognized over the period during which an employee is required to provide services in exchange
for the award, known as the requisite service period (usually the vesting period). The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC
505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based
on the fair grant date FV of equity instruments. The fair value of the share-based payment transaction is determined at the earlier
of performance commitment date or performance completion date. Share-based compensation expense for the nine months ended September
30, 2020 and 2019 was $2,298,028 and $0. Basic
and Diluted Net Loss and Income Per Share Basic
net loss or income per share is calculated by dividing the net loss or income attributable to common stockholders by the weighted-average
number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss or income
per share is computed by dividing the net loss or income attributable to common stockholders by the weighted-average number of
common share equivalents outstanding for the period determined using the treasury-stock method. The following
table presents the computation of basic and diluted net loss or income per common share:
For The Three Months Ended For The Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Historical net loss per share
Numerator
Net loss (1,242,760 ) (327,137 ) (3,363,149 ) (517,942 )
Denominator
Weighted-average common shares outstanding 39,118,321 27,640,296 35,943,565 26,424,522
Less: Weighted-average restricted shares (8,029,365 ) (239,270 ) (6,397,407 ) (88,040 )
Denominator for basic and diluted net loss per share 31,088,956 27,401,026 29,546,158 26,336,482
Basic and diluted net loss per share $ (0.04 ) $ (0.01 ) $ (0.11 ) $ (0.02 ) Potentially dilutive securities
that are not included in the calculation of diluted net loss or income per share because their effect is anti-dilutive are as follows
(in common equivalent shares):
For The Three Months Ended For The Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Restricted shares 8,029,365 950,000 6,397,407 950,000
Convertible debt 1,151,801 — 515,505 — |
