Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2020 | Jan. 24, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2020 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 333-209341 | |
Entity Registrant Name | INNERSCOPE HEARING TECHNOLOGIES, INC. | |
Entity Central Index Key | 0001609139 | |
Entity Tax Identification Number | 46-3096516 | |
Entity Incorporation, State or Country Code | NV | |
Entity Address, Address Line One | 2151 Professional Drive | |
Entity Address, Address Line Two | Second Floor | |
Entity Address, City or Town | Roseville | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 95661 | |
City Area Code | 916 | |
Local Phone Number | 218-4100 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 8,528,457,061 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 10,749 | $ 4,459 |
Accounts receivable, net of allowance for doubtful accounts | 12,158 | 51,160 |
Employee advances | 3,000 | 3,750 |
Prepaid assets | 1,140 | 73,249 |
Inventory | 1,446 | 18,781 |
Total current assets | 28,493 | 151,399 |
Security deposits | 12,752 | 12,752 |
Domain name | 3,000 | 3,000 |
Intangible assets, net of accumulated amortization | 826,084 | 879,336 |
Property and equipment, net of accumulated depreciation | 68,238 | 72,241 |
Operating leases right-of-use assets, net | 722,450 | 846,132 |
Investment in undivided interest in real estate | 1,204,619 | 1,210,526 |
Total assets | 2,865,636 | 3,175,386 |
Current Liabilities: | ||
Bank overdraft | 11,035 | 2,631 |
Accounts payable and accrued expenses | 1,537,529 | 1,316,185 |
Accounts payable to related party | 408,127 | 266,419 |
Notes payable - stockholder | 95,800 | 95,800 |
Current portion of convertible notes payable, net of discounts | 3,001,234 | 2,390,481 |
Note payable, other & related party | 118,786 | 106,942 |
Customer deposits | 13,321 | 21,505 |
Current portion of note payable - undivided interest in real estate | 22,150 | 20,708 |
Derivative liabilities | 4,723,091 | 3,515,055 |
Operating lease liabilities, current portion | 330,419 | 299,794 |
Total current liabilities | 10,261,492 | 8,035,520 |
Long term portion of note payable- undivided interest in real estate | 938,002 | 952,884 |
Payroll Paycheck Protection loan | 262,445 | |
Operating lease liabilities, Less current portion | 577,509 | 731,496 |
Total liabilities | 12,039,448 | 9,719,900 |
Stockholders' Deficit: | ||
Series A preferred stock, par value $0.0001, -0- (2020) and -0- (2019) | ||
Common stock, $0.0001 par value; 14,975,000,000 and 490,000,000 shares authorized, respectively; 2,074,183,163 (2020) and 342,118,136 (2019) shares issued and outstanding, respectively | 345,613 | 34,212 |
Common stock to be issued, $0.0001 par value, 2,412,671 (2019) and 2,412,671 (2020) shares | 241 | 241 |
Additional paid-in capital | 8,534,062 | 7,717,411 |
Accumulated deficit | (18,053,818) | (14,296,468) |
Total stockholders' deficit | (9,173,812) | (6,544,514) |
Total Liabilities and Shareholder Equity | $ 2,865,636 | $ 3,175,386 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | |
Preferred Stock, Shares Authorized | 25,000,000 | |
Common Stock, Par or Stated Value Per Share | $ 0.0001 | |
Common Stock, Shares Authorized | 14,975,000,000 | 490,000,000 |
Common Stock, Shares, Outstanding | 2,074,183,163 | 342,118,136 |
[custom:CommonStockSubscriptionsParOrStatedValuePerShare-0] | $ 0.0001 | |
Common Stock, Shares Subscribed but Unissued | 2,412,671 | 2,412,671 |
Series A Preferred Stock [Member] | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | |
Preferred Stock, Shares Outstanding | 0 | 0 |
Series B Preferred Stock [Member] | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 900,000 | 900,000 |
Preferred Stock, Shares Outstanding | 900,000 | 900,000 |
Preferred Stock, Shares Issued | 900,000 | 900,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenues: | ||||
Revenues, other | $ 15,848 | $ 219,673 | $ 96,987 | $ 391,202 |
Revenues, related party | 15,000 | |||
Total revenues | 15,848 | 219,673 | 96,987 | 406,202 |
Cost of sales | ||||
Cost of sales, other | 7,950 | 99,463 | 57,362 | 181,827 |
Total cost of sales | 7,950 | 99,463 | 57,362 | 181,827 |
Gross profit | 7,898 | 120,210 | 39,625 | 224,375 |
Operating Expenses: | ||||
Compensation and benefits (including stock-based fees of $0 for the three and six months ended June 30, 2020 and $35,917 and $50,000 for the three and six months ended June 30, 2019) | 146,513 | 435,086 | 357,281 | 798,824 |
Advertising and promotion | 6,383 | 143,800 | 16,072 | 311,584 |
Professional fees (including stock-based fees of $0 for the three and six months ended June 30, 2020 and $197,876 and $308,292 for the three and six months ended June 30, 2019 ) | 28,321 | 239,923 | 95,358 | 377,317 |
Rent, including related party (including related party rent of $36,000 and $72,000 for the three and six months ended June 30, 2020 and 2019) | 82,915 | 98,133 | 163,878 | 194,062 |
Investor relations | 1,998 | 89,528 | 14,795 | 164,776 |
Depreciation and amortization expense | 31,302 | 62,604 | ||
Other general and administrative | 41,441 | 132,488 | 102,178 | 269,126 |
Total operating expenses | 338,873 | 1,138,958 | 812,166 | 2,115,689 |
Loss from operations | (330,975) | (1,018,748) | (772,541) | (1,891,314) |
Other Income (Expense): | ||||
Derivative income (loss) | 3,340,010 | 235,478 | (1,687,571) | (342,360) |
Gain (loss) on equity investment | (8,113) | 5,856 | 7,532 | 4,816 |
Amortization of debt discount | (346,733) | (959,451) | ||
Gain/Loss on debt extinguishment | 459 | (44,393) | ||
Interest expense and finance charges | (211,029) | (728,456) | (345,319) | (1,235,198) |
Total other income (expense), net | 2,774,135 | (486,663) | (2,984,809) | (1,617,135) |
Earnings before taxes (loss) | 2,443,160 | (1,505,411) | (3,757,350) | (3,508,449) |
Income tax provision | ||||
Net Income (Loss) | $ 2,443,160 | $ (1,505,411) | $ (3,757,350) | $ (3,508,449) |
Basic and diluted income (loss) per share | $ 0.01 | $ (0.01) | $ 0 | $ (0.02) |
Basic and diluted | 3,133,352,029 | 155,732,524 | 2,015,912,553 | 145,156,477 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Payment Arrangement, Noncash Expense | $ 358,292 | |||
Compensation And Benefits [Member] | ||||
Share-based Payment Arrangement, Noncash Expense | $ 0 | $ 35,917 | 0 | 50,000 |
Professional Fees [Member] | ||||
Share-based Payment Arrangement, Noncash Expense | 0 | 197,876 | 0 | 308,292 |
Related Parties Rent [Member] | ||||
Operating Leases, Rent Expense, Net | $ 36,000 | $ 72,000 | $ 36,000 | $ 72,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Preferred Stock [Member] | Common Stock [Member] | AOCI Attributable to Parent [Member] | Additional Paid-in Capital [Member] | Deferred Compensation, Share-based Payments [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2018 | $ 90 | $ 12,042 | $ 637 | $ 4,836,555 | $ (235,694) | $ (6,372,129) | $ (1,758,499) |
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 | 900,000 | 120,425,344 | 6,373,848 | ||||
Amortization of deferred stock compensation | 165,875 | 165,875 | |||||
Stock based compensation | $ 565 | $ 47 | 364,387 | (172,582) | 192,417 | ||
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture | 5,651,129 | 468,645 | |||||
Stock issued from common stock to be issued | $ 396 | $ (396) | |||||
[custom:StockIssuedDuringPeriodShareFromCommonStockToBeIssued] | 3,961,177 | 3,961,177 | |||||
[custom:StockIssuedDuringPeriodShareFromCommonStockToBeIssued] | (3,961,177) | (3,961,177) | |||||
Common stock issued for convertible notes | $ 3,116 | 418,349 | 421,465 | ||||
Common stock to be issued for settlement of accounts payable | $ 63 | 40,563 | 40,626 | ||||
[custom:StockIssuedDuringPeriodSharesCommonStockToBeIssuedForSettlementOfAccountsPayable] | 625,000 | ||||||
[custom:StockIssuedDuringPeriodSharesCommonStockToBeIssuedForSettlementOfAccountsPayable] | (625,000) | ||||||
Reclassification of derivative liabilities upon payment of convertible debt | 738,112 | 738,112 | |||||
Net Loss | (3,508,449) | (3,508,449) | |||||
Stock Issued During Period, Shares, Conversion of Convertible Securities | 31,163,818 | ||||||
Ending balance, value at Jun. 30, 2019 | $ 90 | $ 16,182 | $ 288 | 6,397,966 | (242,401) | (9,880,578) | (3,708,453) |
Shares, Outstanding, Ending Balance at Jun. 30, 2019 | 900,000 | 161,826,468 | 2,881,316 | ||||
Beginning balance, value at Dec. 31, 2018 | $ 90 | $ 12,042 | $ 637 | 4,836,555 | (235,694) | (6,372,129) | (1,758,499) |
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 | 900,000 | 120,425,344 | 6,373,848 | ||||
Ending balance, value at Dec. 31, 2019 | $ 90 | $ 34,212 | $ 241 | 7,717,411 | (14,296,468) | (6,544,514) | |
Shares, Outstanding, Ending Balance at Dec. 31, 2019 | 900,000 | 342,118,135 | 2,415,671 | ||||
Beginning balance, value at Mar. 31, 2019 | $ 90 | $ 14,958 | $ 356 | 5,767,303 | (137,776) | (8,375,167) | (2,730,236) |
Shares, Outstanding, Beginning Balance at Mar. 31, 2019 | 900,000 | 149,588,383 | 3,561,592 | ||||
Amortization of deferred stock compensation | 165,875 | 165,875 | |||||
Stock based compensation | $ 478 | $ 36 | 337,902 | (270,500) | 67,916 | ||
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture | 4,780,303 | 355,008 | |||||
Stock issued from common stock to be issued | $ 41 | $ (41) | |||||
[custom:StockIssuedDuringPeriodShareFromCommonStockToBeIssued] | 410,284 | 410,284 | |||||
[custom:StockIssuedDuringPeriodShareFromCommonStockToBeIssued] | (410,284) | (410,284) | |||||
Common stock issued for convertible notes | |||||||
Common stock to be issued for settlement of accounts payable | $ 63 | $ (63) | |||||
[custom:StockIssuedDuringPeriodSharesCommonStockToBeIssuedForSettlementOfAccountsPayable] | 625,000 | 625,000 | |||||
[custom:StockIssuedDuringPeriodSharesCommonStockToBeIssuedForSettlementOfAccountsPayable] | (625,000) | (625,000) | |||||
Common stock issued for convertible notes and accrued interest | $ 642 | 135,557 | 136,199 | ||||
[custom:StockIssuedDuringPeriodSharesConversionOfConvertibleSecuritiesAndAccruedInterest] | 6,422,498 | ||||||
Reclassification of derivative liabilities upon payment of convertible debt | 157,204 | 157,204 | |||||
Net Loss | (1,505,411) | (1,505,411) | |||||
Ending balance, value at Jun. 30, 2019 | $ 90 | $ 16,182 | $ 288 | 6,397,966 | (242,401) | (9,880,578) | (3,708,453) |
Shares, Outstanding, Ending Balance at Jun. 30, 2019 | 900,000 | 161,826,468 | 2,881,316 | ||||
Beginning balance, value at Dec. 31, 2019 | $ 90 | $ 34,212 | $ 241 | 7,717,411 | (14,296,468) | (6,544,514) | |
Shares, Outstanding, Beginning Balance at Dec. 31, 2019 | 900,000 | 342,118,135 | 2,415,671 | ||||
Net Loss | (3,757,350) | (3,757,350) | |||||
Debt conversion and retirement of derivative liabilities | $ 311,401 | 816,651 | 1,128,052 | ||||
[custom:DebtConversionAndRetirementOfDerivativeLiabilitiesShares] | 3,114,005,479 | ||||||
Ending balance, value at Jun. 30, 2020 | $ 90 | $ 345,613 | $ 241 | 8,534,062 | (18,053,818) | (9,173,812) | |
Shares, Outstanding, Ending Balance at Jun. 30, 2020 | 900,000 | 3,456,123,614 | 2,415,671 | ||||
Beginning balance, value at Mar. 31, 2020 | $ 90 | $ 207,419 | $ 241 | 8,446,198 | (20,496,978) | $ (11,843,030) | |
Shares, Outstanding, Beginning Balance at Mar. 31, 2020 | 900,000 | 2,415,671 | 2,074,183,163 | ||||
Net Loss | 2,443,160 | $ 2,443,160 | |||||
Debt conversion and retirement of derivative liabilities | $ 138,194 | 87,864 | 226,058 | ||||
[custom:DebtConversionAndRetirementOfDerivativeLiabilitiesShares] | 1,381,940,451 | ||||||
Ending balance, value at Jun. 30, 2020 | $ 90 | $ 345,613 | $ 241 | $ 8,534,062 | $ (18,053,818) | $ (9,173,812) | |
Shares, Outstanding, Ending Balance at Jun. 30, 2020 | 900,000 | 3,456,123,614 | 2,415,671 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net Loss | $ (3,757,350) | $ (3,508,449) |
Adjustments to reconcile net loss to net cash used in operations: | ||
Loss on fair value of derivatives | 1,687,571 | 342,360 |
Amortization of debt discounts | 959,451 | 1,181,202 |
Depreciation and amortization | 62,604 | 212,492 |
Non cash interest expense | 2,500 | |
Penalties on convertible notes | 58,117 | |
(Gain) loss on investment in undivided interest in real estate | 5,907 | (4,816) |
Loss on debt extinguishment | 44,393 | |
Stock based compensation | 358,292 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 39,000 | (16,456) |
Employee advances | (18,779) | |
Inventory | 17,335 | (26,821) |
Prepaid assets | 72,109 | 60,489 |
Related party receivable | 12,594 | (79,739) |
Accounts payable and accrued expenses | 263,398 | (132,903) |
Customer deposits | (8,184) | 14,711 |
Related party advances | 141,708 | |
Operating lease liabilities | 320 | (110,586) |
Net cash used in operating activities | (445,420) | (1,682,110) |
Cash flows from investing activities: | ||
Payment of security deposit | (23,481) | |
Purchase of office and computer equipment | (5,349) | (46,274) |
Change in equity investment | (13,440) | |
Net cash used in investing activities | (18,789) | (69,755) |
Cash flows from financing activities: | ||
Proceeds from issuance of note payable | 199,650 | 21,000 |
Bank overdraft | 8,404 | |
Proceeds from Paycheck Protection Program loan | 262,445 | |
Payments/Proceeds from convertible notes payable | 1,678,725 | |
Repayments of note payable | (36,784) | |
Advances (repayments) to stockholder, net | 6,116 | |
Net cash provided by financing activities | 470,499 | 1,669,057 |
Net increase (decrease) in cash and cash equivalents | 6,290 | (82,808) |
Cash and cash equivalents, Beginning of period | 4,459 | 87,826 |
Cash and cash equivalents, End of period | 10,749 | 5,018 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 13,671 | |
Cash paid for income taxes | ||
Schedule of non-cash Investing or Financing Activity: | ||
Reclassification of derivative liabilities upon principal repayments of convertible notes | 679,184 | 738,112 |
Conversion of notes payable and accrued interest in common stock | 448,868 | 389,738 |
Intangible assets in accounts payable | 536,000 | |
Common stock to be issued for settlement of accounts payable | 25,000 | |
Operating lease right-of-use assets and liabilities | $ 1,428,534 |
NOTE 1 - ORGANIZATION
NOTE 1 - ORGANIZATION | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1 - ORGANIZATION | NOTE 1 - ORGANIZATION Business InnerScope Hearing Technologies, Inc. (“Company”, “InnerScope”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business in Roseville, California. The Company was originally named InnerScope Advertising Agency, Inc. and was formed to provide advertising and marketing services to retail establishments in the hearing device industry. On August 25, 2017, the Company changed its name to InnerScope Hearing Technologies, Inc. to better reflect the Company’s current direction as a hearing health technology company that manufactures, develops, distributes, and sells numerous innovative hearing health-related products, hearing treatments, and hearing solutions direct to consumer (DTC) with a scalable business model. |
NOTE 2 _ SUMMARY OF SIGNIFICANT
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Annual Report for the year ended December 31, 2019, filed with the United States Securities and Exchange Commission (the “SEC”) on September 14, 2022. Interim results of operations for the three and six months ended June 30, 2020, and 2019, are not necessarily indicative of future results for the full year. Certain amounts from the 2019 period have been reclassified to conform to the presentation used in the current period. Emerging Growth Companies The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period for certain accounting standards. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Cash The Company considers all highly liquid investments when acquired with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. We held no cash equivalents as of June 30, 2020, and December 31, 2019. Cash balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail. Accounts receivable The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expense. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2020, and December 31, 2019, management’s evaluation required the establishment of an allowance for uncollectible receivables of $27,991. Reclassification Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the six months ended June 30, 2020 and 2019 and accounts receivable as of June 30, 2020 and 2019. June 30, Accounts Receivable as of June 30, 2020 Accounts Receivable as of June 30, 2019 2020 2019 % % Customer A, related 0 % 0 % 99 % 100 % Customer D 25 % 0 % 0 % 0 % Inventory Inventory 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. As of June 30, 2020, and December 31, 2019, management’s analysis did not require any provisions to be recognized. Intangible Assets Costs for intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the consolidated balance sheets. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds Hearing, Inc., a Delaware corporation (“Zounds”), whereby, Zounds as the Subcontractor will provide design, technology, manufacturing and supply chain services to the Company (see Note 15) for a period of ten years. The Company will pay Zounds $1,000,000 for the right to use proprietary technology (the “Technology Access Fee”). As of December 31, 2018, the Company has capitalized the $1,000,000 Technology Access Fee as an intangible asset on the condensed consolidated balance sheets. The Technology Access Fee will be amortized over the term of the Agreement. During the year ended December 31, 2020 (subsequent to period end), the Company determined that they do not expect to realize any benefit in the foreseeable future, therefore, have recorded an impairment of $775,000. Property and Equipment Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. 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. The estimated useful lives of property and equipment are as follows: Computer equipment 3 years Machinery and equipment 5 years Furniture and fixtures 5 years The Company's property and equipment consisted of the following at June 30, 2020, and December 31, 2019: Depreciation expense of $9,350 and $7,882 was recorded for the six months ended June 30, 2020 and 2019, respectively. Depreciation expense of $4,678 and $5,032 was recorded for the three June 30, 2020 December 31, 2019 Computer and equipment $ 4,266 $ 4,272 Leasehold improvements 12,226 12,222 Machinery and equipment 60,800 38,139 Furniture and equipment 21,840 39,152 99,132 93,785 Accumulated depreciation (30,894 ) (21,544 ) Property and equipment, net $ 68,238 $ 72,241 Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. For the three months ended June 30, 2020 and 2019, the Company recognized a loss of $8,113 and a gain of $5,856, respectively. For the six months ended June 30, 2020 and 2019, the Company recognized a gain of $7,532 and $4,816, respectively. As of June 30, 2020, and December 31, 2019, the carrying value of the Company’s investment in undivided interest in real estate was 8). Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2020, and 2019, for each fair value hierarchy level: June 30, 2020 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 4,723,091 $ 4,723,091 $ — $ — $ 4,723,091 $ 4,723,091 December 31, 2019 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 3,515,055 $ 3,515,055 $ — $ — $ 3,515,055 $ 3,515,055 Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Revenue Recognition Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including 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’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations, Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. The Company accepts prepayments on hearing aids and records the amount received as customer deposits on its’ balance sheet. When the Company delivers the hearing aid to the customer, revenue is recognized as well as the corresponding cost of sales. As of June 30, 2020 and December 31, 2019, the Company had received $13,321 and $21,505 of customer deposits, where revenue will be recognized when the hearing aids are delivered to the customer. Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. Advertising and Marketing Expenses The Company expenses advertising and marketing costs as incurred. For the three months ended June 30, 2020 and 2019 advertising and marketing expenses were $6,383 and $143,800, respectively. For the six months ended June 30, 2020 and 2019 advertising and marketing expenses were $16,072 and $311,584, respectively. Earnings (Loss) Per Share The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of June 30, 2020 and 2019, the Company’s outstanding convertible debt is convertible into 19,095,107,143 and 79,395,431 shares of common stock, subject to adjustment based on changes in the Company’s stock price, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. Recent Accounting Pronouncements The FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, which requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities for fiscal years beginning after December 15, 2021, with early adoption permitted (for “emerging growth company” beginning after December 15, 2023). The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases (ASU 2018-10), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, Leases (Topic 842) —Targeted Improvements (ASU 2018-11), which addressed implementation issues related to the new lease standard. These and certain other lease-related ASUs have generally been codified in ASC 842. ASC 842 supersedes the lease accounting requirements in ASC Topic 840, Leases (ASC 840). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 was effective for annual reporting periods beginning after December 15, 2018 and interim periods within that reporting period (for “emerging growth company” from January 1, 2020). The Company adopted ASC 842 on January 1, 2019 using the effective date transition method. The Company elected the practical expedient to not record short-term leases on its consolidated balance sheet. |
NOTE 3 _ GOING CONCERN AND MANA
NOTE 3 – GOING CONCERN AND MANAGEMENT’S PLANS | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 3 – GOING CONCERN AND MANAGEMENT’S PLANS | NOTE 3 – GOING CONCERN AND MANAGEMENT’S PLANS The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company experienced a net loss of $3,757,350 for the six months ended June 30, 2020. At June 30, 2020, the Company had a working capital deficit of $10,232,999, and an accumulated deficit of $18,053,818. These factors raise substantial doubt about the Company’s ability to continue as a going concern and to operate in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. |
NOTE 4 _ INTANGIBLE ASSETS, NET
NOTE 4 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
NOTE 4 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) | NOTE 4 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) The Company’s intangible assets consist of a customer list and non-compete acquired from Amos Audiology and a Technology Access Fee required to be paid by the Company in connection with a manufacturing design and marketing agreement executed with a supplier (see Note 12). The estimated useful lives of these intangible assets are as follows: Customer list 2 years Non-compete 2 years Technology access fee 10 years The Company's intangible assets consisted of the following at June 30, 2020, and December 31, 2019: June 30, 2020 December 31, 2019 Customer List $ 300 $ 300 Non-Compete 12,708 12,708 Technology Access Fee 1,000,000 1,000,000 Intangibles 1,013,008 1,013,008 Accumulated amortization (186,924 ) (133,672 ) Intangibles, net $ 826,084 $ 879,336 The Company recognized $26,626 and $53,252 of amortization expense for the three and six months ended June 30, 2020. The Company recognized $26,626 and $78,252 of amortization expense for the three and six months ended June 30, 2019, respectively. Subsequent to period end, the technology fee was fully impaired, resulting in impairment expense of $775,000. |
NOTE 5 _ NOTE PAYABLE, STOCKHOL
NOTE 5 – NOTE PAYABLE, STOCKHOLDER | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
NOTE 5 – NOTE PAYABLE, STOCKHOLDER | NOTE 5 – NOTE PAYABLE, STOCKHOLDER A summary of the activity for the six months ended June 30, 2020, and the year ended December 31, 2019, of amounts the Company’s CEO (stockholder) loaned the Company and amounts repaid is as follows: June 30, 2020 December 31, 2019 Beginning Balance $ 95,800 $ 95,800 Amounts loaned to the Company — — Repaid — — Ending Balance $ 95,800 $ 95,800 The note is interest free and ending balance amount is due on demand. |
NOTE 6 _ NOTE PAYABLE
NOTE 6 – NOTE PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
NOTE 6 – NOTE PAYABLE | NOTE 6 – NOTE PAYABLE In July of 2019, the Company entered into a Loan Agreement for $60,000 with a third- party. The loan weekly payments of $1,538. December 31, In November of 2019, the Company entered into a Loan Agreement for $87,000 with a third- party, whereby the Company received loan of $790. December 31, 2019 In December of 2019, the Company entered into a Loan Agreement for $21,750 with a third- party. The loan of $255. |
NOTE 7 _ RELATED PARTY TRANSACT
NOTE 7 – RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
NOTE 7 – RELATED PARTY TRANSACTIONS | NOTE 7 – RELATED PARTY TRANSACTIONS As of June 30, 2020 we had $0 of the account payable to related parties as compared to $266,419 as of December 31, 2019. The balance primarily represents advance payable to shareholders and management of the Company on behalf of the Company. As of June 30, 2020 we had $16,851 of the account payable to related parties as compared to $20 of December 31, 2019. The balance primarily represents advance receivable from shareholders and management of the Company. Effective August 1, 2016, the Company agreed to compensation of $225,000 and $125,000 per year for the Company’s CEO and CFO, respectively. On November 15, 2016, the Company entered into employment agreements with its CEO and CFO, which includes their annual base salaries of $225,000 and $125,000, respectively. On January 1, 2019, the Company agreed to increase compensation to $150,000 per year for the Company’s CFO. Three months ended June 30, Six months ended June 30, Description 2020 2019 2020 2019 CEO $ 37,500 $ 56,250 $ 75,000 $ 112,500 CFO 56,250 31,250 112,500 62,500 Total $ 93,750 $ 87,500 $ 187,500 $ 175,000 As of June 30, 2020, and December 31, 2019, the Company in the aggregate owes the CEO and CFO $449,931 and $262,431, respectively, for accrued and unpaid wages. These amounts are included in Officer salaries payable on the balance sheets included herein. On June 14, 2017, the Company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. For the three and six months ended June 30, 2020, and 2019, the Company expensed $36,000 and $75,000, respectively, related to this lease and is included in Rent, on the condensed consolidated statement of operations, included herein. On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company paid for their building interest by delivering cash at closing of $209,971 and being a co-borrower on a note in the amount of $2,057,000, of which the Company has agreed with LLC1 to pay $1,007,930 (see Note 8). |
NOTE 8 _ INVESTMENT IN UNDIVIDE
NOTE 8 – INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2020 | |
Real Estate [Abstract] | |
NOTE 8 – INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | NOTE 8 – INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company paid for their building interest by delivering cash at closing of $209,971 and being a co-borrower on a note in the amount of $2,057,000, of which the Company has agreed with LLC1 to pay $1,007,930. The allocated portion of the results in an equity method investment in a privately-held, related party, company are included in the Company’s condensed consolidated statements of operations. For the three months ended June 30, 2020, a loss of $8,113, and a gain of $5,856 for the three months end June 30, 2019 is included in “Other income (expense). For the six months ended June 30, 2020 and 2019, a loss of $7,532, and a loss of $4,816, respectively, is included in “Other income (expense). As of June 30, 2020, and December 31, 2019, the carrying value of the Company’s investment in undivided interest in real estate was $1,204,619 and $1,210,526, respectively. The unaudited condensed balance sheets as of June 30, 2020, and December 31, 2019, and the statement of operations for the six months ended June 30, 2020 and 2019, for the real property is as follows: Current assets: (Unaudited) June 30, 2020 (Unaudited) Cash $ 27,107 $ — Accounts Receivable 54,341 106,163 Due from InnerScope 111,014 79,934 Prepaid expenses and other current assets 8,829 — Total current assets 201,291 186,097 Land and Building, net 2,288,939 2,310,722 Other Assets, net 44,839 45,943 Total assets $ 2,535,069 $ 2,542,762 Accounts Payable $ 89,401 $ 72,475 Current portion of mortgage payable 22,150 20,708 Other current liabilities 34,977 16,104 Total current liabilities 146,528 109,287 Mortgage payable, long-term 1,937,345 1,966,215 Security deposits 9,268 13,064 Total liabilities $ 2,093,141.00 2,088,566 Total equity 441,928 454,196 Total liabilities and equity $ 2,535,069 $ 2,542,762 (Unaudited) (Unaudited) Rental income $ 137,749 $ 297,383 Expenses: Property taxes 15,100 29,605 Depreciation and amortization 22,890 50,940 Insurance 5,276 18,783 Repairs and maintenance — 6,202 Utilities and other 18,254 68,156 Interest expenses 88,284 113,858 Total expenses 149,804 287,544 Net income (loss) $ (12,055 ) $ 9,839 |
NOTE 9 _ NOTE PAYABLE - UNDIVID
NOTE 9 – NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2020 | |
Note 9 Note Payable - Undivided Interest In Real Estate | |
NOTE 9 – NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | NOTE 9 – NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company is a co-borrower on a $2,057,000 Small Business Administration Note (the “SBA Note”). The SBA Note carries a 25-year term, with an initial interest rate of 6% per annum, adjustable to the Prime interest rate plus 2%, and is secured by a first position Deed of Trust and business assets located at the property. The Company initially recorded a liability of $1,007,930 for its portion of the SBA Note, with the offset being to Investment in undivided interest in real estate on the balance sheet presented herein. As of June 30, 2020, the long-term portion of the SBA Note is $938,002 and short-term portion is $22,150. Future principal payments for the Company’s portion are. Twelve months ending June 30, Amount 2021 $ 22,150 2022 22,150 2023 23,516 2024 24,966 2025 26,500 2026 28,118 Thereafter 812,752 Total $ 960,152 |
NOTE 10 _ CONVERTIBLE NOTES PAY
NOTE 10 – CONVERTIBLE NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
NOTE 10 – CONVERTIBLE NOTES PAYABLE | NOTE 10 – CONVERTIBLE NOTES PAYABLE At various times during the six months ended June 30, 2020, the Company entered into convertible promissory notes with principal amounts totaling $242,000 with a third party for which the proceeds were used for operations. The Company received net proceeds of $199,650, and a $42,350 original issuance discount was recorded. The convertible promissory notes incur interest at rates from 8% to 12% per annum and mature on dates ranging from November 2019 to March 2021. Further, an additional $58,117 of penalties were added during current period The convertible promissory notes are convertible to shares of the Company’s common stock six (6) months after issuance. The conversion price per share is equal to 65-70% of the lowest trading prices of the Company’s common stock during the fifteen (15) trading days immediately preceding the applicable conversion date. The trading price is defined within the agreement as the closing bid price on the applicable trading market. The convertible promissory notes include various default provisions for which the default interest rate increases to 24%. A summary of the convertible note balances as of June 30, 2020, and December 31, 2019, is as follows: June 30, 2020 December 31, 2019 Principal balance $ 3,295,420 $ 3,402,117 Unamortized discounts (294,186 ) (1,011,636 ) Ending balance, net $ 3,001,234 $ 2,390,481 During period ending June 30, 2020, the company recognized $959,451 of debt discount amortization, which is recorded under interest expense and finance charges account in the other income (expense). Principal Balance Debt Discounts Total Balance at January 1, 2020 $ 3,402,117 $ (1,011,637 ) $ 2,390,481 New issuance 242,000 (242,000 ) — Penalties 58,116 — 58,116 Conversions (406,814 ) — (406,814 ) Amortization — 959,451 959,451 Ending balance, net $ 3,295,420 $ (294,186 ) $ 3,001,234 |
NOTE 11 _ DERIVATIVE LIABILITIE
NOTE 11 – DERIVATIVE LIABILITIES | 6 Months Ended |
Jun. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
NOTE 11 – DERIVATIVE LIABILITIES | NOTE 11 – DERIVATIVE LIABILITIES The Company determined that the conversion features of the convertible notes represented embedded derivatives since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed consolidated statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. The Company valued the derivative liabilities at issuance, June 30, 2020, and December 31, 2019, at $412,806 and $4,745,194, respectively. The Company used the multinomial lattice v period A summary of the activity related to derivative liabilities during six months period ended June 30, 2020 is as follows: June 30, 2020 Beginning Balance $ 3,515,055 Initial derivative liability 412,805 Fair value change 1,474,421 Reclassification for principal payments and conversions (679,190 ) Ending Balance $ 4,723,091 |
NOTE 12 - OPERATING LEASE RIGHT
NOTE 12 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
NOTE 12 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | NOTE 12 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES On June 14, 2017, the company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000 with a related party. On September 10, 2018, pursuant to the Amos Audiology acquisition, the Company assumed a lease dated December 1, 2017 and expiring April 30, 2023, in Walnut Creek, California. Lease payments in the first year of the lease are $3, 988 per month and increase by 3% on December 1 each new lease year. As of December 31, 2018, the Company was in arrears of $25,182 (including late fees) in lease payments and has agreed with the landlord to pay the arrears in seven monthly payments of $3,597 in addition to the monthly lease payments for January 2019 through July 2019. Settlement fees were fully paid during the year ending December 31, 2019. On October 15, 2018, the Company entered into a lease to operate a retail hearing aid clinic in Roseville, California expiring December 31, 2023. Initial lease payments of $3,102 began on January 1, 2019, and increase by 3% on January 1 each new lease year. Upon adoption of ASC 842, the Company recognized $160,623 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end. On November 18, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Walnut Creek, expiring in October of 2022. Initial lease payments of $3,930 began on December 1, 2019, and increase by 3% on December 1 each new lease year. Upon adoption of ASC 842, the Company recognized $129,281 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end. On December 1, 2018, the Company entered into a lease to operate a retail hearing aid clinic in Sacramento, California expiring March 31, 2024. Initial lease payments of $3,002 began on April 1, 2019, and increase by 3.33% on April 1, 2020 and 2021, and by 3% on April 1, 2022. Upon adoption of ASC 842, the Company recognized $149,507 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end. On February 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Elk Grove, California expiring January 31, 2024. Initial lease payments of $2,307 began on February 1, 2019, and increase by an average of 2.6% on February 1, each new lease year. Upon adoption of ASC 842, the Company recognized $116,153 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end. On May 31, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Greenhaven, California expiring June 30, 2022. Initial lease payments of $1,450 began on July 1, 2019, and increase by 5% on July 1, each new lease year. Upon adoption of ASC 842, the Company recognized $48,512 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end. The operating lease expense for the period ending June 30, 2020 was $78,033. These leases will expire between 2021 and 2023. The weighted average discount rate used for these leases were 8% (average borrowing rate of the Company). Future principal payments for the Company’s portion are: For the period ending June 30, Amount 2020 $ 189,858 2021 364,194 2022 255,466 2023 116,888 2024 12,219 Thereafter — Total $ 938,625 Consulting Agreements On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds, whereby, Zounds will provide design, technology, manufacturing and supply chain services to the Company, to enable the Company to manufacture comparable hearing aids and related components and accessories to be sold under the Company’s exclusive brand names (the “Manufacturer’s Products”) through the Company’s various marketing and distribution channels. The Company will pay Zounds $1,000,000 (the “Technology Access Fee”). The Technology Access Fee, as amended will be paid in eight (8) installments of $75,000 each, in four- week intervals until $600,000 is paid and $400,000 is to be paid as Product Surcharges based on $200 per unit manufactured for up to the first 2,000 units. Once $400,000 of Product Surcharges are paid said per unit surcharge will be discontinued. As of December 31, 2018, the Company has paid $183,200 towards the Technology Access Fee and as of December 31, 2018, $816,800 is included in accounts payable and accrued expenses. No additional payments has been made in 2019 and 2020. Subsequent to period end |
NOTE 13 _ PAYCHECK PROTECTION P
NOTE 13 – PAYCHECK PROTECTION PROGRAM LOAN | 6 Months Ended |
Jun. 30, 2020 | |
Note 13 Paycheck Protection Program Loan | |
NOTE 13 – PAYCHECK PROTECTION PROGRAM LOAN | NOTE 13 – PAYCHECK PROTECTION PROGRAM LOAN During the period ending June 30, 2020, the Company borrowed $262,445 under the Paycheck Protection Program. Interest accrues at 1% and the loan is due in two years. Payments are to be paid monthly, however, the first six months payments are deferred but not waived. A portion of the loan could be forgiven provided 75% of the proceeds are used for payroll. Outstanding amount as of June 30, 2020 was $262,445. |
NOTE 14 _ STOCKHOLDERS_ EQUITY
NOTE 14 – STOCKHOLDERS’ EQUITY | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
NOTE 14 – STOCKHOLDERS’ EQUITY | NOTE 14 – STOCKHOLDERS’ EQUITY Preferred Stock The Company has 25,000,000 authorized shares of $0.0001 preferred stock. Series A Preferred Stock On June 4, 2018, the Company filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series A Preferred Stock. 9,510,000 shares were designated as Series A Preferred Stock. The Series A Preferred Stock has mandatory conversion rights, whereby each share of Series A Preferred Stock will convert two (2) shares of common stock upon the Company filing Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, increasing the authorized shares of common stock. The Series A Preferred Stock has voting rights on an is if converted basis. The Series A Preferred Stock does not have any right to dividends. As of March 31, 2020, and December 31, 2019, there were no shares of Series A Preferred Stock issued and outstanding. Series B Preferred Stock On June 4, 2018, the Company also filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series B Preferred Stock. 900,000 shares were designated as Series B Preferred Stock. The Series B Preferred Stock is not convertible into common stock, nor does the Series B Preferred Stock have any right to dividends and any liquidation preference. The Series B Preferred Stock entitles its holder to a number of votes per share equal to 1,000 votes. As of March 31, 2020, and December 31, 2019, there were 900,000 shares of Series B Preferred Stock issued and outstanding. Common Stock On January 30, 2020, the Company increased a number of authorized common shares to 14,975,000,000. As of June 30, 2020, there are 3.456.123.614 shares of common stock outstanding. During the period end June 30, 2020, the Company issued 3,114,005,479 shares of common stock for partial conversion of principal and accrued interest. Common Stock to be issued As of June 30, 2020 there are 2,415,671 shares of common stock to be issued. |
NOTE 15 _ RISKS AND UNCERTAINTI
NOTE 15 – RISKS AND UNCERTAINTIES | 6 Months Ended |
Jun. 30, 2020 | |
Note 15 Risks And Uncertainties | |
NOTE 15 – RISKS AND UNCERTAINTIES | NOTE 15 – RISKS AND UNCERTAINTIES The Company's business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its operations. In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies, and financial markets, leading to a global economic downturn. As a result, the Company experienced a negative impact to its operating results. Regarding future operations, the related financial impact and duration cannot be reasonably estimated at this time. |
NOTE 16 _ SUBSEQUENT EVENTS
NOTE 16 – SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
NOTE 16 – SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS Subsequent to period end, the Company received conversion notices for the issuance of 4,749,544,256 shares of common stock for conversion of $3,651,848 of principal and $1,067,034 of accrued interest on convertible notes. Subsequent to period end, the Company issued 66,410,092 as part of compensation for services based on the market price of the common stock on the date the Company agreed to issue the shares. Subsequent to period end, the Company issued 65,000,000 shares of common stock for cash for a total value of $650,000. Subsequent to period end, the Company issued 127,653,805 shares of common stock to settle payables in the amount of $651,034. Subsequent to period end, 216,000,000 common shares were cancelled. Subsequent to period end, the Company determined that they do not expect to realize any benefit in the foreseeable future related to Technology Access Fee (Note 4), therefore, have recorded an impairment of $775,000. At various times subsequent to period end, the Company entered into convertible promissory notes with principal amounts totaling $3,132,504 with a third parties for which the proceeds were used for operations. The convertible promissory notes incur interest at rates from 8% to 12% per annum and mature on dates ranging from March 2021 to December 2022. The convertible promissory notes are convertible to shares of the Company’s common stock 6 months after issuance. The conversion price per share is equal to 65-90% of the lowest trading prices of the Company’s common stock during the fifteen (15) trading days immediately preceding the applicable conversion date. The trading price is defined within the agreement as the closing bid price on the applicable trading market. The convertible promissory notes include various default provisions for which the default interest rate increases to 24%. set at price of $0.01 per shares. The convertible promissory notes include various default provisions for which the default interest rate increases to 2 4 % At various times subsequent to period end, the Company entered into promissory notes with principal amounts totaling $2,435,210 with a third parties for which the proceeds were used for operations. The promissory notes incur interest at rates from 8% to 10% per annum and mature on dates ranging from June 2023 to August 2023. The convertible promissory notes are convertible to shares of the Company’s common stock 6 months after issuance. The conversion price is set at price of $0.01 per shares. The promissory notes include various default provisions for which the default interest rate increases to 14-24% . Subsequent to period end, convertible promissory notes in the total principal amount of $3,432,300 and accrued interest of $192,294 were forgiven. Subsequent to period end, promissory notes in the total principal amount of $2,435,210 and accrued interest of $68,793 were forgiven. On November 22, 2021, the Company purchased Hearing Assist II, LLC. The Company acquired 100% interest in the entity for a total consideration of 591,209,963 common shares valued at $8,513,423 on the day of purchase. As part of the acquisition, the Company assumed assets in the amount of $15,713,000, consisting of trademarks, domains, customer lists, customer contracts, licenses, royalties, other contracts, and liabilities in the amount of $7,199,678. Subsequent to period end, the Company designated 10,000,000 shares to Series C Preferred Stock, 5,000,000 to Series D Preferred Stock and 250,000 shares to each Series E, F and G Preferred Stock. On September 30, 2021, the Company entered into an Asset Purchase agreement with iHear Medical, Inc. pursuant to which the Company received a number of intangible assets, equipment, customer database and inventory for a total consideration of 400,000 preferred series C shares and $1,000,000 convertible note. Preferred shares valued at $666,667 on the day of purchase. As part of the acquisition, the Company assumed assets in the amount of $1,666,667, consisting of inventory, equipment, customer lists, patents and other technology-based intangibles. The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein. |
NOTE 2 _ SUMMARY OF SIGNIFICA_2
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Annual Report for the year ended December 31, 2019, filed with the United States Securities and Exchange Commission (the “SEC”) on September 14, 2022. Interim results of operations for the three and six months ended June 30, 2020, and 2019, are not necessarily indicative of future results for the full year. Certain amounts from the 2019 period have been reclassified to conform to the presentation used in the current period. |
Emerging Growth Companies | Emerging Growth Companies The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period for certain accounting standards. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. |
Cash | Cash The Company considers all highly liquid investments when acquired with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. We held no cash equivalents as of June 30, 2020, and December 31, 2019. Cash balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail. |
Accounts receivable | Accounts receivable The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expense. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2020, and December 31, 2019, management’s evaluation required the establishment of an allowance for uncollectible receivables of $27,991. |
Reclassification | Reclassification Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. |
Sales Concentration and Credit Risk | Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the six months ended June 30, 2020 and 2019 and accounts receivable as of June 30, 2020 and 2019. June 30, Accounts Receivable as of June 30, 2020 Accounts Receivable as of June 30, 2019 2020 2019 % % Customer A, related 0 % 0 % 99 % 100 % Customer D 25 % 0 % 0 % 0 % |
Inventory | Inventory Inventory 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. As of June 30, 2020, and December 31, 2019, management’s analysis did not require any provisions to be recognized. |
Intangible Assets | Intangible Assets Costs for intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the consolidated balance sheets. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds Hearing, Inc., a Delaware corporation (“Zounds”), whereby, Zounds as the Subcontractor will provide design, technology, manufacturing and supply chain services to the Company (see Note 15) for a period of ten years. The Company will pay Zounds $1,000,000 for the right to use proprietary technology (the “Technology Access Fee”). As of December 31, 2018, the Company has capitalized the $1,000,000 Technology Access Fee as an intangible asset on the condensed consolidated balance sheets. The Technology Access Fee will be amortized over the term of the Agreement. During the year ended December 31, 2020 (subsequent to period end), the Company determined that they do not expect to realize any benefit in the foreseeable future, therefore, have recorded an impairment of $775,000. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. 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. The estimated useful lives of property and equipment are as follows: Computer equipment 3 years Machinery and equipment 5 years Furniture and fixtures 5 years The Company's property and equipment consisted of the following at June 30, 2020, and December 31, 2019: Depreciation expense of $9,350 and $7,882 was recorded for the six months ended June 30, 2020 and 2019, respectively. Depreciation expense of $4,678 and $5,032 was recorded for the three June 30, 2020 December 31, 2019 Computer and equipment $ 4,266 $ 4,272 Leasehold improvements 12,226 12,222 Machinery and equipment 60,800 38,139 Furniture and equipment 21,840 39,152 99,132 93,785 Accumulated depreciation (30,894 ) (21,544 ) Property and equipment, net $ 68,238 $ 72,241 |
Investment in Undivided Interest in Real Estate | Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. For the three months ended June 30, 2020 and 2019, the Company recognized a loss of $8,113 and a gain of $5,856, respectively. For the six months ended June 30, 2020 and 2019, the Company recognized a gain of $7,532 and $4,816, respectively. As of June 30, 2020, and December 31, 2019, the carrying value of the Company’s investment in undivided interest in real estate was 8). |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2020, and 2019, for each fair value hierarchy level: June 30, 2020 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 4,723,091 $ 4,723,091 $ — $ — $ 4,723,091 $ 4,723,091 December 31, 2019 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 3,515,055 $ 3,515,055 $ — $ — $ 3,515,055 $ 3,515,055 |
Embedded Conversion Features | Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. |
Debt Issue Costs and Debt Discount | Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
Original Issue Discount | Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
Revenue Recognition | Revenue Recognition Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including 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’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations, Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. The Company accepts prepayments on hearing aids and records the amount received as customer deposits on its’ balance sheet. When the Company delivers the hearing aid to the customer, revenue is recognized as well as the corresponding cost of sales. As of June 30, 2020 and December 31, 2019, the Company had received $13,321 and $21,505 of customer deposits, where revenue will be recognized when the hearing aids are delivered to the customer. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. |
Advertising and Marketing Expenses | Advertising and Marketing Expenses The Company expenses advertising and marketing costs as incurred. For the three months ended June 30, 2020 and 2019 advertising and marketing expenses were $6,383 and $143,800, respectively. For the six months ended June 30, 2020 and 2019 advertising and marketing expenses were $16,072 and $311,584, respectively. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of June 30, 2020 and 2019, the Company’s outstanding convertible debt is convertible into 19,095,107,143 and 79,395,431 shares of common stock, subject to adjustment based on changes in the Company’s stock price, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, which requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities for fiscal years beginning after December 15, 2021, with early adoption permitted (for “emerging growth company” beginning after December 15, 2023). The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases (ASU 2018-10), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, Leases (Topic 842) —Targeted Improvements (ASU 2018-11), which addressed implementation issues related to the new lease standard. These and certain other lease-related ASUs have generally been codified in ASC 842. ASC 842 supersedes the lease accounting requirements in ASC Topic 840, Leases (ASC 840). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 was effective for annual reporting periods beginning after December 15, 2018 and interim periods within that reporting period (for “emerging growth company” from January 1, 2020). The Company adopted ASC 842 on January 1, 2019 using the effective date transition method. The Company elected the practical expedient to not record short-term leases on its consolidated balance sheet. |
NOTE 2 _ SUMMARY OF SIGNIFICA_3
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] | June 30, Accounts Receivable as of June 30, 2020 Accounts Receivable as of June 30, 2019 2020 2019 % % Customer A, related 0 % 0 % 99 % 100 % Customer D 25 % 0 % 0 % 0 % |
Property, Plant and Equipment [Table Text Block] | June 30, 2020 December 31, 2019 Computer and equipment $ 4,266 $ 4,272 Leasehold improvements 12,226 12,222 Machinery and equipment 60,800 38,139 Furniture and equipment 21,840 39,152 99,132 93,785 Accumulated depreciation (30,894 ) (21,544 ) Property and equipment, net $ 68,238 $ 72,241 |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | June 30, 2020 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 4,723,091 $ 4,723,091 $ — $ — $ 4,723,091 $ 4,723,091 December 31, 2019 Level 1 Level 2 Level 3 Total Derivative liabilities $ — $ — $ 3,515,055 $ 3,515,055 $ — $ — $ 3,515,055 $ 3,515,055 |
NOTE 4 _ INTANGIBLE ASSETS, N_2
NOTE 4 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Indefinite-Lived Intangible Assets [Table Text Block] | June 30, 2020 December 31, 2019 Customer List $ 300 $ 300 Non-Compete 12,708 12,708 Technology Access Fee 1,000,000 1,000,000 Intangibles 1,013,008 1,013,008 Accumulated amortization (186,924 ) (133,672 ) Intangibles, net $ 826,084 $ 879,336 |
NOTE 5 _ NOTE PAYABLE, STOCKH_2
NOTE 5 – NOTE PAYABLE, STOCKHOLDER (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] | June 30, 2020 December 31, 2019 Beginning Balance $ 95,800 $ 95,800 Amounts loaned to the Company — — Repaid — — Ending Balance $ 95,800 $ 95,800 |
NOTE 7 _ RELATED PARTY TRANSA_2
NOTE 7 – RELATED PARTY TRANSACTIONS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions [Table Text Block] | Three months ended June 30, Six months ended June 30, Description 2020 2019 2020 2019 CEO $ 37,500 $ 56,250 $ 75,000 $ 112,500 CFO 56,250 31,250 112,500 62,500 Total $ 93,750 $ 87,500 $ 187,500 $ 175,000 |
NOTE 8 _ INVESTMENT IN UNDIVI_2
NOTE 8 – INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Real Estate [Abstract] | |
Schedule of Real Estate Properties [Table Text Block] | Current assets: (Unaudited) June 30, 2020 (Unaudited) Cash $ 27,107 $ — Accounts Receivable 54,341 106,163 Due from InnerScope 111,014 79,934 Prepaid expenses and other current assets 8,829 — Total current assets 201,291 186,097 Land and Building, net 2,288,939 2,310,722 Other Assets, net 44,839 45,943 Total assets $ 2,535,069 $ 2,542,762 Accounts Payable $ 89,401 $ 72,475 Current portion of mortgage payable 22,150 20,708 Other current liabilities 34,977 16,104 Total current liabilities 146,528 109,287 Mortgage payable, long-term 1,937,345 1,966,215 Security deposits 9,268 13,064 Total liabilities $ 2,093,141.00 2,088,566 Total equity 441,928 454,196 Total liabilities and equity $ 2,535,069 $ 2,542,762 (Unaudited) (Unaudited) Rental income $ 137,749 $ 297,383 Expenses: Property taxes 15,100 29,605 Depreciation and amortization 22,890 50,940 Insurance 5,276 18,783 Repairs and maintenance — 6,202 Utilities and other 18,254 68,156 Interest expenses 88,284 113,858 Total expenses 149,804 287,544 Net income (loss) $ (12,055 ) $ 9,839 |
NOTE 9 _ NOTE PAYABLE - UNDIV_2
NOTE 9 – NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Note 9 Note Payable - Undivided Interest In Real Estate | |
Schedule of Guarantor Obligations [Table Text Block] | Twelve months ending June 30, Amount 2021 $ 22,150 2022 22,150 2023 23,516 2024 24,966 2025 26,500 2026 28,118 Thereafter 812,752 Total $ 960,152 |
NOTE 10 _ CONVERTIBLE NOTES P_2
NOTE 10 – CONVERTIBLE NOTES PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Debt [Table Text Block] | June 30, 2020 December 31, 2019 Principal balance $ 3,295,420 $ 3,402,117 Unamortized discounts (294,186 ) (1,011,636 ) Ending balance, net $ 3,001,234 $ 2,390,481 During period ending June 30, 2020, the company recognized $959,451 of debt discount amortization, which is recorded under interest expense and finance charges account in the other income (expense). Principal Balance Debt Discounts Total Balance at January 1, 2020 $ 3,402,117 $ (1,011,637 ) $ 2,390,481 New issuance 242,000 (242,000 ) — Penalties 58,116 — 58,116 Conversions (406,814 ) — (406,814 ) Amortization — 959,451 959,451 Ending balance, net $ 3,295,420 $ (294,186 ) $ 3,001,234 |
Schedule of Long-term Debt Instruments [Table Text Block] | Principal Balance Debt Discounts Total Balance at January 1, 2020 $ 3,402,117 $ (1,011,637 ) $ 2,390,481 New issuance 242,000 (242,000 ) — Penalties 58,116 — 58,116 Conversions (406,814 ) — (406,814 ) Amortization — 959,451 959,451 Ending balance, net $ 3,295,420 $ (294,186 ) $ 3,001,234 |
NOTE 11 _ DERIVATIVE LIABILIT_2
NOTE 11 – DERIVATIVE LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments [Table Text Block] | June 30, 2020 Beginning Balance $ 3,515,055 Initial derivative liability 412,805 Fair value change 1,474,421 Reclassification for principal payments and conversions (679,190 ) Ending Balance $ 4,723,091 |
NOTE 12 - OPERATING LEASE RIG_2
NOTE 12 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | For the period ending June 30, Amount 2020 $ 189,858 2021 364,194 2022 255,466 2023 116,888 2024 12,219 Thereafter — Total $ 938,625 |
Customers who accounted for mor
Customers who accounted for more than ten percent of the Company's revenues and accounts receivable balances (Details) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Customer A Concentration 1 Risk [Member] | ||
Product Information [Line Items] | ||
Concentration Risk, Percentage | 0% | 0% |
Customer A Concentration 2 Risk [Member] | ||
Product Information [Line Items] | ||
Concentration Risk, Percentage | 99% | 100% |
Customer D Concentration 1 Risk [Member] | ||
Product Information [Line Items] | ||
Concentration Risk, Percentage | 25% | 0% |
Customer D Concentration 2 Risk [Member] | ||
Product Information [Line Items] | ||
Concentration Risk, Percentage | 0% | 0% |
Property and equipment (Details
Property and equipment (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Computer and equipment | $ 4,266 | $ 4,272 |
Leasehold improvements | 12,226 | 12,222 |
Machinery and equipment | 60,800 | 38,139 |
Furniture and equipment | 21,840 | 39,152 |
Accumulated depreciation | (30,894) | (21,544) |
Property and equipment, net | $ 68,238 | $ 72,241 |
Financial instruments measured
Financial instruments measured at fair value on a recurring basis (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Defined Benefit Plan Disclosure [Line Items] | ||
Derivative liabilities | $ 4,723,091 | $ 3,515,055 |
Fair Value, Inputs, Level 1 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Derivative liabilities | ||
Fair Value, Inputs, Level 2 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Derivative liabilities | ||
Fair Value, Inputs, Level 3 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Derivative liabilities | $ 4,723,091 | $ 3,515,055 |
Intangible assets (Details)
Intangible assets (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Customer List | $ 300 | $ 300 |
Non-Compete | 12,708 | 12,708 |
Technology Access Fee | 1,000,000 | 1,000,000 |
Intangibles | 1,013,008 | 1,013,008 |
Accumulated amortization | (186,924) | (133,672) |
Intangibles, net | $ 826,084 | $ 879,336 |
Amounts stockholder loaned the
Amounts stockholder loaned the Company and amounts repaid (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
Payables and Accruals [Abstract] | ||
Beginning Balance | $ 95,800 | $ 95,800 |
Amounts loaned to the Company | ||
Repaid | ||
Ending Balance | $ 95,800 | $ 95,800 |
Expenses to officers (Details)
Expenses to officers (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Related Party Transaction [Line Items] | ||||
Salary and Wage, Officer, Excluding Cost of Good and Service Sold | $ 93,750 | $ 87,500 | $ 187,500 | $ 175,000 |
Chief Executive Officer [Member] | ||||
Related Party Transaction [Line Items] | ||||
Salary and Wage, Officer, Excluding Cost of Good and Service Sold | 37,500 | 56,250 | 75,000 | 112,500 |
Chief Financial Officer [Member] | ||||
Related Party Transaction [Line Items] | ||||
Salary and Wage, Officer, Excluding Cost of Good and Service Sold | $ 56,250 | $ 31,250 | $ 112,500 | $ 62,500 |
Unaudited condensed balance she
Unaudited condensed balance sheets and statement of operations for real property (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2018 | |
Current assets: | ||||||||
Prepaid expenses and other current assets | $ 1,140 | $ 1,140 | $ 73,249 | |||||
Total current assets | 28,493 | 28,493 | 151,399 | |||||
Land and Building, net | 68,238 | 68,238 | 72,241 | |||||
Total assets | 2,865,636 | 2,865,636 | 3,175,386 | |||||
Total current liabilities | 10,261,492 | 10,261,492 | 8,035,520 | |||||
Total liabilities | 12,039,448 | 12,039,448 | 9,719,900 | |||||
Total equity | (9,173,812) | $ (3,708,453) | (9,173,812) | $ (3,708,453) | (6,544,514) | $ (11,843,030) | $ (2,730,236) | $ (1,758,499) |
Total liabilities and equity | 2,865,636 | 2,865,636 | 3,175,386 | |||||
Expenses: | ||||||||
Depreciation and amortization | 31,302 | 62,604 | ||||||
Total expenses | 338,873 | 1,138,958 | 812,166 | 2,115,689 | ||||
Net income (loss) | 2,443,160 | $ (1,505,411) | (3,757,350) | $ (3,508,449) | ||||
Partially Owned Properties [Member] | ||||||||
Current assets: | ||||||||
Cash | 27,107 | 27,107 | ||||||
Accounts Receivable | 54,341 | 54,341 | 106,163 | |||||
Due from InnerScope | 111,014 | 111,014 | 79,934 | |||||
Prepaid expenses and other current assets | 8,829 | 8,829 | ||||||
Total current assets | 201,291 | 201,291 | 186,097 | |||||
Land and Building, net | 2,288,939 | 2,288,939 | 2,310,722 | |||||
Other Assets, net | 44,839 | 44,839 | 45,943 | |||||
Total assets | 2,535,069 | 2,535,069 | 2,542,762 | |||||
Accounts Payable | 89,401 | 89,401 | 72,475 | |||||
Current portion of mortgage payable | 22,150 | 22,150 | 20,708 | |||||
Other current liabilities | 34,977 | 34,977 | 16,104 | |||||
Total current liabilities | 146,528 | 146,528 | 109,287 | |||||
Mortgage payable, long-term | 1,937,345 | 1,937,345 | 1,966,215 | |||||
Security deposits | 9,268 | 9,268 | 13,064 | |||||
Total liabilities | 2,093,141 | 2,093,141 | 2,088,566 | |||||
Total equity | 441,928 | 441,928 | 454,196 | |||||
Total liabilities and equity | $ 2,535,069 | 2,535,069 | 2,542,762 | |||||
Rental income | 137,749 | 297,383 | ||||||
Expenses: | ||||||||
Property taxes | 15,100 | 29,605 | ||||||
Depreciation and amortization | 22,890 | 50,940 | ||||||
Insurance | 5,276 | 18,783 | ||||||
Repairs and maintenance | 6,202 | |||||||
Utilities and other | 18,254 | 68,156 | ||||||
Interest expenses | 88,284 | 113,858 | ||||||
Total expenses | 149,804 | 287,544 | ||||||
Net income (loss) | $ (12,055) | $ 9,839 |
Future principal payments for t
Future principal payments for the Company's portion of real property (Details) - Payment Guarantee [Member] | 12 Months Ended |
Jun. 30, 2020 USD ($) | |
Guarantor Obligations [Line Items] | |
$ 22,150 | |
22,150 | |
23,516 | |
24,966 | |
26,500 | |
28,118 | |
812,752 | |
$ 960,152 |
Summary of convertible note bal
Summary of convertible note balances (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Principal balance | $ 3,295,420 | $ 3,402,117 |
Unamortized discounts | (294,186) | (1,011,636) |
Ending balance, net | $ 3,001,234 | $ 2,390,481 |
Convertible note activity (Deta
Convertible note activity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Short-term Debt [Line Items] | ||||
Amortization | $ 346,733 | $ 959,451 | ||
Convertible Note Principal Balance [Member] | ||||
Short-term Debt [Line Items] | ||||
Balance at January 1, 2020 | 3,402,117 | |||
New issuance | 242,000 | |||
Conversions | (406,814) | |||
Amortization | ||||
Ending balance, net | 3,295,420 | 3,295,420 | ||
Convertible Note Total [Member] | ||||
Short-term Debt [Line Items] | ||||
Balance at January 1, 2020 | 2,390,481 | |||
New issuance | ||||
Conversions | (406,814) | |||
Amortization | 959,451 | |||
Ending balance, net | 3,001,234 | 3,001,234 | ||
Convertible Note Debt Discounts [Member] | ||||
Short-term Debt [Line Items] | ||||
[custom:DebtDiscountsBalance-1] | (1,011,637) | |||
[custom:DebtDiscountsNewIssuance] | (242,000) | |||
[custom:DebtDiscountsConversions] | ||||
[custom:DebtDiscountsAmortization] | 959,451 | |||
[custom:DebtDiscountsBalance-2] | $ (294,186) | $ (294,186) |
Summary of activity related to
Summary of activity related to derivative liabilities (Details) | 6 Months Ended |
Jun. 30, 2020 USD ($) | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Beginning Balance | $ 3,515,055 |
Ending Balance | 4,723,091 |
Derivative Liabilities [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Beginning Balance | 3,515,055 |
Initial derivative liability | 412,805 |
Fair value change | 1,474,421 |
Reclassification for principal payments and conversions | (679,190) |
Ending Balance | $ 4,723,091 |
Future principal payments for C
Future principal payments for Company's portion of operating leases (Details) | Jun. 30, 2020 USD ($) |
Leases [Abstract] | |
$ 189,858 | |
364,194 | |
255,466 | |
116,888 | |
12,219 | |
$ 938,625 |