Notes
to the Consolidated Financial Statements
September
30, 2020
(unaudited)
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
On
January 4, 2001, we incorporated in North Dakota as ADM Enterprises, Inc. On May 9, 2006, the Company changed both its name to
ADM Endeavors, Inc. (“ADM Endeavors,” or the “Company,” “we,” “us,” or “our”)
and its domicile to the state of Nevada. On July 1, 2008, the Company acquired all of the assets of ADM Enterprises, LLC (“ADM
Enterprises”), a sole proprietorship owned by Ardell and Tammera Mees, in exchange for 10,000,000 newly issued shares of
our common stock. As a result, ADM Enterprises became a wholly owned subsidiary of the Company. Even though the Company was incorporated
on January 4, 2001, it had no operations until the share exchange agreement with ADM Enterprises on July 1, 2008. ADM provides
installation services to grocery décor and design companies primarily in North Dakota.
In
May 2013, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized
common stock increased to 800,000,000 shares at a par value of $0.001 per share and preferred stock increased to 80,000,000 shares
at a par value of $0.001 per share.
On
April 19, 2018, the Company acquired Just Right Products, Inc. (“JRP”), a Texas corporation. JRP was incorporated
on January 17, 2010. The acquisition of 100% of JRP from its sole shareholder was through a stock exchange whereas the Company
issued 2,000,000 shares of restricted Series A preferred stock (the “Acquisition Shares”). Each share of the Series
A preferred stock is convertible into ten shares of common stock and each share has 100 votes on a fully diluted basis. The Acquisition
Shares represents 61% of voting shares, thus there is a change of voting control. The transaction was accounted for as a reverse
acquisition.
JRP
is focused on being an added value reseller with concentration in embroidery, screen printing, importing and uniforms for businesses,
schools and individuals in the State of Texas.
On
January 1, 2020, the Company determined that it would discontinue its business operations in North Dakota, specifically, ADM Enterprises
(the “Disposed Company”). The Company has reached a settlement with Ardell Mees to provide him with the assets
of the Disposed Company and in exchange, Mr. Mees will assume all liabilities of the Disposed Company. As part of the transaction,
Mr. Mees resigned from all positions with the Company and, in a private transaction, sold a significant portion of his ownership
in the Company to Marc Johnson. The Company and Mr. Mees entered into an indemnification agreement whereby Mr. Mees indemnified
the Company for any liabilities of the Disposed Company.
The
Company has been affected negatively by COVID-19 as a significant portion of the Company’s sales are for school uniforms
which, due to COVID-19 and the closing of schools nationwide, should have a negative impact on the Company’s financials.
Additionally, the Company experienced delivery delays during the first quarter of 2020 due to slowed
production in China due to COVID-19, but management does not expect this will significantly impact gross sales due to the diverse
growth the Company is experiencing.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States
of America (U.S. GAAP) and has a year-end of December 31.
Management
further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system
of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is
designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions
are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition,
results of operations and cash flows of the Company for the respective periods being presented.
The
unaudited consolidated financial statements of the Company for the nine month periods ended September 30, 2020 and 2019 have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information
and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information
and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion
of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for
interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information
as of December 31, 2019 was derived from the audited financial statements included in the Company’s financial statements
as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission (the “SEC”) on May 13, 2020. These financial statements should be read in conjunction with
that report.
Principles
of Consolidation
The
accompanying unaudited consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary,
JRP, at September 30, 2020. All significant intercompany balances and transactions have been eliminated.
Use
of Estimates
The
preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires management to make use of certain estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as of the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods.
The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable
under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are
related to allowance for doubtful accounts, goodwill, derivative liability, stock-based compensation and deferred tax valuations.
Stock-Based
Compensation
Stock-based
compensation expense is recorded in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, for stock and
stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized
as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures
that it expects will occur and records expense based upon the number of awards expected to vest.
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of nine months or less when purchased to be cash equivalents.
At September 30, 2020 and December 31, 2019, the Company had no cash equivalents. Included in assets attributable to discontinued
operations is $0 and $12,758 of cash as of September 30, 2020 and December 31, 2019, respectively.
Allowance
for Doubtful Accounts
The
Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to non-collectability.
The Company’s allowance is based on a variety of factors, including age of the receivable, significant one-time events,
historical experience, and other risk considerations. The Company had an allowance at September 30, 2020 and December 31, 2019
of $0. The Company had bad debt expense of $5,106 and $5,336 for the nine months ended September 30, 2020 and 2019, respectively.
Inventory
Inventory
is valued at the lower of cost or net realizable value. Cost is determined using a weighted-average cost method. The Company decreases
the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market
value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about
future demand and market conditions. The Company has inventory of $205,145 and $138,693 as of September 30, 2020 and December
31, 2019, respectively.
Two vendors accounted for approximately
37% of inventory purchases during the nine months ended September 30, 2020. Three vendors accounted for approximately
42% of inventory purchases during the nine months ended September 30, 2019. These same vendors made up 34% and 0% of our accounts
payable as of September 30, 2020 and December 31, 2019, respectively.
Derivative
Instruments
Derivatives
are measured at their fair value on the balance sheet. In determining the appropriate fair value, the Company uses the Black-Scholes-Merton
option pricing model. Changes in fair value are recorded in the consolidated statements of operations.
Fair
Value of Financial Instruments
The
Company measures its financial assets and liabilities in accordance with U.S. GAAP. For certain of our financial instruments,
including cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate fair value due to their
short maturities.
We
follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides
guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements,
but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not
apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to
replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those
three levels:
|
Level
1:
|
Observable
inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
|
|
Level
2:
|
Inputs
other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
|
|
|
|
|
Level
3:
|
Unobservable
inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which
reflect those that a market participant would use.
|
The
Company adopted the provisions of FASB ASC 820 (the “Fair Value Topic”) which defines fair value, establishes a framework
for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
The
Company had no assets or liabilities other than derivative liabilities measured at fair value on a recurring basis at September
30, 2020 and December 31, 2019.
Fixed
Assets
Fixed
assets are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life. Upon the
sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and
any gain or loss is reflected in consolidated statements of operations.
Classification
|
|
Estimated
Useful Lives
|
Equipment
|
|
5
to 7 years
|
Leasehold
improvements
|
|
Shorter
of useful life or lease term
|
Furniture
and fixtures
|
|
4
to 7 years
|
Websites
|
|
3
years
|
Goodwill
Goodwill
represents the excess of purchase price and related costs over the value assigned to the net tangible assets of businesses acquired.
Goodwill is not amortized, but instead assessed for impairment. We perform our annual impairment review of goodwill in our fiscal
fourth quarter or when a triggering event occurs between annual impairment tests. No impairment was recorded in fiscal 2019 or
2020 as a result of our qualitative assessments over our single reporting segment.
The
Company performs a qualitative assessment for each of its reporting units to determine if the two-step process for impairment
testing is required. If the Company determines that it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, the Company would then evaluate the recoverability of goodwill using a two-step impairment test approach
at the reporting unit level. In the first step, the fair value for the reporting unit is compared to its book value including
goodwill. In the case that the fair value of the reporting unit is less than book value, a second step is performed which compares
the implied fair value of the reporting unit’s goodwill to the book value of the goodwill. The fair value for the goodwill
is determined based on the difference between the fair values of the reporting unit and the net fair values of the identifiable
assets and liabilities of such reporting unit. If the implied fair value of the goodwill is less than the book value, the difference
is recognized as impairment.
Impairment
of Long-lived Assets
The
Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s
long-lived assets, such as intellectual property, are required to be reviewed for impairment annually, or whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be recoverable.
The
Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated
with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective
carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair
value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than
originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated
useful lives.
The
Company determined that there were no impairments of long-lived assets at September 30, 2020 and December 31, 2019.
Revenue
Recognition
We
recognize revenue for merchandise sales, net of expected returns and sales tax, at the time of in-store purchase or delivery of
the product to our customer. When merchandise is shipped to our guests, we estimate receipt based on historical experience. Revenue
is deferred and a liability is established for sales returns based on historical return rates and sales for the return period.
We recognize an asset and corresponding adjustment to cost of sales for our right to recover returned merchandise. At each financial
reporting date, we assess our estimates of expected returns, refund liabilities and return assets. For merchandise sold in our
stores and online, tender is accepted at the point of sale. When we receive payment before the guest has taken possession of the
merchandise, the amount received is recorded as deferred revenue until the transaction is complete. Our performance obligations
for unfulfilled merchandise orders are typically satisfied within one week. Shipping and handling fees charged to guests relate
to fulfilment activities and are included in net sales with the corresponding costs recorded in cost of sales.
We
provided consulting services from our discontinued operations which were minimal for the nine months ended September 30, 2019.
Cost
of Sales
Cost
of sales includes the actual cost of merchandise sold and services performed; the cost of transportation of merchandise from vendors
to our distribution network, stores, or customers; shipping and handling costs from our stores or distribution network to customers;
and the operating cost and depreciation of our sourcing and distribution network and online fulfilment centers.
Net
Income (Loss) per Share
The
Company computes basic and diluted income (loss) per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards
Codification. Basic loss per share is computed by dividing net loss available to common shareholders, by the weighted average
number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities.
Diluted loss per share is computed by dividing net loss available to common shareholders by the diluted weighted average number
of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted
number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.
The
dilutive effect of outstanding convertible securities and preferred stock is reflected in diluted earnings per share by application
of the if-converted method.
The
following is a reconciliation of basic and diluted earnings (loss) per common share for the nine months ended September 30, 2020
and 2019:
|
|
For the Nine months ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Basic earnings per common share
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
$
|
14,065
|
|
|
$
|
(93,714
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
144,553,603
|
|
|
|
131,335,934
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
14,065
|
|
|
$
|
(93,714
|
)
|
Add convertible debt interest
|
|
|
-
|
|
|
|
-
|
|
Net income (loss) available to common shareholders
|
|
$
|
14,065
|
|
|
$
|
(93,714
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
144,553,603
|
|
|
|
131,335,934
|
|
Preferred shares
|
|
|
20,000,000
|
|
|
|
-
|
|
Convertible debt
|
|
|
5,511,273
|
|
|
|
-
|
|
Adjusted weighted average common shares outstanding
|
|
|
170,064,876
|
|
|
|
131,335,934
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Income
Taxes
The
Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying
amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which
those temporary differences are expected to be recovered or settled.
The
effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation
allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Tax
benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain
a position taken on an income tax return. The Company has no liability for uncertain tax positions as of September 30, 2020 and
December 31, 2019. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as interest expense.
The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant
interest expense recognized during the periods ended September 30, 2020 and 2019.
Segment
Information
In
accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information,”
the Company is required to report financial and descriptive information about its reportable operating segments. The Company has
one operating segment as of September 30, 2020 and December 31, 2019.
Effect
of Recent Accounting Pronouncements
Recently
Issued Accounting Standards Not Yet Adopted
The
Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any,
on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements
will have a significant effect on its financial statements.
NOTE
3 – GOING CONCERN
The
accompanying unaudited financial statements and the factors within it, have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business and the ability of the Company
to continue as a going concern for a reasonable period of time. The Company had a net income of $14,065 and cash used in operating
activities of $151,303 for the nine months ended September 30, 2020. As of September 30, 2020, the Company had a working capital
surplus of $341,259, and retained earnings of $115,463. The Company’s continuation as a going concern is dependent upon
its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain
its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible
notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE
4 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.
As of October 22, 2020, there were no pending or threatened lawsuits.
Franchise
Agreement
The
Company has a franchise agreement effective February 19, 2014 expiring in February 2024, with a right to renew for an additional
5 years to operate stores and websites in the Company’s exclusive territory. The Company is obligated to pay 5% of gross
revenue for use of systems and manuals.
During
the nine months ended September 30, 2020 and 2019, the Company paid $16,076 and $49,699, respectively, for the franchise agreement.
Uniform
Supply Agreement
The
Company has an agreement to be the exclusive provider of school uniforms and logos for a charter school. The Company is obligated
to provide a 3% donation to the charter school each school year. The agreement is for each school year ending through May
31, 2021.
During
the nine months ended September 30, 2020 and 2019, the Company paid $0 and $16,618 for the uniform supply agreement, respectively.
NOTE
5 – FIXED ASSETS
Fixed
assets and finance lease right of use assets, stated at cost, less accumulated depreciation at September 30, 2020 and December
31, 2019 consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Equipment
|
|
$
|
368,868
|
|
|
$
|
368,868
|
|
Autos and trucks
|
|
|
72,898
|
|
|
|
72,898
|
|
Land
|
|
|
498,000
|
|
|
|
-
|
|
Less: accumulated depreciation
|
|
|
(274,849
|
)
|
|
|
(224,393
|
)
|
Property and equipment, net
|
|
$
|
664,917
|
|
|
$
|
217,373
|
|
Depreciation
expense for the nine months ended September 30, 2020 and 2019 was $50,547 and $35,456, respectively.
NOTE
6 – CONVERTIBLE NOTE PAYABLE AND NOTES PAYABLE
Convertible
Notes Payable
On
April 1, 2018, the Company assumed a convertible promissory note in connection with the reverse acquisition. The funding was in
tranches whereby the Company assumed the first tranche of $48,697. The Company received the remaining tranches totaling $57,395
during the year ended December 31, 2018. The Company received total funding of $106,092 as of December 31, 2018. The note had
fees of $53,046 which were recorded as a discount to the convertible promissory note and are being amortized over the life of
the loan using the effective interest method. The Company recorded interest expense of $0 during the nine months ended September
30, 2020.
The
note is convertible into common stock at a price of 35% of the lowest three trading prices during the ten days prior to conversion.
As of September 30, 2020, the convertible debt would convert to 5,511,273 common shares.
The
note balance was $106,092 as of September 30, 2020 and December 31, 2019.
Derivative
liabilities
The
conversion features embedded in the convertible notes were evaluated to determine if such conversion feature should be bifurcated
from its host instrument and accounted for as a freestanding derivative. In the convertible notes with variable conversion terms,
the conversion feature was accounted for as a derivative liability. The derivatives associated with the term convertible notes
were recognized as a discount to the debt instrument and the discount is amortized over the expected life of the notes with any
excess of the derivative value over the note payable value recognized as additional interest expense at the issuance date.
The
derivative liability was calculated using the Black-Scholes method over the expected terms of the convertible debt, with a risk-free
rate of 0.17% and volatility of 100% as of September 30, 2020. Included in Derivative Income in the accompanying unaudited consolidated
statements of operations is expense arising from the change in fair value of the derivatives of $2,193 during the nine
months ended September 30, 2020.
Notes
Payable
On
April 5, 2020, the Company received a Small Business Administration (“SBA”) loan under the government’s assistance
related to COVID-19. The SBA loan was for $169,495 with an interest rate of 0.98% and due in eight weeks. The SBA loan is to assist
the Company in payroll during the COVID-19 time period. The SBA loan is forgivable if the Company payroll during this time utilizes
all of the monies provided.
On
April 29, 2020, the Company received the government assistance check of $10,000 related to the COVID-19 response by the government
to assist companies during the pandemic.
NOTE
7 – FINANCE LEASES
On
November 17, 2016, the Company obtained a finance lease for equipment. Payments were $2,667 per month for three years and the
lease was paid off in 2019.
NOTE
8 – ACCRUED EXPENSES
The
Company had total accrued expenses of $148,067 and $201,790 as of September 30, 2020 and December 31, 2019, respectively. See
breakdown below of accrued expenses as follows:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Credit cards payable
|
|
$
|
(2,587
|
)
|
|
$
|
75,301
|
|
Accrued interest
|
|
|
53,046
|
|
|
|
53,046
|
|
Other accrued expenses
|
|
|
84,464
|
|
|
|
73,443
|
|
|
|
$
|
134,923
|
|
|
$
|
201,790
|
|
NOTE
9 – RELATED PARTY TRANSACTIONS
The
majority shareholder, director and officer, is the owner of M & M Real Estate, Inc. (“M & M”). M & M leases
the Haltom City, Texas facility to the Company. The monthly lease payment, under a month to month lease, is currently $6,500.
The Company incurred lease expense of $58,500 and $58,500, respectively, to M & M for the nine months ended
September 30, 2020 and 2019, respectively.
The
Company has accounts payable to M&M of $0 and $0 as of September 30, 2020 and December 31, 2019, respectively. The accounts
payable is for unpaid lease obligations and products the Company purchased from M&M during the nine months ended September
30, 2020 and 2019, respectively. The Company purchased approximately $0 and $14,060, respectively. M&M marks up their sales
to JRP by 10%.
The
Company has been provided office space by its chief executive officer, Ardell Mees, at no cost. Management has determined that
such cost is nominal and did not recognize the rent expense in its financial statements.
The
Company had expenses of approximately $15,985 related to Ardell Mees and family for the year ended December 31, 2019, respectively.
These expenses are considered compensation and are included in discontinued operations.
In
April 2020, Marc Johnson advanced $40,000 to the Company. The advance was repaid in May 2020.
On
July 28, 2020, Just Right Products, Inc., a wholly owned subsidiary of ADM Endeavors, Inc. (collectively, the “Company”)
entered into an asset purchase agreement (the “APA”) with M&M Real Estate, Inc. (“M&M”). M&M
is owned by Marc Johnson, the Company’s CEO, CFO and Chairman. The Company utilized the APA to acquire 10.4 acres of land
with a cost basis of $498,000 from M&M. It is anticipated that this land will be used this year for the construction of the
Company’s corporate office and expanded operational facilities. The Company compensated M&M in the amount of 22,232,143
shares of common stock of the Company.
Employment
and Consulting Agreements
In
April 2018, the Company executed a two-year employment agreement with Ardell D. Mees, the Company’s Chief Executive Officer
and Chief Financial Officer. As compensation for services, Mr. Mees is to receive an annual base salary of $60,000. On December
31, 2019, Mr. Mees waived all balances due to him.
In
April 2018, the Company executed a two-year employment agreement with Marc Johnson, the Company’s Chief Operating Officer.
As compensation for services, Mr. Johnson is to receive an annual base salary of $60,000. On December 31, 2019, Mr. Johnson waived
all balances due to him.
On
May 1, 2018, the Company entered into a consulting agreement for financial services and business development for a term of one
year and agreed to issue 2,250,000 common shares earned on a monthly basis to a former officer’s family member. On January
9, 2019, the Company issued the shares of common stock. The Company incurred stock compensation expense of $0 for the nine months
ended September 30, 2020 and $112,500 as of September 30, 2019. In 2020 the Company issued 4,500,000 shares of common stock related
to the current and prior agreements.
On
February 28, 2019, the Company entered into a consulting agreement for financial services and business development for a term
of nine months and issued 1,500,000 common shares earned on a monthly basis. On February 28, 2019, the Company issued the shares
of common stock. The Company incurred stock compensation expense of $0 for the nine months ended September 30, 2020 and $25,000
as of September 30, 2019.
On
January 9, 2020, Motasem Khanfur, the controller of the Company, was appointed as chief financial officer of the Company. As part
of his compensation, Mr. Khanfur was awarded 500,000 shares of common stock.
On
January 9, 2020, Sarah Nelson was appointed as chief operating officer and director of the Company. As part of her compensation,
Ms. Nelson was awarded 1,000,000 shares of common stock.
On
January 9, 2020, Andreana McKelvey resigned as director. She was awarded 250,000 shares of common stock of the Company.
On
May 30, 2020, the Company entered into a consulting agreement for financial services and business development for a term of one
year and agreed to issue 2,250,000 common shares earned on the date of issuance.
NOTE
10 – STOCKHOLDERS’ EQUITY
Our
Articles of Incorporation authorize the issuance of 800,000,000 shares of common stock and 80,000,000 shares of preferred stock
with $0.001 par values per share. There were 163,652,143 and 136,920,000 outstanding shares of common stock at September
30, 2020 and December 31, 2019, respectively. There were 2,000,000 outstanding shares of preferred stock as of September 30, 2020
and December 31, 2019, respectively. Each share of preferred stock has 100 votes per share and is convertible into 10 shares of
common stock. The preferred stock pays dividends equal with common stock and has preferential liquidation rights to common stockholders.
On
May 1, 2018, the Company entered into a consulting agreement for financial services and business development for a term of one
year and agreed to issue 2,250,000 common shares earned on a monthly basis to an officer’s family member. On January 9,
2019, the Company issued the shares of common stock. The Company incurred stock compensation expense of $0 for the nine months
ended September 30, 2020 and $112,500 as of September 30, 2019. In 2020 the Company issued 4,500,000 shares of common stock related
to the current and prior agreements.
On
January 28, 2019, the Company entered into a consulting agreement for 6 months and agreed to issue 1,500,000 common shares vesting
on a monthly basis. The shares were issued on February 28, 2019. The Company incurred stock compensation expense of $0 for the
nine months ended September 30, 2020 and $25,000 as of September 30, 2019.
On
January 9, 2020, Motasem Khanfur, the controller of the Company, was appointed as chief financial officer of the Company. As part
of his compensation, Mr. Khanfur was awarded 500,000 shares of common stock. The Company recorded $10,000 as stock-based compensation.
On
January 9, 2020, Sarah Nelson was appointed as chief operating officer and director of the Company. As part of her compensation,
Ms. Nelson was awarded 1,000,000 shares of common stock. The Company recorded $20,000 as stock-based compensation.
On
January 9, 2020, Andreana McKelvey resigned as director. She was awarded 250,000 shares of common stock of the Company. The Company
recorded $5,000 as stock-based compensation.
On
April 24, 2020, the Company entered into a consulting agreement for financial services and agreed to issue 650,000 shares of common
stock. The shares were valued at $65,000 and were expensed.
On
May 30, 2020, the Company entered into a consulting agreement for financial services and business development for a term of one
year and agreed to issue 2,250,000 common shares earned on the date of issuance. The Company will amortize the stock compensation
on a monthly basis in the amount of $13,125. As of September 30, 2020, the Company has recorded an expense of $52,500.
On
July 28, 2020, Just Right Products, Inc., a wholly owned subsidiary of ADM Endeavors, Inc. (collectively, the “Company”)
entered into an asset purchase agreement (the “APA”) with M&M Real Estate, Inc. (“M&M”). M&M
is owned by Marc Johnson, the Company’s CEO, CFO and Chairman. The Company utilized the APA to acquire 10.4 acres of land
with a cost basis of $498,000 from M&M. It is anticipated that this land will be used this year for the construction of the
Company’s corporate office and expanded operational facilities. The Company compensated M&M in the amount of 22,232,143
shares of common stock of the Company.
On
September 24, 2020, the Company issued 500,000 shares of common stock to legal counsel for services. The shares were valued at
$40,000 and were expensed.
NOTE
11 – CONCENTRATION OF CUSTOMERS
Concentration
of Revenue
For
the nine months ended September 30, 2020, one customer made up 52% of revenues and for the nine months ended September 30, 2019
two customers made up 54% of revenues, respectively. One customer accounted for 64% of accounts receivable as of
September 30, 2020. There were no customers that accounted for more than 10% of accounts receivable as of December 31, 2019.
NOTE
12 – LEASE LIABILITY
Finance
Leases
Finance
leases are included in finance lease right-of-use lease assets and finance lease liability current and long-term debt on the consolidated
balance sheets. The associated amortization expense and interest expense are included in depreciation and amortization and interest
expense, respectively, on the consolidated income statements.
Operating
Leases
The
Company leases office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Leases with
initial terms in excess of 12 months are recorded as operating or financing leases in our consolidated balance sheet. Lease expense
is recognized on a straight-line basis over the term of the lease. For leases beginning in 2018 and later, the Company accounts
for lease components separately from the non-lease components. Most leases include one or more options to renew. The exercise
of the lease renewal options is at the sole discretion of the Company. The depreciable life of the assets and leasehold improvements
are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
The
Company leases approximately 18,000 square feet of space in Haltom City, Texas, pursuant to a month to month lease. This facility
serves as our corporate headquarters, manufacturing facility and showroom. The lease is with M & M Real Estate, Inc. (“M
& M”), a company owned solely by our majority shareholder and director of the Company.
The
Company has approximately 6,000 square feet of space in Arlington, Texas which serves as an academic showroom, pursuant to a lease
that expired on June 1, 2020. The Company is leasing this space on a month-to-month basis beginning June 1, 2020.
As
of September 30, 2020, the operating lease right-of-use assets and operating lease liabilities were $0. Operating lease expense
during the nine months ended September 30, 2020 was $35,961 and was included as part of operating expenses.
NOTE
13 – DISCONTINUED OPERATIONS
On
January 1, 2020, the Company determined that it would discontinue its business operations in North Dakota, specifically, ADM Enterprises
LLC (the “Disposed Company”). The Company has made a settlement with Ardell Mees to provide him with the assets of
the Disposed Company and in exchange, Mr. Mees will assume all liabilities of the Disposed Company. As part of the transaction,
Mr. Mees resigned from all positions with the Company and, in a private transaction, sold a significant portion of his ownership
in the Company to Marc Johnson. The Company and Mr. Mees entered into an indemnification agreement whereby Mr. Mees indemnified
the Company for any liabilities of the Disposed Company.
Reconciliation
of the Items Constituting Profit and (Loss)
from
Discontinued Operations
For
the Nine Months Ended September 30,
(unaudited)
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
81,841
|
|
Direct costs of revenue
|
|
|
|
|
|
|
9,999
|
|
General and administrative
|
|
|
|
|
|
|
52,805
|
|
Income from operations
|
|
|
|
|
|
|
19,037
|
|
Gain on disposal
|
|
|
96,635
|
|
|
|
|
|
Net income
|
|
$
|
96,635
|
|
|
$
|
19,037
|
|
NOTE
14 – SUBSEQUENT EVENTS
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.
The
outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause
slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related
to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners,
service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection,
sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus
impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will
include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses
to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results
of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and
could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow
our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination
of agreements due to deterioration in economic conditions could negatively impact our results of operations.
On October 16, 2020, the Company acquired
7.5 acres of land adjacent to the current land acquired previously to facilitate the space for long-term growth and infrastructure.
The purchase price for the land was $465,000 paid in cash and a note payable of $372,000. The note bears interest at 5% and
is payable in full on October 16, 2021.