Notes
to Consolidated Financial Statements
September
30, 2019
(Unaudited)
Note
1 - Summary of Significant Accounting Policies
The
accompanying unaudited interim financial statements of American International Holdings Corp. (“AMIH”), have been prepared
in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and
Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in AMIH’s
latest Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations
for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the unaudited interim consolidated financial statements that
would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as
reported in the Form 10-K have been omitted.
Organization,
Ownership and Business
Prior
to May 31, 2018, American International Holdings Corp. (“AMIH”) was a 93.2% owned subsidiary of American International
Industries, Inc. (“American”, “AMIN”) (OTCBB: AMIN). Effective May 31, 2018, the Company issued 10,100,000
shares of restricted common stock. As a result of the issuance of the common shares, a change in control occurred. American International
Industries, Inc. ownership decreased from 93.2% to 6.4%. No one individual or entity owns at least 50% of the outstanding shares
of the Company. Effective April 12, 2019, the Company changed its business focus to the services of medical spas.
On
April 12, 2019, The Company entered into a Share Exchange Agreement (the “Agreement”) with Novopelle Diamond, LLC
(“Novopelle”) and all three members of Novopelle. See Note 2 for the detail of the transaction. The acquisition was
treated as a reverse acquisition for accounting purposes, with the Company remaining the parent company and Novopelle becoming
a wholly-owned subsidiary of the Company.
Principles
of Consolidation
The
consolidated financial statements include the accounts of AMIH and its wholly-owned subsidiaries: Novopelle Diamond, LLC and Capitol
City Solutions USA, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain
reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications
have been applied consistently to the periods presented.
Cash
Equivalents
Highly
liquid investments with original maturities of three months or less are considered cash equivalents. There are no cash equivalents
at September 30, 2019 and December 31, 2018.
Fair
Value of Financial Instruments
FASB
ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC
825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction
between willing parties. At September 30, 2019 and December 31, 2018, the carrying value of certain financial instruments (cash
and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments
or interest rates, which are comparable with current rates.
Net
Loss Per Common Share
We
compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both
basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method
and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential shares if their effect is anti-dilutive.
Property,
Plant, Equipment, Depreciation, Amortization and Long-Lived Assets
Long-lived
assets include:
Property,
Plant and Equipment – Assets acquired in the normal course of business are recorded at original cost and may be adjusted
for any additional significant improvements after purchase. We depreciate the cost evenly over the assets’ estimated useful
lives. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the
accounts, with any resultant gain or loss being recognized as a component of other income or expense.
Identifiable
intangible assets – These assets are recorded at acquisition cost. Intangible assets with finite lives are amortized evenly
over their estimated useful lives.
At
least annually, we review all long-lived assets for impairment. When necessary, we record changes for impairments of long-lived
assets for the amount by which the present value of future cash flows, or some other fair value measure, is less than the carrying
value of these assets.
If
the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation
of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including
any previously unrecognized intangible assets (Step Two Analysis). The excess of the fair value of a reporting unit over the amounts
assigned to its assets and liabilities (“carrying amount”) is the implied fair value of goodwill.
Management’s
Estimates and Assumptions
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these
estimates.
Revenue
Recognition
The
Company recognizes revenue in according with Accounting Standards Codification (ASC) Topic 606. The underlying principle is that
the Company recognize revenue to depict the transfer of promised goods and services to customers in an amount that they expect
to be entitled to in the exchange for goods and services provided. A five-step process has been designed for the individual or
pools of contracts to keep financial statements focused on this principle.
Note
2 - Acquisition
Effective
April 12, 2019, American International Holdings Corp. (“AMIH”) issued 18,000,000 shares of the Company common stock
to the members (three individuals) of Novopelle Diamond, LLC (“Novopelle”), a Texas limited company, to acquire 100%
of the membership interests of Novopelle. The issuance of these shares represent a change in control of AMIH. Concurrent with
the issuance, Jacob Cohen, Esteban Alexander and Alan Hernandez, representing the three former members of Novopelle, were elected
to the board of directors and to the office of Chief Executive Officer, Chief Operating Officer and Chief Marketing officer of
the AMIH, respectively. Everett Bassie and Charles Zeller resigned as board members of AMIH. This transaction was accounted for
as a reverse acquisition. At closing, in accordance with the share exchange agreement, AMIH will remain as the parent company
with Novopelle being a wholly owned subsidiary of AMIH.
Note
3 – Property and Equipment
Property
and equipment is as follows at September 30, 2019 and December 31, 2018:
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Leasehold improvements
|
|
$
|
92,516
|
|
|
$
|
85,016
|
|
Furniture & fixtures
|
|
|
5,843
|
|
|
|
1,462
|
|
Equipment
|
|
|
39,180
|
|
|
|
-
|
|
|
|
|
137,539
|
|
|
|
86,478
|
|
Less accumulated
depreciation and amortization
|
|
|
12,727
|
|
|
|
-
|
|
Net property
and equipment
|
|
$
|
124,812
|
|
|
$
|
86,478
|
|
Depreciation
and amortization expense for the nine months ended September 30, 2019 was $18,480.
The
Company incurred long-debt in the amount of $34,027 during the nine months ended September 30, 2019 to purchase equipment used
in its operations. The total purchase price was $37,027, with the Company making a down payment in the amount of $3,000.
Note
4 – Licensing Agreement
On
June 27th, 2019, the Company executed an exclusive license agreement with Novo MedSpa Addison Corp (“Novo Medspa”)
providing the Company with the exclusive rights to the Novopelle brand and to establish new Novopelle branded MedSpa locations
on a worldwide basis (the “Exclusive License”). In consideration for the Exclusive License, the Company paid Novo
MedSpa a one-time cash payment of $40,000 and issued to Novo MedSpa 250,000 shares of the Company’s common stock. The 250,000
shares of the Company’s common stock was valued at $0.10 per share or $25,000.
Note
5 – Operating Right-of-Use Lease Liability
On
January 1, 2019, the Company adopted Accounting Standards Update No. 2016-2, Leases (Topic 842), as amended, which supersedes
the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities
and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosure surrounding the amount, timing
and uncertainty of cash flows arising from leasing arrangements.
On
January 1, 2019, the Company recognized an operating right-of-use asset in the amount $287,206 and an operating lease liability
in the amount of $294,774. The lease term is eighty-four (84) months and expires in November 2025.
The
following is a schedule, by year, of maturities of lease liabilities as of September 30, 2019:
2019
|
|
$
|
26,599
|
|
2020
|
|
|
54,066
|
|
2021
|
|
|
54,951
|
|
2022
|
|
|
55,854
|
|
2023
|
|
|
56,776
|
|
2024
|
|
|
57,715
|
|
2025
|
|
|
53,828
|
|
Total undiscounted cash flows
|
|
|
359,789
|
|
Less imputed
interest (8%)
|
|
|
(103,622
|
)
|
Present value of lease liability
|
|
$
|
256,167
|
|
Total
rental expense for the nine months ended September 30, 2019 was $45,011.
The
operating lease right-of-use asset net balance at September 30, 2019 was $247,430.
Note
6 – Accrued Compensation for Related Parties
At
September 30, 2019, accrued compensation represent compensation for the Company’s executive officers from April 12, 2019
to September 30, 2019 in the amount of $126,000, less $45,000 that was paid.
Note
7 – Short-Term Notes Payable
Short-term
notes payable represents the following at September 31, 2019:
Note payable to an individual
dated May 17, 2019 for $30,000, with interest at 5%. The note is due on April 30, 2020. The Note in unsecured
|
|
$
|
30,000
|
|
|
|
|
|
|
Note payable to an individual dated
July 8, 2019 for $40,000, with interest at 8%. The Note in a convertible promissory note. In the event that the Company files,
and has qualified by the SEC an offering Statement on Regulation A of the Securities Act of 1933, as amended, the Note holder
has the rights to convert all of any portion of the principal amount and accrued interest due on the Note into issued in the
Offering Statement
|
|
|
40,000
|
|
|
|
|
|
|
Note payable to financial group dated
August 26, 2019 for $75,000, with interest at 12%. The Note is due on August 26, 2020.
|
|
|
75,000
|
|
|
|
|
|
|
Total
|
|
$
|
145,000
|
|
Note
8 – Loans to Related Parties
During
the nine-month period ended September 30, 2019, two of the Company officers and board members, loaned the Company $19,908. During
the nine months ended September 30, 2019, the Company repaid 66,624 of loans to the two officers/board members. The Company incurred
$7,942 on imputed interest expense on related party borrowing during the nine months ended September 30, 2019. Outstanding loan
balances to these related parties was $79,979 at September 30, 2019.
On
June 21st, 2019, the Company issued a promissory note with a principal amount of $40,000 to a related party in exchange
for $40,000 in cash. The promissory note is unsecured, has a maturity date of June 21, 2020 and accrues interest at the rate of
8% per annum until paid in full by the Company. Furthermore, the Company issued 50,000 shares of the Company’s common stock
to the related party investor as further consideration to enter into the loan with the Company. The Company issued 50,000 shares
of common stock valued at $.10 per share or $5,000, which was accounted for a discount on the note.
On
September 9th, 2019, the Company issued a promissory note with a principal amount of $100,000 to a related party in
exchange for $100,000 in cash. The promissory note is unsecured, has a maturity date of September 9, 2020 and accrues interest
at the rate of 8% per annum until paid in full by the Company. Furthermore, the Company issued 100,000 shares of the Company’s
common stock to the related party investor as further consideration to enter into the loan with the Company. The Company issued
100,000 shares of common stock valued at $1.00 per share or $100,000, which was accounted for a discount on the note.
As
of September 30, 2019, AMIH had a short-term note payable in the amount of $13,473 to Kemah Development Texas, LP, a company owned
by Dror Family Trust, a related party.
Note
9 – Long-Term Debt to Related Parties
On
April 12, 2019 the Company entered into individual share exchange agreements and promissory notes with each of Daniel Dror, Winfred
Fields and former Directors Everett Bassie and Charles Zeller (the “AMIH Shareholders”), whereby the AMIH Shareholders
agreed to cancel and exchange a total of 5,900,000 shares of their AMIH common stock. The Company issued individual promissory
notes with an aggregate principal amount of $350,000 (the “Promissory Notes”) for cancellation of the 5,900,000
shares of common stock. The Promissory Notes have a term of two years and accrue interest at the rate of 10% per annum until paid
in full by the Company. The Company accrued $16,395 of interest on these notes during the nine months ended September 30, 2019.
Note
10 – Long-Term Debt
The
Company incurred long-debt in the amount of $34,027 during the six months ended Septembe 30, 2019 to purchase equipment used in
its operations. The total purchase price was $37,027, with the Company making a down payment in the amount of $3,000. The note
is due in monthly payments of $1,258.50, including interest at 8%, due in September 2021.
The
maturities of long-term debt is as follows:
Year
|
|
Amounts
|
|
2019
|
|
$
|
6,417
|
|
2020
|
|
|
13,628
|
|
2021
|
|
|
10,958
|
|
Total
|
|
|
31,003
|
|
Less
current installments
|
|
|
(13,095
|
)
|
Long-term
debt, less current installments
|
|
$
|
17,908
|
|
Note
11 – Capital Stock
The
Company is authorized to issue up to 5,000,000 shares of preferred stock, $ 0.0001 par value, of which 0 shares are issued and
outstanding at September 30, 2019 and December 31, 2018.
The
Company is authorized to issue up to 195,000,000 shares of common stock, $0.0001 par value, of which 24,968,355 shares are issued
and outstanding (outstanding shares includes 410 treasury shares) at September 30, 2019 and 10,933,355 at December 31, 2018.
On
May 31, 2018, the Company issued 3,800,000 shares of common stock to Robert Holden for future services as the Company CEO and
Director to pursue a digital marketing business under the name of Digital Marketing Interactive. As a result of the resignation
of Mr. Holden on August 19, 2018, the Company no longer anticipates operating under the d/b/a Digital Marketing Interactive and/or
maintaining a business focus in digital marketing moving forward. The Company plans to pursue legal actions to recover the 3,800,000
shares of stock issued to Mr. Holden.
On
April 12, 2019, the Company issued 18,000,000 shares of common stock for the acquisition Novopelle.
On
April 12, 2019, the Company entered into four exchange agreements with current shareholders to cancel 5,900,000 shares of common
stock in exchange for four long-term notes totaling $350,000.
On
May 3rd, 2019, the Company issued 100,000 shares of the Company’s common stock to a non-related third-party investor
in exchange for $10,000 in cash.
On
June 21, 2019, the Company issued 50,000 shares of common stock as part consideration of a loan agreement. The shares were valued
at $0.10 per share or $5,000.
On
June 24th, 2019, the issued 250,000 shares of the Company’s common stock as part consideration of an exclusive
licensing agreement. The shares were valued at $0.10 per share or $25,000.
On
August 23, 2019, the Company issued 100,000 shares of the Company’s common stock in consideration for consulting services.
The shares were valued at $1.50 per share or $150,000.
On
September 9, 2019, the Company issued 100,000 shares of common stock as part consideration of a loan agreement. The shares were
valued at $1.00 per share or $100,000.
On
July 5, 2019, our Board of Directors adopted and approved our 2019 Stock Option and Incentive Plan (the “Plan”).
The Plan is intended to promote the interests of our Company by providing eligible person with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Company as an incentive for them to remain in the service of
the Company. The maximum number of shares available to be issued under the Plan is currently 10,000,000 shares, subject to adjustments
for any stock splits, stock dividends or other specified adjustments which may take place in the future. The Company issued a
total of 1,335,000 shares to eligible persons under the Plan and recorded a total $1,662,750 as Stock Based Compensation against
these issuances for the nine months ended September 30, 2019.
Note
12 — Going Concern
As
reflected in the accompanying financial statements, the Company has a net loss of $2,171,601 for the nine months ended September
30, 2019, an accumulated deficit of $2,179,121. The ability to continue as a going concern is dependent upon the Company generating
profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. These financials do not include any adjustments relating to the recoverability
and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
Note
13 – Subsequent Events
On
October 1, 2019, the Company entered into an Employment Agreement with Jesse L. Dickens, Jr. to serve as the Chief Executive Officer
of the Company’s newly formed wholly owned subsidiary, Capitol City Solutions USA, Inc. (“CCS”) (the “Employment
Agreement”). Pursuant to the Employment Agreement, Mr. Dickens will receive an annual base salary of $120,000 and shall
receive an equity grant in the amount of one million (1,000,000) shares of the Company’s common stock (the “Equity
Shares”) pursuant to a vesting period of one-year, of which two-hundred and fifty thousand (250,000) shares were issued
to Mr. Dickens at the signing of the Employment Agreement and the remaining shares issuable as follows: 250,000 shares on January
1, 2020, 250,000 shares on April 1, 2020, and 250,000 shares on July 1, 2020.
On
October 11, 2019, the Company issued a convertible promissory note with a principal amount of $75,000 to an unrelated party in
exchange for $75,000 in cash. The convertible promissory note has a maturity date of July 11, 2020 and accrues interest at the
rate of 10% per annum until paid in full by the Company. In the event that the Company files, and has qualified by the SEC an
offering Statement on Regulation A of the Securities Act of 1933, as amended, the Note holder has the rights to convert all of
any portion of the principal amount and accrued interest due on the Note into issued in the Offering Statement. In the event the
Company does not file an Offering Statement or an Offering Statement has not been Qualified, the investor shall have the to convert
all or any part of the outstanding and unpaid amount of the Note shares of the Company’s common stock valued at sixty percent
(60%) of the lowest traded price for the Company’s common stock during the twenty (20) trading days preceding the relevant
conversion, representing a 40% discount. Furthermore, the Company issued 10,000 shares of the Company’s common stock to
the unrelated party investor as further consideration to enter into the loan with the Company.
On
October 18, 2019, Legend Nutrition, Inc. (“Legend”), a wholly owned subsidiary of the Company entered into an Asset
Purchase Agreement with David Morales (the “Asset Purchase Agreement”) to acquire all of the assets associated with
and related to a retail vitamin, supplements and nutrition store located in Mckinney, TX and currently identified and doing business
as “Ideal Nutrition.” Pursuant to the Asset Purchase Agreement, Legend purchased a variety of assets including software,
contracts, bank and merchant accounts, products, inventory, computers, security systems and other intellectual properties (the
“Assets”). Legend is continuing to operate the business as Ideal Nutrition and intends to officially rebrand as Legend
Nutrition in the upcoming months. For consideration of the Assets, Legend issued to Mr. Morales a promissory note in the amount
of Seventy-Five Thousand US Dollars ($75,000) bearing an interest rate of five percent (5%) per annum and with a maturity date
of one year (the “Promissory Note”).
On
October 18, 2019 and concurrent with the Asset Purchase Agreement, Legend entered into an Employment Agreement with Michael Ladner
to serve as its Chief Executive Officer (the “Ladner Employment Agreement”). Pursuant to the Ladner Employment Agreement,
Mr. Ladner will receive an annual base salary of $60,000 per annum and shall increase to $100,000 per annum starting January 1,
2020 through October 18, 2021. In addition, Mr. Ladner shall be eligible to receive cash performance bonuses equal to five percent
(5%) of the net profits generated by each Legend Nutrition store location while the Mr. Ladner is employed by Legend. Further,
Mr. Ladner may participate in equity incentive programs as determined by the Company from time to time. The Ladner Employment
Agreement has a two-year term, provided, however, after the end of the term, the agreement will automatically renew for successive
one-year terms.
On
October 28, 2019, the Company issued a convertible promissory note with a principal amount of $78,750 to an unrelated party investor
in exchange for $75,000 in cash. The convertible promissory note has a maturity date of October 28, 2020 and accrues interest
at the rate of 10% per annum until paid in full by the Company. The conversion price shall equal the lesser of (i) the price per
share of Common Stock sold to investors in that certain offering Statement on Regulation A as qualified by the Securities Act
of 1933, as amended, or (ii) a variable conversion Price” equal to 60% multiplied by the lowest Trading Price for the Common
Stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date, representing
a discount rate of 40%.
On
October 28, 2019, the Company issued a convertible promissory note with a principal amount of $78,750 to an unrelated party investor
in exchange for $75,000 in cash. The convertible promissory note has a maturity date of October 28, 2020 and accrues interest
at the rate of 10% per annum until paid in full by the Company. The conversion price shall equal the lesser of (i) the price per
share of Common Stock sold to investors in that certain offering Statement on Regulation A as qualified by the Securities Act
of 1933, as amended, or (ii) a variable conversion Price” equal to 60% multiplied by the lowest Trading Price for the Common
Stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date, representing
a discount rate of 40%.
On
October 28, 2019, the Company issued a convertible promissory note with a principal amount of $78,750 to an unrelated party investor
in exchange for $75,000 in cash. The convertible promissory note has a maturity date of October 28, 2020 and accrues interest
at the rate of 10% per annum until paid in full by the Company. The conversion price shall equal the lesser of (i) the price per
share of Common Stock sold to investors in that certain offering Statement on Regulation A as qualified by the Securities Act
of 1933, as amended, or (ii) a variable conversion Price” equal to 60% multiplied by the lowest Trading Price for the Common
Stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date, representing
a discount rate of 40%.
On
November 1, 2019, the Company issued 300,000 shares of the Company’s common stock to eligible persons under the Plan.
On
November 6, 2019, Novopelle Waterway, Inc. (“Novopelle Waterway”), a wholly owned subsidiary of the Company, entered
into a Lease Agreement with 20 & 25 Waterway Holdings, LLC (the “Landlord”) to lease and occupy approximately
1,254 square feet of commercial retail space located at 25 Waterway, Suite 150, The Woodlands, TX to operate a newly established
Novopelle Med Spa (the “Lease Agreement”). The Lease Agreement has a term of five (5) years and commences on the date
which is the earlier to occur of (a) one hundred ten (110) days following delivery of the premises to Novopelle Waterway, or (b)
the day upon which Novopelle Waterway opens for business. The annual base rent is $53,922, or $43 per square foot, and shall increase
at a rate of three percent (3%) per annum until the end of the lease term (the “Base Rent”). In addition to the Base
Rent, Novopelle Waterway shall reimburse the landlord for its pro-rata share of all real estate taxes and assessments, hazard
and liability insurance and common area maintenance costs for the entire shopping center (the “Additional Rent” or
“Triple Net”). At execution of the Lease Agreement, the Additional Rent was estimated at $15.59 per square foot per
year.
On
November 11, 2019, the Company issued 30,000 shares of the Company’s common stock to eligible persons under the Plan.
Management
has evaluated all subsequent events through November 20, 2019, the date the financial statements were available to be issued.
No change to the financial statements for the quarter ended September 30, 2019 is deemed necessary as a result of this evaluation.