UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to _______

 

Commission File Number 333-191618

 

ADM ENDEAVORS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		45-0459323
(State of incorporation)		(I.R.S. Employer Identification No.)

 

2021 N. 3^rd Street

Bismarck, North Dakota 58501

(Address of principal executive offices)

 

(701) 226-9058

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

	Large Accelerated Filer	[  ]	Accelerated Filer	[  ]
	Non-Accelerated Filer	[  ]	Smaller Reporting Company	[X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[  ] Yes [X] No

 

As of August 13, 2018, there were 129,315,500 shares of the registrant’s $0.001 par value common stock issued, issuable, and outstanding.

 

 

 

ADM ENDEAVORS, INC.

 

TABLE OF CONTENTS		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4.	CONTROLS AND PROCEDURES	15
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	17
ITEM 1A.	RISK FACTORS	17
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4.	MINE SAFETY DISCLOSURES	17
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS	17

 

 

PART I – FINANCIAL INFORMATION

 

TABLE OF CONTENTS

 

Index to Financial Statements		Page
Condensed Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017		4
Condensed Consolidated Statements of Operations for the six months ended June 30, 2018 and 2017 (unaudited)		5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)		6
Notes to Condensed Consolidated Financial Statements		7

 

 

ITEM 1. FINANCIAL STATEMENTS

 

ADM Endeavors, Inc.

and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

		June 30, 2018				December 31, 2017
ASSETS
Current assets
Cash		$	129,479			$	45,589
Accounts receivable, net			174,191				284,071
Inventory			13,679				13,679
Other receivable			11,333				11,333
Total current assets			328,682				354,672
Goodwill			936,760				-
Fixed assets, net			103,114				117,261
Total assets		$	1,368,556			$	471,933
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Convertible note payable, net of discounts		$	28,601			$	-
Note payable			4,488				-
Capital leases, current portion			38,161				47,378
Accounts payable			56,515				78,551
Accounts payable to related parties			-				23,978
Accrued expenses			289,065				100,787
Due to related party			152,766				-
Income tax payable			33,500				33,500
Derivative liabilities			53,644				-
Total current liabilities			656,740				284,194
Non-current liabilities
Capital leases, net of current portion			10,674				26,684
Note payable, net of current portion			8,613				-
Total non-current liabilities			19,287				26,684
Total liabilities			676,027				310,878
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.001 par value, 80,000,000 shares authorized, 2,000,000 and - shares outstanding as of June 30, 2018 and December 31, 2017, respectively			2,000				-
Common stock, $0.001 par value, 800,000,000 shares authorized, 128,744,997 and - shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively			128,745				-
Common stock, $0.01 par value, 1,000,000 shares authorized, 0 and 510,000 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively			-				5,100
Additional paid-in capital			471,155				76,800
Retained earnings			90,629				79,155
Total stockholders’ equity			692,529				161,055
Total liabilities and stockholders’ equity		$	1,368,556			$	471,933

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

ADM Endeavors, Inc.

and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

 

		For the three months ended								For the six months ended
		June 30,								June 30,
		2018				2017				2018				2017
Revenue, net		$	602,055			$	612,880			$	1,326,491			$	1,058,008
Operating expenses
Direct costs of revenue			338,417				393,610				805,928				643,057
General and administrative			268,347				233,617				501,892				473,074
Total operating expenses			606,764				627,227				1,307,819				1,116,131
Operating income (loss)			(4,709	)			(14,347	)			18,672				(58,123	)
Other income (expense)
Change in fair value of embedded conversion feature			2,797				-				2,797				-
Interest expense			(9,995	)			-				(9,995	)			(1,377	)
Total other income (expense)			(7,198	)			-				(7,198	)			(1,377	)
Net income (loss)		$	(11,907	)		$	(14,347	)		$	11,474			$	(59,500	)
Net income (loss) per share - basic and diluted		$	(0.00	)		$	(0.00	)		$	0.00			$	(0.00	)
Weighted average number of shares outstanding - basic and diluted			148,454,709				510,000				85,141,341				510,000

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

ADM Endeavors, Inc.

and Subsidiary

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(unaudited)

 

		2018				2017
Cash flows from operating activities:
Net income (loss)		$	11,474			$	(59,500	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization			19,052				17,766
Amortization of discount			9,995				-
Bad debt			1,605				1,347
Change in fair value of embedded conversion features			(2,797	)			-
Changes in operating assets and liabilities:
Accounts receivable			108,275				15,336
Inventory			-				-
Other receivable			-				(7,847	)
Accounts payable			(134,722	)			15,473
Accounts payable – related party			(23,978	)			-
Accrued expenses			72,881				82,371
Due to related party			14,181				-
Net cash provided by operating activities			75,966				64,946
Cash flows from investing activities
Reverse acquisition			8,411				-
Purchase of assets			-				(11,780	)
Net cash provided by (used in) investing activities			8,411				(11,780	)
Cash flows from financing activities:
Proceeds from convertible note payable			24,740				-
Repayments on notes payable			-				-
Repayments on capitalized leases			(25,227	)			(50,450	)
Net cash provided by (used in) financing activities			(487	)			(50,450	)
Net increase in cash			83,890				2,716
Cash at beginning of period			45,589				81,674
Cash at end of period		$	129,479			$	84,390
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	-			$	-

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

ADM ENDEAVORS, INC.

and Subsidiary

Notes to the Condensed Consolidated Financial Statements

June 30, 2018

(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 60.8% of voting shares, thus there is a change of voting control. The transaction will be 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.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company prepares its condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. In the opinion of management, these interim financial statements contain all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim period presented. The results of operations for interim period are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements, which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the year ended December 31, 2017 contained in the Company’s Form 8-K/A file on August 20, 2018 have been omitted.

 

Principles of Consolidation

 

The accompanying unaudited consolidated financial statements include all of the accounts of the Company and its wholly-owned subsidiaries, AMD Enterprises and Just Right Products, Inc., at June 30, 2018. All significant intercompany balances and transactions have been eliminated.

 

 

Use of Estimates

 

The preparation of the Consolidated Financial Statements in accordance with 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, the reverse acquisition and deferred tax valuations.

 

Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At June 30, 2018 and December 31, 2017, the Company had no cash equivalents.

 

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 statements of operations.

 

Fair Value of Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. 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 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 June 30, 2018. The Company had no assets or liabilities measured at fair value on a recurring basis at December 31, 2017.

 

Property and Equipment

 

Property and equipment 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 of three years for equipment, five years for automobile, and seven years for furniture and fixtures. Upon 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 statements of operations.

 

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.

 

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 June 30, 2018 and December 31, 2017.

 

Revenue Recognition

 

We recognize revenue, net of expected returns and sales tax, at the time the customer takes possession of merchandise, or when a service is performed. The liability for sales returns, including the impact to gross profit, is estimated based on historical return levels, and recognized at the transaction price. We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets.

 

For merchandise sold in one of our stores or online, tender is accepted at the point of sale. For services, we generally accept tender upon completion of the job. When we receive payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue until the sale or service is complete. Such performance obligations are part of contracts with expected original durations of three months or less. For merchandise sold to customers to whom we directly extend credit, collection of tender is typically expected within three months or less from the time of purchase.

 

 

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 fulfillment centers.

 

Recently Adopted Accounting Pronouncements

 

ASU No. 2014-09. In May 2014, the FASB issued a new standard related to revenue recognition. Under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On January 1, 2018, we adopted ASU No. 2014-09 using the modified retrospective transition method.

 

The adoption of ASU No. 2014-09 requires that we recognize our sales return allowance on a gross basis rather than as a net liability. As such, we now recognize (i) a return asset for the right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery costs (recorded as an increase to other current assets) and (ii) a return liability for the amount of expected returns (recorded as an increase to other accrued expenses and a decrease to receivables, net).

 

The effect of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of June 30, 2018 was minimal.

 

Stock-Based Compensation

 

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model.

 

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 six and three months ended June 30, 2018 and 2017:

 

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Basic earnings (loss) per common share
Numerator:
Net earnings (loss) available to common shareholders		$	(11,907	)		$	(14,347	)		$	11,474			$	(59,500	)
Denominator:
Weighted average common shares outstanding			127,330,217				-				64,016,849				-
Basic earnings (loss) per common share		$	(0.00	)		$	(0.00	)		$	0.00			$	(0.00	)
Diluted earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders		$	(11,907	)		$	(14,347	)		$	11,474			$	(59,500	)
Add convertible debt interest			-				-				3,183				-
Net income (loss) available to common shareholders		$	17,357			$	(14,437	)		$	14,657			$	(59,500	)
Denominator:
Weighted average common shares outstanding			127,330,217				510,000				64,016,849				510,000
Preferred shares			-				-				20,000,000				-
Convertible debt			-				-				1,124,492				-
Adjusted weighted average common shares outstanding			148,454,709				510,000				85,141,341				510,000
Diluted earnings (loss) per common share		$	(0.00	)		$	(0.03	)		$	0.00			$	(0.12	)

 

For the three months ended June 30, 2018 and the three and six months ended June 30, 2017 fully diluted loss per share excludes preferred stock convertible to 20,000,000 common shares because their inclusion would have been anti-dilutive.

 

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 carry-forwards 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 June 30, 2018 and December 31, 2017. 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 June 30, 2018 and December 31, 2017.

 

On December 22, 2017, the United States Government passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets recorded on our balance sheet. Given that the deferred tax assets are offset by a full valuation allowance, these changes will have no net impact on the Company’s financial position and net loss. However, if and when we become profitable, we will receive a reduced benefit from such deferred tax assets.

 

 

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 does not have any operating segments as of June 30, 2018 and December 31, 2017.

 

Effect of Recent Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU not to have a material effect on the Company’s financial condition due to the Company has no leases in place as of June 30, 2018.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statement.

 

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 sustained net income of $11,474 and had cash provided by operating activities of $75,966 for the six months ended June 30, 2018. The Company had working capital deficit, stockholders’ equity and retained earnings of $328,058, $692,529 and $90,629, respectively, as of June 30, 2018. 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 August 20, 2018, there were no pending or threatened lawsuits.

 

Operating Lease Commitment

 

The Company leases approximately 18,000 square feet of space in Haltom City, Texas, pursuant to a lease that will expire on June 1, 2020. 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 (see Note 4). Additionally, the Company has approximately 6,000 square feet of space in Arlington, Texas which serves as an academic showroom, pursuant to a lease that will expire on June 1, 2020.

 

Future minimum lease payments under these leases are as follows:

 

		Related				Non-related
2018		$	78,000			$	67,741
2019			39,000				65,578
Total		$	117,000			$	133,319

 

The ADM office totals approximately 550 square feet in area and is provided by the CEO at no cost to the Company. The space is suitable for our current administrative needs, although we anticipate that we will require additional space in order to support the planned expansion of our workforce in sales, marketing and administration.

 

Rent expense for the six months ended June 30, 2018 and 2017 was $82,810 and $48,980, respectively. Rent expense included $39,000 and $32,651 for the related party for the six months ended June 30, 2018 and 2017, respectively.

 

Capital Leases

 

The Company leases equipment under leases classified as capital leases.

 

The following is a schedule showing the future minimum lease payments under capital leases by years and the present value of the minimum lease payments and of June 30, 2018. The interest rates related to the lease obligations are minimal, and the leases mature through November 2019.

 

Future minimum lease payments under these capital leases are as follows:

 

		Non-related
2018		$	38,161
2019			10,674
Total			48,835
Less amount representing interest			-
Present value of minimum lease payments		$	48,835

 

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 six months ended June 30, 2018 and 2017, the Company paid $7,014 and $5,935 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 for each school year. The agreement is for each school year ending through May 31, 2019.

 

During the six months ended June 30, 2018 and 2017, the Company paid $3,287 and $4,210 for the uniform supply agreement.

 

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Fixed assets, stated at cost, less accumulated depreciation at June 30, 2018 and December 31, 2017 consisted of the following:

 

		June 30, 2018				December 31, 2017
Equipment		$	247,280			$	244,649
Furniture and fixtures			15,330				15,330
Less: accumulated depreciation			(159,496	)			(142,718	)
Property and equipment, net		$	103,114			$	117,261

 

Depreciation expense for the six months ended June 30, 2018 and 2017 was $19,052 and $24,778, respectively.

 

NOTE 6 – NOTE PAYABLE

 

As of June 30, 2018, and December 31, 2017, the Company has a note payable balance of $13,101 and $-, respectively.

 

NOTE 7 – CONVERTIBLE NOTE PAYABLE

 

On March 5, 2018, the Company entered into a convertible promissory note. The funding to the Company is in tranches. On March 5, 2018, the Company received the first tranche of $48,697. The Company received $24,395 during the 3 months ended June 30, 2018. The Company will receive total funding of $106,092. The note and interest of $28,601 are due on March 5, 2019. The note is convertible into common stock at a price of 65% of the lowest three trading prices during the ten days prior to conversion.

 

The Company recorded a debt discount and derivative liability related to the variable conversion feature of the note. For the period ended June 30, 2018, the Company recorded amortization of the note discount of $9,995. The note balance was $73,092, less a discount of $44,491, at June 30, 2018.

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

The majority shareholder and director and officer of the Company has receivables due from him of $11,333 and $11,333 as of June 30, 2018 and December 31, 2017, respectively.

 

The sole director and officer is the owner of M & M (see Note 3) which leases the Haltom City, Texas facility to the Company. The monthly lease payment is currently $6,500. The Company incurred rent expense of $39,000 and $32,651, respectively, to M & M for the six months ended June 30, 2018 and 2017, respectively.

 

The Company has accounts payable to M&M of $- and $23,978 as of June 30, 2018 and December 31, 2017, respectively.

 

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.

 

As of June 30, 2018, and December 31, 2017, a related party advanced the Company $152,766 and $0, respectively. The amounts are non-interest bearing and payable upon demand.

 

Employment Agreement

 

On January 3, 2017, 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 $72,000. The amount payable to Mr. Mees at June 30, 2018 and December 31, 2017 was $119,132 and $0 respectively.

 

NOTE 9 – 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, both $0.001 par value per share. There were 129,315,500 outstanding shares of common stock at June 30, 2018 and December 31, 2017. There were 2,000,000 and 0 outstanding shares of preferred stock as of June 30, 2018 and December 31, 2017. 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 stock holders.

 

NOTE 10 – CONCENTRATION OF CUSTOMER

 

Concentration of Revenue

 

For the six months ended June 30, 2018 and 2017, 1 customer made up 16% and 11% of revenues, respectively. No customers accounted for more than 10% of accounts receivable as of June 30, 2018 and 2017, respectively.

 

NOTE 11 – REVERSE ACQUISITION

 

On April 19, 2018, the Company acquired Just Right Products, Inc. (“JRP”), a Texas corporation. 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 60.8% of voting shares, thus there is a change of voting control.

 

The purchase price was estimated to be $520,000 based on a preliminary valuation of the equity interest of JRP which was transferred to the owners of ADM in the reverse acquisition (40% of JRP). The purchase price was allocated to the fair value of the assets and liabilities acquired including goodwill of $936,760. The Company is in the process of finalizing the valuation.

 

The following summarizes the allocation of the fair values assigned to assets and liabilities assumed:

 

		Amount
Cash		$	8,411
Non-current assets			4,905
Goodwill			936,760
Current liabilities			(430,076	)
Total purchase price		$	520,000

 

NOTE 12 – 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.

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

We began operations in 1988, under the ownership and control of Ardell Mees, who provided installation services to grocery decor design companies. As our reputation for excellent workmanship has grown, we have expanded our operations to serve a larger geographic region. 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 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. All business operations are those solely of the Company’s wholly-owned subsidiary, ADM Enterprises.

 

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.

 

For the Three Months Ended June 30, 2018 and 2017

 

Revenues

 

Our revenue was $602,055 for the three months ended June 30, 2018, compared to $612,880 for the three months ended June 30, 2017, resulting in a decrease of $10,825. Historically, the second quarter sales are comparable year to year.

 

Operating Expenses

 

Direct costs of revenues were $338,416 and $393,610 for the three months ended June 30, 2018 and 2017, respectively resulting in a decrease of $55,194 partially due to the decrease in revenue as well as efficiencies in production.

 

For the three months ended June 30, 2018, our general and administrative expenses and marketing and selling expenses were $242,266 compared to $233,617 for the three months ended June 30, 2017, resulting in an increase of $8,649. As a result, net income was $14,174 for the three months ended June 30, 2018, compared to net loss of $14,347 for the three months ended June 30, 2017.

 

 

For the Six Months Ended June 30, 2018 and 2017

 

Revenues

 

Our revenue was $1,326,491 for the six months ended June 30, 2018, compared to $1,058,008 for the six months ended June 30, 2017, resulting in an increase was of $268,483 (25.4%), which reflects the positive impact of marketing and the increase in number of schools, and maximizing the search engine optimization. The first six months of the year has historically been significantly lower revenue than the second six months of the year due to the seasonality of certain products related to schools.

 

Operating Expenses

 

Direct costs of revenues were $805,928 and $643,057 for the six months ended June 30, 2018 and 2017, respectively. The increase of $162,871 (25.4%) was directly related to the increase of revenue.

 

For the six months ended June 30, 2018, our general and administrative expenses and marketing and selling expenses were $501,892 compared to $473,074 for the six months ended June 30, 2017, resulting in an increase of $28,818. As a result, net income was $11,474 for the six months ended June 30, 2018, compared to net loss of $59,500 for the six months ended June 30, 2017.

 

Liquidity and Capital Resources

 

Liquidity and Capital Resources during the six months ended June 30, 2018 compared to the six months ended June 30, 2017

 

We had cash provided by operations of $75,966 for the six months ended June 30, 2018, compared to cash provided by operations of $64,946 for the six months ended June 30, 2017. The positive cash flow from operating activities for the six months ended June 30, 2018 is attributable to the Company’s net income from operations of $11,474. Cash provided by operations for the six months ended June 30, 2017 is attributable to the Company’s increase in accrued liabilities of $82,371.

 

We had cash provided by investing activities of $8,411 for the six months ended June 30, 2018 and used cash in investing activities of $11,780 for the six months ended June 30, 2017.

 

We used cash in financing activities of $487 for the six months ended June 30, 2018, compared to $50,450 for the same period in 2017.

 

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

 

 

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 sustained net income of $11,474 and had cash provided by operating activities of $75,966 for the six months ended June 30, 2018. The Company had working capital deficit, stockholders’ equity and retained earnings of $328,058, $692,529 and $90,629, respectively, as of June 30, 2018. 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.

 

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 Marc Johnson (“Johnson”) was through a stock exchange whereas the Company issued Johnson 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, after issuance, constitutes a change of control as Johnson, the receiver of the Acquisition Shares controls approximately 60.8% of the outstanding votes.

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended December 31, 2017, included in our Annual Report on Form 10-K as filed on April 17, 2018, for a discussion of our critical accounting policies and estimates.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weaknesses:

 

1.	The Company’s lack of independent directors, the Company intends to appoint additional independent directors;
2.	Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
3.	Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.	Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

 

To remediate our internal control weaknesses, management intends to implement the following measures:

 

	●	The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.
	●	The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
	●	The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.
	●	Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

 

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

 

Changes in Internal Control Over Financial Reporting

 

There are no changes in our internal controls over financial reporting other than as described elsewhere herein.

 

Limitations on the Effectiveness of Controls

 

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

 

PART II - OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS.

 

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us. Our property is not the subject of any pending legal proceedings.

 

ITEM 1A.

RISK FACTORS.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the quarter ending June 30, 2018, the Company issued no unregistered securities.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not Applicable.

 

ITEM 5.

OTHER INFORMATION.

 

None.

 

ITEM 6.

EXHIBITS

 

Exhibit Number		Description
3.1		Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1, filed on October 8, 2013).
3.2		Bylaws (incorporated by reference to our Registration Statement on Form S-1, filed on October 8, 2013).
10.1		Acquisition Agreement between ADM Endeavors, Inc. and Just Right Products, Inc., dated April 19, 2018, with an effective date of April 1, 2018 (incorporated by reference to our Form 8-K filed on April 25, 2018).
31 (1)		Certification of Principal Executive Officer and Principal Accounting Officer of ADM Endeavors, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 (1)		Certification of Principal Executive Officer and Principal Accounting Officer of ADM Endeavors, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE		XBRL Taxonomy Extension Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document
(1)		Filed herewith.

 

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	ADM ENDEAVORS, INC.
Dated: August 20, 2018		/s/ Ardell Mees
	By:	Ardell Mees
	Its:	Chief Executive Officer and Chief Financial Officer