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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~March 3031, ~~2019~~2020

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

For the transition period from ~~________________~~______________ to ~~__________________~~_______________

Commission File Number 333-209341

INNERSCOPE HEARING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Nevada	46-3096516
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2151 Professional Drive, Second Floor, Roseville, CA 95661
(Address of principal executive offices)
(833) 788-0506
(Registrant's telephone number, including area code)

~~2151~~Indicate by check mark whether ~~Professional~~the ~~Drive,~~registrant ~~Second~~(1) ~~Floor,~~has ~~Roseville~~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 shorter period that the registrant was required to file such reports), CAand ~~95661~~(2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☑ No

(Address of principal executive offices)

(916) 218-4100

(Registrant's telephone number, including area code)

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 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. ☑ 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). ☑ 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	☑
		Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

The number of shares outstanding of the Registrant's $0.0001 par value Common Stock as of ~~November~~December 1312, ~~2019~~2022, was ~~248~~8,~~154~~087,~~252~~822,519 shares.

INNERSCOPE HEARING TECHNOLOGIES, INC.

FORM 10-Q

Quarterly Period Ended ~~September~~March 3031, ~~2019~~2020

INDEX

FORWARD-LOOKING STATEMENTS		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at September 30, 2019, and December 31, 2018 (Unaudited)	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURES		43

FORWARD-LOOKING STATEMENTS

INNERSCOPE HEARING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	September 30,			December 31,
	2019			2018
ASSETS
Current Assets:
Cash	$	10,477		$	87,826
Accounts receivable, allowance for doubtful accounts of $29,700 (2019) and $18,383 (2018)		32,272			6,112
Accounts receivable from related party		345,574			203,325
Employee advances		58,990			40,942
Prepaid expenses		118,825			167,992
Inventory		134,161			91,510
Total current assets		700,298			597,707
Security deposits		34,537			11,056
Domain name		3,000			3,000
Intangible assets, net of accumulated amortization of $107,046 (2019) and $2,168 (2018)		905,962			1,010,840
Property and equipment, net of accumulated depreciation of $17,806 (2019) and $4,705 (2018)		79,963			43,450
Operating leases right-of-use assets, net		1,273,841			—
Investment in undivided interest in real estate		1,222,534			1,226,963
Total assets	$	4,220,134		$	2,893,014
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	1,232,194		$	1,233,653
Accounts payable to related party		22,548			22,548
Notes payable - stockholder		95,800			95,800
Advances payable, stockholders		39,964			57,526
Convertible notes payable, net of discounts		1,413,675			151,166
Current portion of notes payable, net of deferred loan fees		44,987			29,270
Current portion of note payable-undivided interest in real estate		20,401			19,660
Customer deposits		83,801			56,698
Officer salaries payable		206,985			188,942
Income taxes payable		23,998			23,998
Derivative liabilities		2,775,571			1,807,404
Operating lease liabilities, current portion		345,106			—
Total current liabilities		6,305,030			3,686,665
Long term portion of note payable- undivided interest in real estate		954,407			964,847
Operating lease liabilities, less current portion		945,242			—
Total liabilities		8,204,679			4,651,512
Commitments and contingencies
Stockholders' Deficit:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized;
Series A preferred stock, par value $0.0001, 9,510,000 shares authorized and -0- issued and outstanding		—			—
Series B preferred stock, par value $0.0001, 900,000 shares authorized and issued and outstanding		90			90
Common stock, $0.0001 par value; 975,000,000 shares authorized; 220,613,389 (2019) and 120,425,344 (2018) shares issued and outstanding, respectively		22,061			12,042
Common stock to be issued, $0.0001 par value, 3,066,912 (2019) and 6,373,848 (2018) shares, respectively		306			637
Additional paid-in capital		7,416,528			4,836,557
Deferred stock compensation		(70,903	)		(235,694	)
Accumulated deficit		(11,352,625	)		(6,372,129	)
Total stockholders' deficit		(3,984,543	)		(1,758,498	)
	$	4,220,134		$	2,893,014
See notes to condensed consolidated financial statements.

PART I. FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at March 31, 2020, (Unaudited) and December 31, 2019 (Unaudited)		2
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)		3
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2020 and 2019 (Unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)		6
	Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures about Market Risks		22
Item 4.	Controls and Procedures		22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

SIGNATURES		25

INNERSCOPE HEARING TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of March 31, 2020			As of December 31, 2019
		(Unaudited)			(Unaudited)
ASSETS
Current Assets:
Cash	$	11,868		$	4,459
Accounts receivable, net allowance for doubtful accounts		18,350			51,160
Employee advances		3,000			3,750
Prepaid assets		5,783			73,249
Inventory		8,125			18,781
Total current assets		47,126			151,399

Security deposits		12,752			12,752
Domain name		3,000			3,000
Intangible assets, net of accumulated amortization		852,710			879,336
Property and equipment, net of accumulated depreciation		70,239			72,241
Operating leases right-of-use assets, net		784,905			846,132
Investment in undivided interest in real estate		1,226,171			1,210,526
Total assets	$	2,996,903		$	3,175,386

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Bank overdraft	$	7,081		$	2,631
Accounts payable and accrued expenses		1,398,128			1,316,185
Accounts payable to related party		372,125			266,419
Notes payable - stockholder		95,800			95,800
Current portion of convertible notes payable, net of discounts		2,673,315			2,390,481
Note payable, other & related party		122,391			106,942
Customer deposits		22,875			21,505
Current portion of note payable - undivided interest in real estate		22,150			20,708
Derivative liabilities		8,204,211			3,515,055
Operating lease liabilities, current portion		315,076			299,794
Total current liabilities	$	13,233,152			8,035,520

Long term portion of note payable- undivided interest in real estate		951,442			952,884
Operating lease liabilities, Less current portion		655,339			731,496
Total liabilities	$	14,839,933			9,719,900

Commitments and contingencies
Stockholders' Deficit:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized;
Series A preferred stock, par value $0.0001, -0- (2020) and -0- (2019)		—			—
Series B preferred stock, par value $0.0001, 900,000 (2020) and 900,000 (2019) shares authorized, and 900,000 (2020) and 900,000 (2019) shares issued and outstanding		90			90
Common stock, $0.0001 par value; 14,975,000,000 shares authorized; 2,074,183,163 (2020) and 342,118,136 (2019) shares issued and outstanding, respectively		207,419			34,212
Common stock to be issued, $0.0001 par value, 2,412,671 (2022) and 2,412,671 (2021) shares		241			241
Additional paid-in capital		8,446,198			7,717,411
Accumulated deficit		(20,496,978	)		(14,296,468	)
Total stockholders' deficit		(11,843,030	)		(6,544,514	)
Total Liabilities and Shareholder Equity	$	2,996,903		$	3,175,386

See notes to condensed consolidated financial statements.

INNERSCOPE HEARING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Revenues	$	250,781		$	44,724		$	641,983		$	98,696
Revenues, related party		—			15,000			15,000			67,019
Total revenues		250,781			59,724			656,983			165,715
Cost of sales
Cost of sales		103,010			25,714			284,837			74,972
Cost of sales, related		—			3,371			—			24,779
Total cost of sales		103,010			29,085			284,837			99,751
Gross profit		147,771			30,639			372,146			65,964
Operating Expenses:
Compensation and benefits (including stock- based fees of $25,000 and $75,000 for the three and nine months ended September 30, 2019 and $772,600 for the nine months ended September 30, 2018)		462,770			177,778			1,261,594			1,263,084
Professional fees (including stock- based fees of $171,500 and $479,791 for three and nine months ended September 30, 2019 and $62,597 and $126,837 for three and nine months ended September 30, 2018)		197,733			174,952			575,050			405,858
Advertising and promotion		92,966			46,408			404,550			137,736
Rent (including related party of $36,000 for three months ended September 30, 2019 and 2018 and $108,000 for nine months ended September 30, 2019 and 2018		100,240			47,937			294,302			119,937
Investor relations		11,297			11,482			176,073			87,901
Other general and administrative		137,979			24,148			407,105			71,464
Total operating expenses		1,002,985			482,705			3,118,674			2,085,980
Loss from operations		(855,214	)		(452,066	)		(2,746,528	)		(2,020,015	)
Other Expense:
Derivative income (expense)		501,977			(270,849	)		159,617			(940,819	)
Loss on investment in undivided interest in real estate		(9,245	)		(2,132	)		(4,429	)		(1,390	)
Gain (loss) on debt extinguishment		—			33,775			(44,393	)		33,775
Gain on contract cancellations		—			1,297,223			—			1,297,223
Gain on collection of bad debt		—			3,000			—			3,000
Interest expense and finance charges		(1,109,565	)		(399,278	)		(2,344,763	)		(713,070	)
Total other expense, net		(616,833	)		661,739			(2,233,968	)		(321,281	)
Net income (loss)	$	(1,472,047	)	$	209,673		$	(4,980,496	)	$	(2,341,296	)
Basic and diluted income (loss) per share	$	(0.01	)	$	0.00		$	(0.03	)	$	(0.04	)
Weighted average number of common shares outstanding Basic and diluted		190,804,118			80,652,837			160,489,585			66,651,688

INNERSCOPE HEARING TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
	2020			2019
Revenues:
Revenues, other	$	81,139		$	171,529
Revenues, related party		—			15,000
Total revenues		81,139			186,529

Cost of sales
Cost of sales, other	$	49,412			82,364
Total cost of sales		49,412			82,364

Gross profit	$	31,727		$	104,165

Operating Expenses:
Compensation and benefits (including stock-based fees of $0 and $14,084, respectively)		210,769			363,737
Advertising and promotion		9,689			167,784
Professional fees (including stock-based fees of $0 and $110,416, respectively)		67,037			137,394
Rent, including related party		80,963			95,929
Investor relations		12,797			75,248
Depreciation and Amortization expense		31,302			—
Other general and administrative		60,737			136,639
Total operating expenses	$	473,294		$	976,731

Loss from operations	$	(441,567	)	$	(872,566	)

Other Income (Expense):
Derivative income (loss)		(5,027,581	)		(577,838	)
Gain (loss) on equity investment		15,645			(1,040	)
Amortization of debt discount		(612,718	)		—
Loss on debt extinguishment		—			(44,852	)
Interest expense and finance charges		(134,290	)		(506,742	)
Total other income (expense), net	$	(5,758,944	)	$	(1,130,472	)

Earnings Before Tax (loss)	$	(6,200,511	)	$	(2,003,038	)

Income tax provision		—			—

Net Loss	$	(6,200,510	)	$	(2,003,038	)

Basic and diluted loss per share		(0.01	)		(0.01	)

Weighted average number of common shares outstanding
Basic and diluted		898,828,413			134,411,801

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 and 2018
(Unaudited)
	Series A Preferred stock			Series B Preferred stock			Common stock			Common stock to be issued						Additional Paid-in		Deferred stock			Retained			Total Stockholders'
	Shares		Amount	Shares		Amount	Shares		Amount	Shares			Amount			Capital		Compensation			deficit			deficit
Balances July 1, 2019	—	$	—	900,000	$	90	161,826,468	$	16,182	2,881,316		$	288		$	6,397,967	$	(242,402	)	$	(9,880,578	)	$	(3,708,453	)
Stock based compensation	—		—	—		—	—		—	654,241			65			24,935		171,499			—			196,499
Stock issued from common stock to be issued	—		—	—		—	468,645		47	(468,645	)		(47	)		—		—			—			—
Common stock issued for convertible notes and accrued interest	—		—	—		—	58,318,276		5,832	—			—			559,391		—			—			565,223
Reclassification of derivative liabilities upon payment of convertible debt	—		—	—		—	—		—	—			—			434,234		—			—			434,234
Net loss for the three months ended September 30, 2019	—		—	—		—	—		—	—			—			—		—			(1,472,047	)		(1,472,047	)
Balances September 30, 2019	—	$	—	900,000	$	90	220,613,389	$	22,061	3,066,912		$	306		$	7,416,528	$	(70,903	)	$	(11,352,625	)	$	(3,984,543	)
Balances January 1, 2019	—	$	—	900,000	$	90	120,425,344	$	12,042	6,373,848		$	637		$	4,836,556	$	(235,694	)	$	(6,372,129	)	$	(1,758,498	)
Stock based compensation	—		—	—		—	6,119,774		612	654,241			65			389,324		(270,500	)		—			119,501
Amortization of deferred stock compensation	—		—	—		—	—		—	—			—			—		435,291			—			435,291
Stock issued from common stock to be issued	—		—	—		—	3,961,177		396	(3,961,177	)		(396	)		—		—			—			—
Common stock issued for settlement of accounts payable	—		—	—		—	625,000		63	—			—			40,563		—						40,625
Common stock issued for convertible notes and accrued interest	—		—	—		—	89,482,094		8,948	—			—			977,739		—			—			986,688
Reclassification of derivative liabilities upon payment of convertible debt	—		—	—		—	—		—	—			—			1,172,346		—			—			1,172,346
Net loss for the nine months ended September 30, 2019	—		—	—		—	—		—	—			—			—		—			(4,980,496	)		(4,980,496	)
Balances September 30, 2019	—	$	—	900,000	$	90	220,613,389	$	22,061	3,066,912		$	306		$	7,416,528	$	(70,903	)	$	(11,352,625	)	$	(3,984,543	)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

THREE MONTHS ENDED MARCH 31, 2020 AND 2019


	Series B Preferred stock				Common stock				Common stock to be issued						Additional Paid-in		Deferred Stock			Retained			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital		Compensation			deficit			Deficit
Balances January 1, 2019		900,000	$	90		120,425,344	$	12,042		6,373,848		$	637		$	4,836,555		(235,694	)	$	(6,372,129	)		(1,758,499	)

Stock issued from common stock to be issued		—		—		3,550,893		355		(3,550,893	)		(355	)		—					—			—

Stock based compensation		—		—		870,826		87		113,637			11			26,485		97,918			—			124,501

Common stock issued for convertible notes		—		—		24,741,320		2,474								282,792					—			285,266

Common stock to be issued for settlement of accounts payable		—		—		—		—		625,000			63			40,563					—			40,626

Reclassification of derivative liabilities upon payment of convertible debt		—		—		—		—		—			—			580,908					—			580,908

Net loss for the period ended March 31, 2019		—		—		—		—		—			—			—		—			(2,003,038	)		(2,003,038	)

Balances March 31, 2019		900,000	$	90		149,588,383	$	14,958		3,561,592		$	356		$	5,767,303		(137,776	)	$	(8,375,167	)		(2,730,236	)

Balances January 1, 2020		900,000	$	90		342,118,135	$	34,212		2,415,671		$	241		$	7,717,411		—		$	(14,296,468	)		(6,544,514	)

Debt conversion and retirement of derivative liabilities		—		—		1,732,065,028		173,207								728,787								901,994

Net loss for the period ended March 31, 2020		—		—		—		—		—			—			—		—			(6,200,510	)		(6,200,510	)

Balances March 31, 2020		900,000	$	90		2,074,183,163	$	207,419		2,415,671		$	241		$	8,446,198		—		$	(20,496,978	)		(11,843,030	)

See notes to condensed consolidated financial statements.

	Series A Preferred stock					Series B Preferred stock			Common stock			Common stock to be issued						Additional Paid-in		Deferred stock			Retained			Total Stockholders'
	Shares			Amount		Shares		Amount	Shares		Amount	Shares			Amount			Capital		Compensation			deficit			deficit
Balances July 1, 2018	9,510,000		$	951		900,000	$	90	48,956,945	$	4,896	814,020		$	81		$	1,501,129	$	—		$	(4,337,982	)	$	(2,830,837	)
Stock based compensation	—			—		—		—	3,543,553		354	186,289			19			195,657		(175,000	)		—			21,030
Cancellation of Series A Preferred Stock	(9,510,000	)		(951	)	—		—	19,020,000		1,902	—			—			-951		—			—			—
Amortization of deferred stock compensation	—			—		—		—	—		—	—			—			—		29,167			—			29,167
Stock issued from common stock to be issued	—			—		—		—	—		—	(814,020	)		(81	)		—		—			—			(81	)
Common stock issued or to be issued for convertible notes	—			—		—		—	32,431,252		3,243	844,870			84			290,214		—			—			293,541
Common stock issued for asset purchase	—			—		—		—	—		—	340,352			34			22,940		—			—			22,974
Reclassification of derivative liabilities upon payment of convertible debt	—			—		—		—	—		—	—			—			543,616		—			—			543,616
Net income for the three months ended September 30, 2018	—			—		—		—	—		—	—			—			—		—			209,673			209,673
Balances September 30, 2018	—		$	—		900,000	$	90	103,951,750	$	10,395	1,371,511		$	137		$	2,552,604	$	(145,833	)	$	(4,128,308	)	$	(1,710,915	)
Balances January 1, 2018	—		$	—		—	$	—	61,539,334	$	6,153	102,564		$	10		$	331,227	$	(25,000	)	$	(1,787,012	)	$	(1,474,623	)
Stock based compensation	—			—		—		—	3,767,625		377	186,289			19			227,937		(175,000	)		—			53,333
Amortization of deferred stock compensation	—			—		—		—	—		—	—			—			—		54,167			—			54,167
Stock issued from common stock to be issued	—			—		—		—	102,564		10	(102,564	)		(10	)		—		—			—			—
Common stock to be issued for asset purchase	—			—		—		—	—		—	340,352			34			22,940		—			—			22,974
Issuance of Series B preferred stock	—			—		900,000		90	—		—	—			—			817,510		—			—			817,600
Common stock issued or to be issued for convertible notes	—			—		—		—	38,542,227		3,855	844,870			84			365,829		—			—			369,769
Reclassification of derivative liabilities upon payment of convertible debt	—			—		—		—	—		—	—			—			787,161		—			—			787,161
Net loss for the nine months ended September 30, 2018						—		—	—		—	—			—			—		—			(2,341,296	)		(2,341,296	)
Balances September 30, 2018	—		$	—		900,000	$	90	103,951,750	$	10,395	1,371,511		$	137		$	2,552,604	$	(145,833	)	$	(4,128,308	)	$	(1,710,915	)

INNERSCOPE HEARING TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net Income (Loss)	$	(6,200,510	)	$	(2,003,038	)
Adjustments to reconcile net income (loss) to net cash used in operations:					—
Loss on fair value of derivatives		5,027,582			577,838
Amortization of debt discounts		612,718			456,030
Depreciation and amortization		31,300			111,226
Non cash interest expense		—			2,500
(Gain) loss on investment in undivided interest in real estate		(15,645	)		1,040
(Gain) loss on debt extinguishment		—			44,852
Stock based compensation		—			124,500
Changes in operating assets and liabilities:
Accounts receivable		32,810			(18,117	)
Employee advances		—			(17,181	)
Inventory		10,656			(41,571	)
Prepaid assets		67,466			17,398
Related party receivable		750			(41,888	)
Accounts payable and accrued expenses		131,427			10,036
Security deposit		—			—
Customer deposits		1,369			33,719
Related party advances		105,706			—
Operating lease liabilities		352			(42,450	)
Net cash used in operating activities		(194,019	)		(785,106	)

Cash flows from investing activities:
Payment of security deposit		—			(9,181	)
Purchase of office and computer equipment		(2,672	)		(17,322	)
Net cash used in investing activities		(2,672	)		(26,503	)

Cash flows from financing activities:
Proceeds from issuance of note payable		199,650			7,400
Bank overdraft		4,450			—
Payments/Proceeds from convertible notes payable		—			813,475
Repayments of note payable		—			(20,784	)
Advances (repayments) to stockholder, net		—			(41,394	)
Net cash provided by financing activities		204,100			758,697

Net increase (decrease) in cash and cash equivalents		7,409			(52,912	)

Cash and cash equivalents, Beginning of period	$	4,459		$	87,826

Cash and cash equivalents, End of period	$	11,868		$	34,914

Supplemental disclosure of cash flow information:
Cash paid for interest		—			13,671
Cash paid for income taxes		—			—


Schedule of non-cash Investing or Financing Activity:
Reclassification of derivative liabilities upon principal repayments of convertible notes		583,073			580,900
Conversion of notes payable and accrued interest in common stock		363,920			253,539
Intangible assets in accounts payable					680,000
Common stock to be issued for settlement of accounts payable		—			40,624

See notes to condensed consolidated financial statements.

INNERSCOPE HEARING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the nine months ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(4,980,496	)	$	(2,341,296	)
Adjustments to reconcile net loss to net cash used in operations:
(Gain) loss on fair value of derivatives		(159,617	)		940,819
Amortization of debt discounts		2,183,394			619,336
Depreciation and amortization		317,388			1,853
Stock compensation expense		554,791			899,437
Non cash interest expense		2,500			—
Loss on investment in undivided interest in real estate		4,429			1,390
(Gain) loss on debt extinguishment		44,393			(33,775	)
Gain on collection of bad debts		—			(3,000	)
Recognition of deferred revenues per settlement		—			(847,223	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable		(26,160	)		(7,663	)
Employee advances		(18,047	)		—
Inventory		(42,651	)		(29,847	)
Prepaid assets		49,167			12,297
Other receivables		—			(5,725	)
Accounts receivable, related party		(142,249	)		(35,125	)
Increase (decrease) in:
Accounts payable and accrued expenses		68,878			138,530
Officer salaries payable		18,044			75,510
Customer deposits		27,103			48,914
Due to related party		—			(62,794	)
Operating lease liabilities		(182,902	)		—
Net cash used in operating activities		(2,282,037	)		(628,362	)
Cash flows from investing activities:
Payment of security deposits		(23,481	)		—
Purchases of office and computer equipment		(49,614	)		—
Net cash used in investing activities		(73,095	)		—
Cash flows from financing activities:
Proceeds from issuance of note payable		89,100			32,600
Advances (payments) to stockholder, net		(17,562	)		14,550
Proceeds from issuances of convertible notes payable, net of debt issuance costs		2,308,775			772,500
Repayments of note payable		(102,530	)		(55,578	)
Repayments of advances, shareholder		—			(6,000	)
Repayments of principal of convertible note payable		—			(149,546	)
Net cash provided by financing activities		2,277,783			608,526
Net decrease in cash		(77,349	)		(19,836	)
Cash, Beginning of period		87,826			84,720
Cash, End of period	$	10,477		$	64,884
Supplemental disclosure of cash flow information:
Cash paid for interest	$	14,755		$	126,549
Cash paid for income taxes	$	—		$	—
Schedule of non-cash Investing or Financing Activity:
Reclassification of derivative liabilities upon principal repayments of convertible notes	$	1,172,346		$	787,162
Conversion of notes payable and accrued interest in common stock	$	954,960		$	—
Common stock issued for settlement of accounts payable	$	25,000		$	—
Operating lease right-of-use assets and liabilities	$	1,473,250		$	—
Acquisition of Assets
Issuance of common stock as consideration for assets purchased	$	22,974		$	—
Assumed liabilities		33,047			—
Property and equipment		(38,400	)		—
Other Assets		(4,614	)		—
Customer base		(300	)		—
Non- compete		(12,707	)
	$	—		$	—
See notes to condensed consolidated financial statements.

NOTE 1 - ORGANIZATION

Business

InnerScope Hearing Technologies, Inc. (“Company”, “InnerScope”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business in Roseville, California. The Company was originally named InnerScope Advertising Agency, Inc. and was formed to provide advertising and marketing services to retail establishments in the hearing device industry. On August 25, 2017, the Company changed its name to InnerScope Hearing Technologies, Inc. to better reflect the Company’s current direction as a ~~technology~~hearing ~~driven~~health technology company ~~with~~that ~~a scalable business model~~manufactures, develops, ~~encompassing; business to business (B2B) solutions~~distributes, ~~direct to consumer (DTC) sales~~ and ~~marketing~~sells ~~and~~numerous ~~business~~innovative ~~to consumer (and B2C) solutions. The Company is a manufacturer and a DTC distributor/retailer of FDA (Food and Drug Administration) registered~~ hearing ~~aids,~~health-related ~~personal sound amplifier~~ products ~~(“PSAP’s”)~~, hearing ~~related treatment therapies~~treatments, ~~doctor-formulated dietary hearing supplements~~ and ~~proprietary CDB oil for treating tinnitus. The Company also owns and operates audiological and retail~~ hearing ~~device~~solutions ~~clinics and plans~~direct to ~~continue~~consumer to(DTC) ~~open~~with ~~and acquire additional clinics. As of the date of this filing, the Company owns nine retail hearing device clinics in California and manages two additional clinics that are owned by~~ a ~~related~~scalable ~~party.~~business model.

NOTE 2 2 – ~~Asset~~SUMMARY ~~Purchase~~OF ~~Acquisition~~SIGNIFICANT ofACCOUNTING ~~Kathy L Amos Audiology~~ PRINCIPLES

Effective September 10, 2018, the Company acquired all of the assets and assumed certain liabilities of Kathy L Amos Audiology (“Amos Audiology”) in exchange for 340,352 shares of common stock (the “Acquisition”). Amos Audiology provides retail hearing aid sales and audiological services in the East Bay area of San Francisco.

Based on the fair value of the common stock issued of $22,974 and the assumed liabilities of $33,049, the total purchase consideration was $56,023.

The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the acquisition:

	Purchase Price Allocation
Fair value of consideration for Acquisition	$	22,974
Liabilities assumed		33,049
Total purchase consideration	$	56,023
Tangible assets acquired	$	43,016
Intangible assets		13,007
	$	56,023

The total purchase price of $56,023 has been allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values as of the completion of the Acquisition. The fair value of Amos Audiology’s identifiable intangible assets was estimated primarily using the income approach which requires an estimate or forecast of all the expected future cash flows, either through the use of the relief-from-royalty method or the multi-period excess earnings method. The Company determined the identifiable intangible assets, consisting of a customer base and non-compete had fair values of $300 and $12,707, respectively.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Annual Report for the year ended December 31, ~~2018~~ 2019, filed with the United States Securities and Exchange Commission (the “SEC”) on ~~April~~September 1614, ~~2019~~2022. Interim results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020, and ~~2018~~2019, are not necessarily indicative of future results for the full year. Certain amounts from the ~~2018~~ 2019 period have been reclassified to conform to the presentation used in the current period.

Emerging Growth Companies

The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period for certain accounting standards.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

Cash

The Company considers all highly liquid investments with an original term, when acquired, of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. We held no cash equivalents as of ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~2019. Cash balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail.

Accounts receivable

The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expense. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of ~~September~~March ~~30, 2019, and December~~ 31, ~~2018,~~2020 management’s evaluation required the establishment of an allowance for uncollectible receivables of $2927,~~700 and $18,383, respectively~~991.

Sales Concentration and Credit Risk

Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018.~~2020 and No2019 ~~customer~~and ~~accounted~~accounts ~~for~~receivable ~~more~~as ~~than ten percent (10%)~~ of ~~the~~March ~~Company’s~~31, ~~revenues~~2020 ~~for the three~~ and ~~nine months ended September 30,~~ 2019.

	March 31,		Accounts Receivable as of March 31, 2020	Accounts Receivable as of March 31, 2019
	2020	2019
	%	%
Customer A, related	0%	0%	66%	13%
Customer B, related	0%	0%	21%	13%
Customer C, realted	0%	0%	0%	76%
Customer D	19%	0%	0%	0%

							Accounts
	September 30, 2018						Receivable
	3 months			9 months			as of
	%			%			September 30, 2019
Customer A, related		25.1	%		40.4	%	$	345,574
Customer B		—			16.3	%	$	—

Inventory

Inventory is valued at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow-moving inventory is made based on management analysis or inventory levels and future sales forecasts. As of ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~2019, management’s analysis did not require any provisions to be recognized.

Intangible Assets

Costs for intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the consolidated balance sheets. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds Hearing, Inc., a Delaware corporation (“Zounds”), whereby, Zounds as the Subcontractor will provide design, technology, manufacturing and supply chain services to the Company (see Note 15) for a period of ten years. The Company will pay Zounds ~~One Million (~~$1,000,000) for the right to use proprietary technology (the “Technology Access Fee”). As of December 31, 2018, the Company has capitalized the $1,000,000 Technology Access Fee as an intangible asset on the condensed consolidated balance sheets. The Technology Access Fee will be amortized over the term of the Agreement. ~~The~~During the year ended December 31, 2020 (subsequent to period end), the Company ~~also~~determined ~~acquired~~that ~~intangible~~they ~~assets~~do ~~from~~not anexpect ~~asset~~to ~~purchase~~realize any benefit in the foreseeable ~~agreement~~future, ~~(see~~therefore, ~~Note~~have 2)recorded an impairment of $775,000.

Property and Equipment

Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment are as follows:

Computer equipment	3 years
Machinery and equipment	5 years
Furniture and fixtures	5 years

The Company's property and equipment consisted of the following at ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~2019:

	September 30, 2019			December 31, 2018
	March 31, 2020			December 31, 2019
Computer equipment	$	4,272		$	2,651
Computer and equipment	$	4,271		$	4,272
Machinery and equipment		55,451			31,122
Leasehold improvements		12,222			12,222
Furniture and fixtures		21,840			2,160
Machinery and equipment		58,126			38,139
Leasehold improvements		16,206			12,222
Furniture and equipment		21,840			39,152
Accumulated depreciation		(17,806	)		(4,705	)
		96,459			93,785
Balance	$	79,963		$	43,450
Accumulated depreciation		(26,220	)		(21,544	)
Property and equipment, net	$	70,239		$	72,241

Depreciation expense of $54,~~211~~ 676 and $132,~~101~~850 was recorded for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019,~~2020 ~~respectively,~~ and ~~$869 and $1~~2019,~~311,~~ ~~for the three and nine months ended September 30, 2018,~~ respectively.

Investment in Undivided Interest in Real Estate

The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. For the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 and ~~2018~~2019, the Company recognized a ~~loss~~ gain of $915,~~245~~645 and a loss of $41,~~429~~040, respectively. As of ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~2019, the carrying value of the Company’s investment in undivided interest in real estate was $1,~~222~~226,~~534~~171 and $1,~~226~~210,~~963~~526, respectively (see Note 118).

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

• Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. • Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

~~The carrying~~• ~~amounts~~Level of2 ~~the~~- ~~Company's~~Inputs ~~financial~~reflect quoted prices for identical assets ~~and~~or liabilities, ~~such~~in asmarkets ~~cash,~~that ~~prepaid~~are ~~expenses,~~not ~~accounts~~active; ~~receivable,~~quoted ~~accounts payable~~prices ~~and~~for ~~accrued~~similar ~~expenses,~~assets ~~certain~~or ~~notes~~liabilities ~~payable~~in ~~and~~active ~~notes~~markets; ~~payable~~inputs -other ~~related~~than ~~party,~~quoted ~~approximate~~prices ~~their~~that ~~fair~~are ~~values~~observable ~~because~~for of the ~~short~~assets ~~maturity~~or ofliabilities; ~~these~~or ~~instruments~~inputs that are derived principally from or corroborated by observable market data by correlation or other means.

~~The following~~• ~~table~~Level ~~represents~~3 - Unobservable inputs reflecting the Company’'s ~~financial~~assumptions ~~instruments~~incorporated ~~that~~in ~~are~~valuation ~~measured~~techniques atused to determine fair value. onThese aassumptions ~~recurring~~are ~~basis~~required asto ~~of September~~be ~~30,~~consistent ~~2019~~with ~~and~~market ~~December~~participant ~~31,~~assumptions ~~2018,~~that ~~for~~are ~~each~~reasonably ~~fair value hierarchy level:~~available.

September 30, 2018		Derivative Liabilities		Total
Level I	$	—	$	—
Level II	$	—	$	—
Level III	$	2,775,571	$	2,775,571
December 31, 2018
Level I	$	—	$	—
Level II	$	—	$	—
Level III	$	1,807,404	$	1,807,404

The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2020, and 2019, for each fair value hierarchy level:


	March 31, 2020
	Level 1		Level 2		Level 3		Total
Derivative liabilities	$	—	$	—	$	8,204,211	$	8,204,211
	$	—	$	—	$	8,204,211	$	8,204,211


		December 31, 2019
		Level 1		Level 2		Level 3		Total
Derivative liabilities	$	—	$	—	$	3,515,055	$	3,515,055
	$	—	$	—	$	3,515,055	$	3,515,055

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature.

108

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Debt Issue Costs and Debt Discount

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.

Original Issue Discount

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows.

The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The Company’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations. Obligation is considered to be completed upon delivery of a product to a customer. The Company utilizes third party carriers to ship the product. Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. The Company accepts prepayments on hearing aids and records the amount received as customer deposits on its’ balance sheet. When the Company delivers the hearing aid to the customer, revenue is recognized as well as the corresponding cost of sales.

As of ~~September~~March 3031, 2020 and December 31, 2019, the Company had received $8322,~~801~~875 and $20,708 of customer deposits, ~~that~~where revenue will be recognized ~~as revenue after September 30, 2019,~~ when the hearing aids are delivered to the customer.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

119

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties.

Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.

Advertising and Marketing Expenses

The Company expenses advertising and marketing costs as incurred. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019,~~2020 ~~advertising~~ and ~~marketing~~2019 ~~expenses~~advertising ~~were $92,966~~ and ~~$404,550, respectively, and for the three and nine months ended September 30, 2018, advertising and~~ marketing expenses were $469,~~408~~689 and $~~137~~167,~~736~~784, respectively.

Leases

Effective January 1, 2019, the Company began accounting for leases under ASU 2016-02 (see Note 14). Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the condensed consolidated balance sheets. The Company leases an office space and several retail locations used to conduct our business. On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in rent in the condensed consolidated statements of operations.

Earnings (Loss) Per Share

The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of ~~September~~March 3031, ~~2019,~~2020 and ~~2018~~ 2019, the Company’s outstanding convertible debt is convertible into approximately ~~393~~19,~~621~~095,~~118~~107,143 and 1679,~~998~~395,~~883~~431 shares of common stock, subject to adjustment based on changes in the Company’s stock price, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive.

Recent Accounting Pronouncements

In ~~July~~ ~~2017~~August 2018, the ~~Financial Accounting Standards Board (“~~FASB”) issued ASU ~~2017-11 “Earnings~~ ~~Per Share (Topic 260)”. The amendments in the update change the classification of certain equity~~2018-~~linked~~13, ~~financial~~“Changes ~~instruments (or~~to ~~embedded~~Disclosure ~~features)~~Requirements ~~with down round features. The amendments also clarify existing disclosure requirements~~ for ~~equity-classified instruments.~~Fair ~~For~~Value ~~freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (“EPS~~Measurements”~~) in accordance with Topic 260~~, ~~Earnings~~which ~~Per~~will ~~Share,~~improve ~~to recognize~~ the ~~effect~~ effectiveness of ~~the~~disclosure ~~down~~requirements ~~round~~for ~~feature when~~recurring ~~it is triggered. That effect is treated as a dividend~~ and asnonrecurring afair ~~reduction~~value ~~of income available to common shareholders in basic EPS~~measurements. ~~Convertible~~The ~~instruments~~standard ~~with~~removes, ~~embedded~~modifies, ~~conversion~~and ~~options~~adds ~~that~~certain ~~have down round features would be subject to the specialized~~disclosure ~~guidance for contingent beneficial conversion features (in Subtopic 470-20~~requirements, ~~Debt—Debt with Conversion~~ and ~~Other~~is ~~Options), including related EPS guidance (in Topic 260). For public business entities, the amendments in Part I of this update are~~ effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2018~~2019 ~~with~~(for “emerging ~~early~~growth ~~adoption~~company” ~~permitted~~beginning after December 15, 2020). The Company ~~adopted~~will be evaluating the impact this ~~pronouncement~~standard aswill have ofon ~~fiscal~~the ~~2017~~Company’s consolidated financial statements.

~~In June~~The ~~2018, the~~ FASB recently issued ASU ~~No. 2018~~2020-~~07 “Compensation~~06, Debt – Debt with Conversion and Other Options (Subtopic 470- ~~Stock~~20) ~~Compensation~~and Derivatives and Hedging – Contracts in Entity’s Own Equity (~~Topic~~Subtopic ~~718~~815-40): ~~Improvements~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to ~~Nonemployee~~reduce complexity in applying GAAP to certain financial ~~Share-Based~~instruments ~~Payment~~with ~~Accounting~~characteristics of liabilities and equity.~~” These~~ ~~amendments~~The ~~expand~~guidance in ASU 2020-06 simplifies the ~~scope~~accounting offor ~~Topic~~convertible ~~718,~~debt instruments ~~Compensation~~and convertible preferred stock by removing the existing guidance in ASC 470-20, ~~Stock~~Debt: ~~Compensation~~Debt with Conversion and Other Options, (which ~~currently~~requires ~~only~~entities ~~includes~~to ~~share~~account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-~~based~~20 ~~payments~~applies to ~~employees)~~convertible toinstruments ~~include~~for ~~share-based~~which ~~payments~~the ~~issued~~embedded conversion features are not required to ~~nonemployees~~be bifurcated from the host contract and accounted for ~~goods or~~as ~~services~~derivatives. ~~Consequently~~In addition, the amendments revise the scope exception from derivative accounting ~~for~~in ~~share~~ASC 815-~~based~~40 ~~payments~~for freestanding financial instruments and embedded features that are both indexed to ~~nonemployees~~the issuer’s own stock and ~~employees~~classified ~~will~~in bestockholders’ ~~substantially~~equity, ~~aligned~~by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The ~~ASU~~amendments ~~supersedes~~in ~~Subtopic~~ASU ~~505~~2020-5006 further revise the guidance in ASC 260, ~~Equity~~Earnings -Per ~~Equity-Based~~Share, ~~Payments~~to require entities to ~~Non~~calculate diluted earnings per share (EPS) for convertible instruments by using the if-~~Employees~~converted method. ~~The~~In ~~guidance~~addition, isentities ~~effective~~must ~~for~~presume ~~public~~share ~~companies~~ settlement for purposes ~~fiscal~~of ~~years,~~calculating ~~and~~diluted ~~interim~~EPS ~~fiscal~~when ~~periods~~an ~~within~~instrument ~~those~~may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities for fiscal years, beginning after December 15, ~~2018.~~2021, ~~Early~~with early adoption is permitted~~, but~~ no(for ~~earlier~~“emerging ~~than~~growth a company’s” beginning ~~adoption~~after ~~date~~December ~~of Topic 606~~15, ~~Revenue from Contracts with Customers~~2023). The Company ~~does~~will ~~not anticipate~~be ~~this~~evaluating ~~ASU~~the ~~having~~impact athis ~~material~~standard ~~impact~~will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU ~~August~~No. 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases (ASU 2018-1310), ~~“Changes~~ which provides narrow amendments to ~~Disclosure~~clarify ~~Requirements~~how ~~for~~to ~~Fair~~apply ~~Value~~certain ~~Measurements”~~aspects of the new lease standard, and ASU No. 2018-11, Leases (Topic 842)—Targeted Improvements (ASU 2018-11), which ~~will~~addressed ~~improve~~implementation ~~the~~issues ~~effectiveness~~related ofto ~~disclosure~~the ~~requirements~~new ~~for~~lease ~~recurring~~standard. These and ~~nonrecurring~~certain ~~fair~~other ~~value~~lease-related ~~measurements~~ASUs have generally been codified in ASC 842. ~~The~~ASC ~~standard~~842 supersedes the lease accounting requirements ~~removes,~~in ~~modifies~~ASC Topic 840, Leases (ASC 840). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a ~~adds~~lease ~~certain~~liability ~~disclosure~~on ~~requirements~~the balance sheet for all leases. Under ASC 842, ~~and~~leases isare classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 was effective for ~~fiscal~~annual ~~years~~reporting periods beginning after December 15, 2018 and interim periods within ~~those fiscal~~that ~~years,~~reporting ~~beginning~~period ~~after~~(for ~~December~~“emerging ~~15,~~growth ~~2019~~company” from January 1, 2020). The Company ~~will~~adopted beASC ~~evaluating~~842 ~~the~~on ~~impact~~January 1, ~~this~~2019 ~~standard~~using ~~will have on~~ the ~~Company’s consolidated~~effective ~~financial~~date ~~statements~~transition method.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company ~~does not discuss recent pronouncements~~elected ~~that~~the ~~are~~practical ~~not~~expedient ~~anticipated~~ to ~~have~~not anrecord ~~impact~~short-term leases on ~~or are unrelated to~~ its ~~financial~~consolidated ~~condition,~~balance ~~results of operations, cash flows or disclosures~~sheet.

~~NOTE 4 – GOING CONCERN AND MANAGEMENT’S PLANS~~10

~~The accompanying~~NOTE ~~unaudited~~3 ~~condensed~~– ~~consolidated~~GOING ~~financial~~CONCERN ~~statements~~AND have been prepared assuming the Company will continue as a going concern. which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company experienced a net loss of $4,980,496 for the nine months ended September 30, 2019. At September 30, 2019, the Company had a working capital deficit of $5,604,732, and an accumulated deficit of $11,352,625. These factors raise substantial doubt about the CompanyMANAGEMENT’~~s ability to continue as a going concern and to operate in the normal course of business. These~~S consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. PLANS

~~Management~~The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company experienced a net loss of $6,200,510 for the three months ended March 31, 2020. At March 31, 2020, the Company had a working capital deficit of $13,186,026, and an accumulated deficit of $20,496,978. These factors raise substantial doubt about the Company’s ability to continue as a going ~~Plans~~concern and to operate in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

~~The Company~~NOTE ~~continues~~4 to– ~~implement an industry encompassing revenue strategy, including the current revenue model to other major sectors~~INTANGIBLE ~~of the global hearing industry. On September 10~~ASSETS, ~~2018,~~NET ~~the Company acquired all of the assets and assumed certain liabilities of Amos Audiology~~ (~~see~~OTHER ~~Note~~THAN 2). This transaction is part of management’s plans to expand the Company’s retail clinic business by opening multiple clinics in the next 12 months. During the nine months ended September 30, 2019, the Company opened 6 more retail clinics. The Company currently owns 9 clinics and manages two additional clinics that are owned by a related party. GOODWILL

13The Company’s intangible assets consist of a customer list and non-compete acquired from Amos Audiology and a Technology Access Fee required to be paid by the Company in connection with a manufacturing design and marketing agreement executed with a supplier (see Note 12). The estimated useful lives of these intangible assets are as follows:

NOTE 5 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

The Company’s intangible assets consist of a customer list and non-compete acquired from Amos Audiology (see Note 2) and a Technology Access Fee required to be paid by the Company in connection with a manufacturing design and marketing agreement executed with a supplier (see Note 13). The estimated useful lives of these intangible assets are as follows:

Customer list	2 years
Non-compete	2 years
Technology access fee	10 years

The Company's intangible assets consisted of the following at ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~2019:

	September 30, 2019			December 31, 2018
	March 31, 2020			December 31, 2019
Customer list	$	300		$	300
Customer List		300			300
Non-compete		12,708			12,708
Non-Compete		12,708			12,708
Technology access fee		1,000,000			1,000,000
Technology Access Fee		1,000,000			1,000,000
Amortization		(107,046	)		(2,168	)
Intangibles		1,013,008			1,013,008
Balance	$	905,962		$	1,010,840
Accumulated amortization		(160,298	)		(133,672	)
Intangibles, net	$	852,710		$	879,336

The Company recognized $26,626 and $~~104~~51,~~878~~626 of amortization expense for the three ~~and nine~~ months ended ~~September~~March 3031, 2020 and 2019, respectively. Subsequent to period end, the technology fee was fully impaired, resulting in impairment expense of $775,000.

NOTE 65 – ~~ADVANCES~~NOTE PAYABLE, STOCKHOLDER

~~Chief~~A ~~Executive~~summary ~~Officer~~of the activity for the three months ended March 31, 2020, and the year ended December 31, 2019, of amounts the Company’s CEO (stockholder) loaned the Company and amounts repaid is as follows:

A summary of the activity for the nine months ended September 30, 2019, and the year ended December 31, 2018, representing amounts paid by the Company’s CEO (stockholder) on behalf of the Company and amounts reimbursed is as follows.

	March 31, 2020		December 31, 2019
Beginning Balance	$	95,800	$	95,800
Amounts loaned to the Company		—		—
Repaid		—		—
Ending Balance	$	95,800	$	95,800

	September 30, 2019			December 31, 2018
Beginning Balance	$	57,526		$	138,637
Amounts paid on Company’s behalf		517,188			589,524
Amount applied to accrued officer salaries		53,943			—
Reimbursements		(588,693	)		(625,635	)
Cancelled in exchange for Series B preferred stock		—			(45,000	)
Ending Balance	$	39,964		$	57,526

The note is interest free and ending balance amount is due on demand.

~~The ending~~NOTE ~~balances~~6 as– ofNOTE ~~September 30, 2019, and December 31, 2018, are included in Advances payable, stockholder on the condensed consolidated balance sheets included herein.~~PAYABLE

~~NOTE~~In July of 2019, the Company entered into 7a –Loan ~~NOTE~~Agreement ~~PAYABLE~~for $60,000 ~~STOCKHOLDER~~with a third- party. The loan requires the Company to make weekly payments of $1,538. No payments have been made during period ended March 31, 2020. As of March 31, 2020, and December 31, 2019, the note balance is $50,581 and $50,581.

A summary of the activity for the nine months ended September 30, 2019, and the year ended December 31, 2018, of amounts the Company’s CEO (stockholder) loaned the Company and amounts repaid is as follows:11

	September 30, 2019		December 31, 2018
Beginning Balance	$	95,800	$	65,000
Amounts loaned to the Company		—		36,800
Repaid		—		—
Ending Balance	$	95,800	$	95,800

In November of 2019, the Company entered into a Loan Agreement for $87,000 with a third- party, whereby the Company received $58,000. The loan requires the Company to make weekly payments of principal and interest of $790. As of March 31, 2020, and December 31, 2019, the note balance is $57,736 and $37,938, net of unamortized discounts of $0 and $21,380 respectively.

In December of 2019, the Company entered into a Loan Agreement for $21,750 with a third- party. The loan requires the Company to make weekly payments of principal and interest of $255. As of March 31, 2020, and December 31, 2019, the note balance is $14,073 and $18,423.

NOTE 7 – RELATED PARTY TRANSACTIONS

As of March 31, 2020 we had $15,944 of the account payable to related parties as compared to $266,419 as of December 31, 2019. The balance primarily represents advance payable to shareholders and management of the Company on behalf of the Company.

Effective August 1, 2016, the Company agreed to compensation of $225,000 and $125,000 per year for the Company’s CEO and CFO, respectively. On November 15, 2016, the Company entered into employment agreements with its CEO and CFO, which includes their annual base salaries of $225,000 and $125,000, respectively. On January 1, 2019, the Company agreed to increase compensation to $150,000 per year for the Company’s CFO. For the period ending March 31, 2020 and 2019, the Company recorded expenses to its officers in the following amounts:

	Period ended		Period ended
Description	March 31, 2020		March 31, 2019
CEO	$	37,500	$	56,057
CFO		56,250		31,143
Total	$	93,750	$	87,200

As of March 31, 2020, and December 31, 2019, the Company in the aggregate owes the CEO and CFO $356,181and $262,431, respectively, for accrued and unpaid wages. These amounts are included in Officer salaries payable on the balance sheets included herein.

On June 14, 2017, the Company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. For the three months ended March 31, 2020, and 2019, the Company expensed $36,000 and $36,000, respectively, related to this lease and is included in Rent, on the condensed consolidated statement of operations, included herein.

NOTE 8– INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE

The allocated portion of the results in an equity method investment in a privately-held, related party, company are included in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2020, a gain of $15,645, and a net loss of $1,040, for the three months ended March 31, 2019, is included in “Other income (expense), net”. As of March 31, 2020, and December 31, 2019, the carrying value of the Company’s investment in undivided interest in real estate was $1,226,171 and $1,210,526, respectively.

The unaudited condensed balance sheets as of March 31, 2020, and December 31, 2019, and the statement of operations for the three months ended March 31, 2020 and 2019, for the real property is as follows:

Current assets:	(Unaudited) March 31, 2020		(Unaudited) December 31, 2019
Cash	$	2,895	$	—
Accounts Receivable		138,163		106,163
Due from InnerScope		—		79,934
Prepaid expenses and other current assets		103,464		—
Total current assets		244,522		186,097
Land and Building, net		2,299,830		2,310,722
Other Assets, net		45,389		45,943
Total assets	$	2,589,741	$	2,542,762

Accounts Payable	$	76,734	$	72,475
Current portion of mortgage payable		—		20,708
Other current liabilities		30,904		16,104
Total current liabilities		107,638		109,287
Mortgage payable, long-term		1,986,923		1,966,215
Security deposits		9,268		13,064
Total liabilities		2,103,829		2,088,566
Total equity		485,912		454,196
Total liabilities and equity	$	2,589,741	$	2,542,762

		(Unaudited) March 31, 2020		(Unaudited) December 31, 2019
Rental income	$	67,315	$	297,383
Expenses:
Property taxes		7,550		29,605
Depreciation and amortization		11,445		50,940
Insurance		2,638		18,783
Repairs and maintenance		—		6,202
Utilities and other		13,649		68,156
Interest expenses		105		113,858
Total expenses		35,387		287,544
Net income (loss)	$	31,928	$	9,839

NOTE 9– NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE

On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company is a co-borrower on a $2,057,000 Small Business Administration Note (the “SBA Note”). The SBA Note carries a 25-year term, with an initial interest rate of 6% per annum, adjustable to the Prime interest rate plus 2%, and is secured by a first position Deed of Trust and business assets located at the property. The Company initially recorded a liability of $1,007,930 for its portion of the SBA Note, with the offset being to Investment in undivided interest in real estate on the balance sheet presented herein. As of March 31, 2020, the long-term portion of the SBA Note is $973,592. Future principal payments for the Company’s portion are:

Twelve months ending March 31,	Amount
2020	$	22,150
2021		22,150
2022		23,516
2023		24,966
2024		26,500
2025		28,118
Thereafter		826,192
Total	$	973,592

NOTE 10– CONVERTIBLE NOTES PAYABLE

At various times during the three months ended March 31, 2020, the Company entered into convertible promissory notes with principal amounts totaling $242,000 with a third party for which the proceeds were used for operations. The Company received net proceeds of $199,650, and a $42,350 original issuance discount was recorded. The convertible promissory notes incur interest at rates from 8% to 12% per annum and mature on dates ranging from November 2019 to March 2021. The convertible promissory notes are convertible to shares of the Company’s common stock six months after issuance. The conversion price per share is equal to 65-70% of the lowest trading prices of the Company’s common stock during the fifteen (15) trading days immediately preceding the applicable conversion date. The trading price is defined within the agreement as the closing bid price on the applicable trading market. The convertible promissory notes include various default provisions for which the default interest rate increases to 24%.

A summary of the convertible note balances as of March 31, 2020, and December 31, 2019, is as follows:

	March 31, 2020			December 31, 2019
Principal balance	$	3,314,234		$	3,402,117
Unamortized discounts		(640,919	)		(1,011,636	)
Ending balance, net	$	2,673,315		$	2,390,481

During period ending March 31, 2020, the company recognized $612,718

	Principal Balance			Debt Discounts			Total
Balance at January 1, 2020	$	3,402,117		$	(1,011,636	)	$	2,390,481
New issuance		242,000			(242,000	)		—
Conversions		(329,884	)		—			(329,884	)
Amortization		—			612,718			612,718
Ending balance, net	$	3,314,233		$	(640,918	)	$	2,673,315

~~The ending~~NOTE ~~balance~~11 ~~amount~~– isDERIVATIVE ~~due on demand, carries interest at 8% per annum and is included Notes payable, stockholder on the consolidated balance sheets included herein.~~LIABILITIES

~~NOTE~~The Company determined that the conversion 8features –of ~~NOTE~~the ~~PAYABLE~~convertible notes represented embedded derivatives since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed consolidated statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet.

~~On October~~The ~~8, 2018, the~~ Company ~~entered into a Business Loan Agreement (~~valued the ~~“October~~derivative ~~BLA”)~~liabilities ~~for~~at ~~$47~~issuance,~~215~~ ~~with~~March a31 ~~third- party~~2020, ~~whereby~~and ~~the~~December ~~Company~~31, ~~received $35~~2019,~~500~~ onat ~~October 10~~$412,800 ~~2018. The October BLA requires the Company to make the first six monthly payments of principal~~ and ~~interest of~~ $4,~~467 per month~~745, ~~and then $3~~194,~~402~~ ~~for months seven through twelve~~respectively. The ~~note~~Company ~~carries a 33%~~used ~~interest~~the ~~rate~~multinomial ~~and~~lattice ~~matures~~valuation onmodel ~~October~~with ~~28,~~the ~~2019.~~following ~~The~~assumptions ~~October~~for ~~BLA~~new ~~was~~notes ~~paid~~issued during inthe ~~full~~period onended ~~July~~March ~~26, 2019. As of September 30, 2019, and December~~ 31, ~~2018~~2020, ~~there~~risk-free ~~was~~interest arate ~~balance~~ of $-0-.05% and ~~$38,280,~~volatility ~~respectively,~~of 150% onto ~~the October BLA~~250%, ~~with~~and ~~carrying~~as ~~value~~ of ~~$29,270 as of~~ December 31, ~~2018~~2019, ~~net~~risk-free interest rate of an0.05% ~~unamortized~~and ~~discount~~volatility of ~~$9,011~~200% to 300%.

~~On February~~A 4,summary ~~2019,~~of the ~~Company entered into a Business Loan Agreement (the “Feb 2019 BLA”) for $8,584 with a third-~~ ~~party,~~activity ~~whereby~~related ~~the Company received $7,400 on February 5, 2019. The Feb 2019 BLA requires the Company~~ to ~~make~~derivative ~~the~~liabilities ~~first~~during ~~two~~period ~~monthly payments~~ended ofMarch ~~principal and interest of $1~~31,~~640~~ ~~per~~2020 ~~month,~~is ~~and~~as ~~then $1,326 for months three through six. The note carried a 16% interest rate and was paid in full on July 26, 2019.~~follows:

On May 7, 2019, the Company entered into a Business Loan Agreement (the “May 2019 BLA”) for $18,088 with a third- party, whereby the Company received $13,600 on May 7, 2019. The May 2019 BLA requires the Company to make the first six monthly payments of principal and interest of $1,711 per month, and then $1,303 for months seven through twelve. The note carried a 33% interest rate and was paid in full on July 26, 2019.

	March 31, 2020
Beginning Balance	$	3,515,059
Initial derivative liability		412,801
Fair value change		4,814,431
Reclassification for principal payments and conversions		(538,073	)
Ending Balance	$	8,204,218

~~On July~~NOTE ~~11,~~12- ~~2019,~~OPERATING ~~the~~LEASE ~~Company entered into a Business Loan Agreement (the “July 2019 BLA”) for $11,136 with a third~~RIGHT-OF-USE ~~party,~~ASSETS ~~whereby~~AND ~~the~~OPERATING ~~Company~~LEASE received $9,600 on July 12, 2019. The July 2019 BLA requires the Company to make the first two monthly payments of principal and interest of $2,128 per month, and then $1,720 for months three through six. The note carried a 47% interest rate and was paid in full on July 26, 2019.LIABILITIES

On ~~July~~ 23June 14, ~~2019~~2017, the ~~Company~~company entered into a ~~Business~~five-year ~~Loan Agreement (the “2nd July 2019 BLA”) for $79,200~~lease with aLLC1 ~~third-~~for ~~party,~~approximately ~~whereby the Company received $58~~6,~~500~~944 onsquare ~~July~~feet ~~26,~~and ~~2019.~~a ~~The~~monthly ~~2nd~~rent ~~July 2019 BLA requires the Company to make 39 weekly payments~~ of $212,~~031.~~000 ~~The~~with ~~note carries~~ a ~~32%~~related ~~interest rate and matures April 23, 2020~~party. Upon ~~During~~adoption ~~the~~of ~~nine~~ASC ~~months ended September 30~~842, ~~2019,~~ the Company ~~made~~recognized ~~payments of~~ $18434,~~277.~~504 As of ~~September~~right-to-use ~~30,~~assets ~~2019,~~as ~~the~~operating ~~was~~leases aand ~~remaining~~operating ~~balance~~lease ~~of $60,923~~obligations.

~~A summary~~On ofSeptember 10, 2018, pursuant to the ~~activity~~Amos ~~for~~Audiology acquisition, the ~~nine~~Company ~~months~~assumed ~~ended~~a ~~September~~lease dated December 1, 2017 and expiring April 30, ~~2019~~2023, ~~and~~in Walnut Creek, California. Lease payments in the first year ~~ended~~of the lease are $3, 988 per month and increase by 3% on December 1 each new lease year. As of December 31, 2018, the Company was in arrears of ~~notes~~$25,182 ~~payable~~(including islate fees) in lease payments and has agreed with the landlord to pay the arrears in seven monthly payments asof ~~follows:~~$3,597 in addition to the monthly lease payments for January 2019 through July 2019. Settlement fees were fully paid during the year ending December 31, 2019.

	September 30, 2019			December 31, 2018
Beginning loan balance	$	38,281		$	—
Amounts loaned to the Company		115,473			101,593
Repaid		(92,831	)		(63,312	)
Principal balance		60,923			38,281
Unamortized discounts		(15,936	)		(9,011	)
Ending Balance	$	44,987		$	29,270

On October 15, 2018, the Company entered into a lease to operate a retail hearing aid clinic in Roseville, California expiring December 31, 2023. Initial lease payments of $3,102 began on January 1, 2019, and increase by 3% on January 1 each new lease year. Upon adoption of ASC 842, the Company recognized $160,623 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end.

~~NOTE~~On November 18, 2019, the Company entered into a lease to operate 9a –retail ~~RELATED~~hearing ~~PARTY~~aid ~~TRANSACTIONS~~clinic in Walnut Creek, expiring in October of 2022. Initial lease payments of $3,930 began on December 1, 2019, and increase by 3% on December 1 each new lease year. Upon adoption of ASC 842, the Company recognized $129,281 of right-to-use assets as operating leases and operating lease obligations. The Company abandoned the lease location subsequent to period end.

~~During~~On December 1, 2018, the ~~nine~~Company ~~months~~entered ~~ended~~into ~~September~~a ~~30,~~lease ~~2019,~~to ~~and~~operate ~~the~~a ~~year~~retail ~~ended~~hearing ~~December~~aid ~~31,~~clinic ~~2018~~in Sacramento, ~~our~~California ~~CEO~~expiring ~~(stockholder)~~March ~~paid~~31, ~~expenses~~2024. ~~and~~Initial ~~accounts~~lease ~~payable~~payments of $3,002 began on ~~behalf~~April of1, ~~the~~2019, ~~Company~~and ~~(see~~increase ~~Note~~by 6)3.33% Ason ofApril ~~September 30~~1, ~~2019~~2020 and 2021, and ~~December~~by ~~31,~~3% ~~2018~~on April 1, ~~the~~2022. ~~Company~~Upon ~~owed~~adoption of ASC 842, the ~~CEO~~Company ~~$39,964 and~~recognized $57149,~~526,~~507 ~~respectively,~~of ~~which~~right-to-use isassets ~~included~~as inoperating ~~Advances~~leases ~~payable,~~and ~~stockholder~~operating onlease obligations. The Company abandoned the ~~condensed~~lease ~~consolidated~~location ~~balance~~subsequent ~~sheets~~to ~~included herein~~period end.

~~Pursuant to~~On aFebruary ~~Marketing Agreement (cancelled August 5~~1, ~~2016)~~2019, the Company ~~provided~~entered ~~marketing~~into ~~programs~~a tolease ~~promote and sell hearing aid instruments and related devices~~ to ~~Moore~~operate ~~Family~~a ~~Hearing Company (“MFHC”). MFHC owned and operated~~ retail hearing aid ~~stores.~~clinic ~~Based on~~in ~~common~~Elk ~~control~~Grove, ofCalifornia ~~MFHC~~expiring ~~and~~January ~~the Company~~31, ~~all transactions with MFHC are classified as related party transactions~~2024. ~~The~~Initial ~~Company~~lease ~~has~~payments ~~offset~~of ~~the~~$2,307 ~~accounts~~began ~~receivable~~on ~~owed~~February ~~from~~1, ~~MFHC~~2019, ~~for~~and ~~these~~increase ~~services~~by ~~with~~an ~~expenses~~average of ~~the~~2.6% ~~Company~~on ~~that~~February ~~have~~1, ~~been~~each ~~paid~~new bylease ~~MFHC~~year. As aUpon ~~result~~adoption of ASC ~~these payments~~842, ~~in addition to MFHC’s payments to~~ the Company ~~through~~recognized ~~December 31~~$116,153 ~~2016,~~of ~~the balance due~~ right-to-use ~~MFHC~~assets as ofoperating ~~September~~leases ~~30, 2019,~~ and ~~December~~operating ~~31,~~lease ~~2018,~~obligations. ~~was~~The ~~$22,548,~~Company ~~which is included in Accounts payable, related party, on~~abandoned the ~~condensed~~lease ~~consolidated~~location ~~balance~~subsequent ~~sheets~~to ~~included~~period ~~herein~~end.

~~Effective~~The ~~August~~operating 1,lease ~~2016,~~expense for the ~~Company~~period ~~agreed~~ending toMarch ~~compensation of $225~~31,~~000~~ ~~and~~2020 was $~~125~~78,~~000~~033. ~~per~~These ~~year~~leases ~~for~~will ~~the~~expire ~~Company’s~~between ~~CEO~~2021 and ~~CFO, respectively~~2023. The weighted Onaverage ~~November~~discount ~~15,~~rate ~~2016,~~used ~~the~~for ~~Company~~these ~~entered~~leases ~~into~~were ~~employment~~8% ~~agreements~~(average ~~with~~borrowing ~~its~~rate ~~CEO and CFO, which includes their annual base salaries~~ of ~~$225,000~~the ~~and $125,000, respectively~~Company). ~~For~~Future ~~the~~principal ~~three~~payments ~~and~~for ~~nine months ended September 30, 2019, and 2018,~~ the Company ~~recorded~~’s ~~expenses~~portion ~~to its officers in the following amounts~~are:

	Three months ended September 30,				Nine months ended September 30,
For the three months ending March 31, 2020	Amount
Description	2019		2018		2019		2018
2020	$	287,725
CEO	$	56,250	$	59,134	$	168,750	$	171,634
2021		364,194
CFO		31,250		30,449		93,450		91,989
2022		255,466
Total	$	87,500	$	89,583	$	262,200	$	263,623
2023		116,888
2024		12,219
Thereafter		—
Total	$	1,036,492

As of September 30, 2019, and December 31, 2018, the Company in the aggregate owes the CEO and CFO $206,985 and $188,942, respectively, for accrued and unpaid wages. These amounts are included in Officer salaries payable on the balance sheets included herein.

In September 2016, the officers and directors of the Company formed a California Limited Liability Company (“LLC1”), for the purpose of acquiring commercial real estate and other business activities. On December 24, 2016, LLC1 acquired two retail stores from the buyer of the MFHC stores. On March 1, 2017, the Company entered into a twelve-month Marketing Agreement with each of the stores to provide telemarketing and design and marketing services for $2,500 per month per store, resulting in related party revenues of $15,000 for the nine months ended September 30, 2019, and $15,000 and $45,000 for the three and nine months ended September 30, 2018, respectively. Additionally, for the nine months ended September 30, 2018, the Company invoiced LLC1 $20,745 for the Company’s production, printing and mailing services and $1,275 for the nine months ended September 30, 2018, for sale of products. As of September 30, 2019, and December 31, 2018, LLC1 owes the Company $345,574 and $203,325, respectively, for the consulting fees and mailing services as well as expenses of LLC1 paid by the Company.

On June 14, 2017, the Company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. For the three and nine months ended September 30, 2019, and 2018, the Company expensed $36,000 and $108,000, respectively, related to this lease and is included in Rent, on the condensed consolidated statement of operations, included herein. As of September 30, 2019, and December 31, 2018, the Company owed LLC1 $71,700 and $30,500, respectively, for unpaid rent.

NOTE 10– INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE

The allocated portion of the results in an equity method investment in a privately-held, related party, company are included in the Company’s condensed consolidated statements of operations. For the three and nine months ended September 30, 2019, a loss of $9,245 and $4,429, respectively, and a net loss of $2,132 and $1,390, for the three and nine months ended September 30, 2018, respectively, is included in “Other income (expense), net”. As of September 30, 2019, and December 31, 2018, the carrying value of the Company’s investment in undivided interest in real estate was $1,222,534 and $1,226,963, respectively.

The unaudited condensed balance sheets as of September 30, 2019, and December 31, 2018, and the statement of operations for the nine months ended September 30, 2019, and 2018, for the real property is as follows:

	(Unaudited)		(Unaudited)
Current assets:	September 30, 2019		December 31, 2018
Cash	$	178	$	2,257
Due from InnerScope		72,600		30,500
Prepaid expenses and other current assets		58,761		72,931
Total current assets		131,539		105,958
Land and Building, net		2,321,612		2,354,282
Other Assets, net		47,788		53,323
Total assets	$	2,500,937	$	2,513,563
Current portion of mortgage payable	$	41,635	$	40,122
Other current liabilities		64,758		48,551
Total current liabilities		106,393		88,673
Mortgage payable, long-term		1,947,769		1,969,076
Security deposits		13,064		13,064
Total liabilities		2,067,226		2,070,813
Total equity		433,711		442,750
Total liabilities and equity	$	2,500,937	$	2,513,563

	2019			2018
Rental income	$	221,870		$	210,696
Expenses:
Property taxes		6,645			10,938
Depreciation and amortization		38,205			32,675
Insurance		16,457			2,033
Repairs and maintenance		18,214			20,860
Utilities and other		35,049			24,707
Interest expense		116,339			103,319
Total expenses		230,909			213,532
Net loss	$	(9,039	)	$	(2,836	)

NOTE 11– NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE

On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company is a co-borrower on a $2,057,000 Small Business Administration Note (the “SBA Note”). The SBA Note carries a 25-year term, with an initial interest rate of 6% per annum, adjustable to the Prime interest rate plus 2%, and is secured by a first position Deed of Trust and business assets located at the property. The Company initially recorded a liability of $1,007,930 for its portion of the SBA Note, with the offset being to Investment in undivided interest in real estate on the balance sheet presented herein. As of September 30, 2019, the current and long-term portion of the SBA Note is $20,401 and $954,407, respectively. Future principal payments for the Company’s portion are:

Twelve months ending September 30,	Amount
2020	$	20,401
2021		21,821
2022		23,168
2023		24,597
2024		25,967
Thereafter		858,854
Total	$	974,808

NOTE 12– CONVERTIBLE NOTES PAYABLE

On March 2, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest was due and payable March 2, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $13,399, and an initial derivative liability of $13,399. For the nine months ended September 30, 2019, amortization of the debt discount of $2,233 was charged to interest expense. During the nine months ended September 30, 2019, the investor converted $50,000 of principal and $2,514 of interest into 2,236,291 shares of common stock. As of September 30, 2019, and December 31, 2018, the note balance was $-0- and $50,000, respectively, with a carrying value of $47,767 at December 31, 2018, net of unamortized discounts of $2,333.

On March 27, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $25,000. Principal and interest were due and payable March 27, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $6,736, and an initial derivative liability of $6,736. For the nine months ended September 30, 2019, amortization of the debt discount of $1,628 was charged to interest expense. On April 29, 2019 the Note was sold to a third- party investor (see below). As of September 30 2019, and December 31, 2018, the note balance is $-0- and $25,000, respectively, with a carrying value of $23,372, net of unamortized discount of $1,628 as of December 31, 2018.

On May 11, 2018, the Company issued a convertible promissory note (the “Note”), with a face value of $100,000, maturing on May 11, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time after the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 62% of the lowest trading price for the 20 days prior to conversion. The note was funded on May 16, 2018, when the Company received proceeds of $75,825, after disbursements to vendors and for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $95,000, an initial derivative expense of $60,635 and an initial derivative liability of $155,635. For the nine months ended September 30, 2019, amortization of the debt discount of $17,020 was charged to interest expense. The Company also recorded a debt issue discount of $5,000 and amortized $895 to interest expense for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the investor converted $50,000 of principal and $3,564 of interest into 5,539,273 shares of common stock. As of September 30, 2019, and December 31, 2018, the note balance is $-0- and $50,000, respectively, with a December 31, 2018, carrying value of $32,085, net of unamortized discounts of $17,915.

On May 23, 2018, the Company issued a convertible promissory note (the “Note”), with a face value of $60,000, with a maturity date of February 22, 2019, and stated interest of 12% to a third-party investor. The note is convertible at any time after the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 65% of the lowest trading price for the 20 days prior to conversion. The note was funded on May 30, 2018, when the Company received proceeds of $57,000, after the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $57,000, an initial derivative expense of $48,033 and an initial derivative liability of $105,033. For the nine months ended September 30, 2019, amortization of the debt discount of $11,292 was charged to interest expense. The Company also recorded a debt issue discounts of $4,500 and amortized $1,377 to interest expense for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the investor converted $51,275 of principal and $9,838 of interest into 7,909,037 shares of common stock. As of September 30, 2019, and December 31, 2018, the note balance was $-0- and $51,275, respectively, with a carrying value of $39,389, net of unamortized discounts of $11,886 at December 31, 2018.

On October 23, 2018, an investor funded the $50,000 remaining of a convertible promissory note (the “Note”) issued on June 26, 2018, with an original face value of $92,000, maturing on September 26, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time after ninety (90) days of the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 65% of the lowest trading price for the 20 days prior to conversion. On October 23, 2018, the Company recorded a note balance of $50,000 when the Company received proceeds of $50,000. The embedded conversion feature included in the funding of October 23, 2018, resulted in an initial debt discount of $50,000, an initial derivative expense of $45,291 and an initial derivative liability of $95,291. For the nine months ended September 30, 2019, amortization of the debt discount of $37,986 was charged to interest expense. During the nine months ended September 30, 2019, the investor converted $50,000 of principal and $2,397 of interest into 2,495,107 shares of common stock. As of September 30, 2019, and December 31, 2018, the note balance is $-0- and $50,000, respectively, with a carrying value of $12,014, net of unamortized discounts of $37,986, at December 31, 2018.

On November 2, 2018, the Company issued a convertible redeemable note with a face value of $280,500 and a back-end convertible redeemable note for $280,500 (the “Notes”), maturing on November 2, 2019, and a stated interest of 8% to a third-party investor. The notes are convertible at any time after funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The first note was funded on November 2, 2018, when the Company received proceeds of $255,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the first note resulted in an initial debt discount of $250,000, an initial derivative expense of $148,544 and an initial derivative liability of $398,544. For the nine months ended September 30, 2019, amortization of the debt discount of $208,333 was charged to interest expense. The Company also recorded debt issue discounts of $55,500 and amortized $46,320 to interest expense for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the investor converted $280,500 of principal and $14,001 of interest into 23,705,749 shares of common stock. As of September 30, 2019, and December 31, 2018, the first note balance is $-0- and $280,500, respectively, with a December 31, 2018, carrying value of $46,750, net of unamortized discounts of $233,750. On December 26, 2018, the investor partially funded $187,000 of the back-end note, when the Company received proceeds of $166,667, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the partial funding of the back-end note resulted in an initial debt discount of $166,667, an initial derivative expense of $100,081 and an initial derivative liability of $266,748. For the nine months ended September 30, 2019, amortization of the debt discount of $146,704 was charged to interest expense. The Company also recorded debt issue discounts of $37,000 and amortized $30,398 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, and December 31, 2018, the partial back-end note balance is $187,000, with carrying values of $163,633 and $2,926, respectively, net of unamortized discounts of $23,367 and $184,074, respectively. On January 29, 2019, the investor funded $93,500, of and completing the back-end note, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the partial funding of the back-end note resulted in an initial debt discount of $75,000, an initial derivative expense of $63,924 and an initial derivative liability of $138,924. For the nine months ended September 30, 2019, amortization of the debt discount of $65,884 was charged to interest expense. The Company also recorded debt issue discounts of $18,500 and amortized $14,486 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the second partial back-end note balance is $93,500, with carrying values of $80,371, net of unamortized discounts of $13,129.

On December 4, 2018, the Company issued a convertible redeemable note (the “Note”) with a face value of $158,333 maturing on December 4, 2019, and a stated interest of 8% to a third-party investor. The note is convertible at any time after funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on December 4, 2018, when the Company received proceeds of $137,250, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $137,500, an initial derivative expense of $87,293 and an initial derivative liability of $224,793. For the nine months ended September 30, 2019, amortization of the debt discount of $103,125 was charged to interest expense. The Company also recorded debt issue discounts of $35,083 and amortized $26,313 to interest expense for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the investor converted $125,000 of principal and $7,550 of interest into 16,267,528 shares of common stock. As of September 30, 2019, and December 31, 2018, the note balance is $33,333 and $158,333, respectively, with carrying values of $4,450 and $13,194, respectively, net of unamortized discounts of $28,883 and $145,139, respectively.

On December 4, 2018, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $230,000 and two back-end convertible redeemable notes for $115,000 each. The notes mature on December 4, 2019, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on December 4, 2018, when the Company received proceeds of $210,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $210,000, an initial derivative expense of $108,922 and an initial derivative liability of $318,292. For the nine months ended September 30, 2019, amortization of the debt discount of $192,500 was charged to interest expense. The Company also recorded debt issue discounts of $41,800 and amortized $38,498 to interest expense for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the investor converted $230,000 of principal and $9,500 of interest into 23,862,502 shares of common stock. As of September 30, 2019, and December 31, 2018, the initial note balance is $-0- and $230,000, respectively, with a December 31, 218, carrying value of $19,167, net of unamortized discounts of $210,833. On February 12, 2019, the investor funded the first back-end note, when the Company received proceeds of $94,100, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the first back-end note resulted in an initial debt discount of $94,100, an initial derivative expense of $64,364 and an initial derivative liability of $158,464. For the nine months ended September 30, 2019, amortization of the debt discount of $58,813 was charged to interest expense. The Company also recorded debt issue discounts of $20,900 and amortized $13,063 to interest expense for the nine months ended September30, 2019. During the nine months ended September 30, 2019, the investor converted $40,000 of principal and $2,560 of interest into 6,019,802 shares of common stock As of September 30, 2019, the first back-end note balance is $75,000, with a carrying value of $31,875 net of unamortized discounts of $43,125. On March 1, 2019, the investor funded the second back-end note, when the Company received proceeds of $98,175, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the funding of the second back-end note resulted in an initial debt discount of $98,175, an initial derivative expense of $62,254 and an initial derivative liability of $160,429. For the nine months ended September 30, 2019, amortization of the debt discount of $57,596 was charged to interest expense. The Company also recorded debt issue discounts of $16,825 and amortized $9,949 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the second back-end note balance is $115,000, with carrying values of $67,444, net of unamortized discounts of $47,556.

On December 24, 2018, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $195,000 and two back-end convertible redeemable notes for $97,500 each. The notes mature on December 24, 2019, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on December 26, 2018, when the Company received proceeds of $177,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $177,000, an initial derivative expense of $92,464 and an initial derivative liability of $269,464. For the nine months ended September 30, 2019, amortization of the debt discount of $132,750 was charged to interest expense. The Company also recorded debt issue discounts of $35,000 and amortized $26,250 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, and December 31, 2018, the initial note balance is $195,000, with carrying values of $144,931 and $2,600, respectively, net of unamortized discounts of $50,069 and $192,400, respectively.

On January 22, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $245,000 and two back-end convertible redeemable notes for $122,500 each. The notes mature on January 22, 2020, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on January 22, 2019, when the Company received proceeds of $200,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $200,000, an initial derivative expense of $134,208 and an initial derivative liability of $334,208. For the nine months ended September 30, 2019, amortization of the debt discount of $13,500 was charged to interest expense. The Company also recorded debt issue discounts of $45,000 and amortized $30,938 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the initial note balance is $245,000, with a carrying value of $168,438, net of unamortized discounts of $76,562. On July 18, 2019, the investor funded the first back-end note, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the funding of the first back-end note resulted in an initial debt discount of $100,000, an initial derivative expense of $19,852 and an initial derivative liability of $19,852. For the nine months ended September 30, 2019, amortization of the debt discount of $20,776 was charged to interest expense. The Company also recorded debt issue discounts of $22,500 and amortized $4,680 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the first back-end note balance is $122,500, with a carrying value of $25,457, net of unamortized discounts of $97,043.

On February 22, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $116,667. The note matures on February 22, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on February 22, 2019, when the Company received proceeds of $90,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $90,000, an initial derivative expense of $36,138 and an initial derivative liability of $126,138. For the nine months ended September 30, 2019, amortization of the debt discount of $54,375 was charged to interest expense. The Company also recorded debt issue discounts of $24,467, and amortized $14,458 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $116,667, with a carrying value of $71,032, net of unamortized discounts of $45,635.

On March 8, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $133,333. The note matures on March 8, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on March 8, 2019, when the Company received proceeds of $106,200, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $106,200, an initial derivative expense of $82,538 and an initial derivative liability of $188,738. For the nine months ended September 30, 2019, amortization of the debt discount of $59,574 was charged to interest expense. The Company also recorded debt issue discounts of $29,333, and amortized $16,928 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $133,333, with a carrying value of $74,303, net of unamortized discounts of $59,030.

On March 20, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $89,085 and a back-end convertible redeemable note for $89,085. The notes mature on March 20, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on March 20, 2019, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $75,000, an initial derivative expense of $48,913 and an initial derivative liability of $123,913. For the nine months ended September 30, 2019, amortization of the debt discount of $39,454 was charged to interest expense. The Company also recorded debt issue discounts of $14,085, and amortized $7,404 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the initial note balance is $89,075, with a carrying value of $46,859, net of unamortized discounts of $42,226. On August 20, 2019, the investor funded the first back-end note, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the funding of the first back-end note resulted in an initial debt discount of $75,000, an initial derivative expense of $84,293 and an initial derivative liability of $9,293. For the nine months ended September 30, 2019, amortization of the debt discount of $8,103 was charged to interest expense. The Company also recorded debt issue discounts of $14,085 and amortized $1,523 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the first back-end note balance is $89,085, with a carrying value of $9,626, net of unamortized discounts of $79,459.

Also, on March 20, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $89,085 and a back-end convertible redeemable note for $89,085. The notes mature on March 20, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on March 20, 2019, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $75,000, an initial derivative expense of $48,913 and an initial derivative liability of $123,913. For the nine months ended September 30, 2019, amortization of the debt discount of $39,454 was charged to interest expense. The Company also recorded debt issue discounts of $14,085, and amortized $7,404 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the initial note balance is $89,075, with carrying values of $46,859, net of unamortized discounts of $42,226. On September 5, 2019, the investor funded the first back-end note, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the funding of the first back-end note resulted in an initial debt discount derivative liability of $74,664. For the nine months ended September 30, 2019, amortization of the debt discount of $6,205 was charged to interest expense. The Company also recorded debt issue discounts of $14,085 and amortized $1,171 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the first back-end note balance is $89,085, with a carrying value of $7,713, net of unamortized discounts of $81,372.

On April 12, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on April 12, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on April 12, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,450 and an initial derivative liability of $279,450. For the nine months ended September 30, 2019, amortization of the debt discount of $79,989 was charged to interest expense. The Company also recorded a debt issue discount of $33,000, and amortized $15,098 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $208,000, with a carrying value of $95,087, net of unamortized discounts of $12,913.

Also, on April 12, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on April 12, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on April 12, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,450 and an initial derivative liability of $279,450. . For the nine months ended September 30, 2019, amortization of the debt discount of $79,989 was charged to interest expense. The Company also recorded a debt issue discount of $33,000, and amortized $15,098 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $208,000, with a carrying value of $95,087, net of unamortized discounts of $12,913.

On May 15, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on May 15, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on May 15, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,082 and an initial derivative liability of $279,082. For the nine months ended September 30, 2019, amortization of the debt discount of $65,446 was charged to interest expense. The Company also recorded a debt issue discount of $33,000, and amortized $12,353 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $208,000, with a carrying value of $77,799, net of unamortized discounts of $130,201.

Also, on May 15, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $167,352. The note matures on May 15, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on May 15, 2019, when the Company received proceeds of $140,250, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $140,250, an initial derivative expense of $85,329 and an initial derivative liability of $225,579. For the nine months ended September 30, 2019, amortization of the debt discount of $52,450 was charged to interest expense. The Company also recorded a debt issue discount of $27,102, and amortized $10,145 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $167,352, with a carrying value of $62,596, net of unamortized discounts of $104,756.

On June 13, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $119,000. The note matures on June 13, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on June 13, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $100,000, an initial derivative expense of $49,779 and an initial derivative liability of $149,779. For the nine months ended September 30, 2019, amortization of the debt discount of $29,087 was charged to interest expense. The Company also recorded a debt issue discount of $19,000, and amortized $5,532 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $119,000, with a carrying value of $34,619, net of unamortized discounts of $84,381.

Also, on June 13, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $119,000. The note matures on June 13, 2020, has a stated interest of 8% and convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on June 13, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $100,000, an initial derivative expense of $49,779 and an initial derivative liability of $149,779. For the nine months ended September 30, 2019, amortization of the debt discount of $29,087 was charged to interest expense. The Company also recorded a debt issue discount of $19,000, and amortized $5,532 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $119,000, with a carrying value of $34,619, net of unamortized discounts of $84,381.

On July 1, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $183,975. The note matures on July 1, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on July 1, 2019, when the Company received proceeds of $150,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $150,000, an initial derivative expense of $65,783 and an initial derivative liability of $215,783. For the nine months ended September 30, 2019, amortization of the debt discount of $37.398 was charged to interest expense. The Company also recorded debt issue discounts of $33,975, and amortized $8,478 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $183,975, with a carrying value of $45,875, net of unamortized discounts of $138,100.

On August 9, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $122,650. The note matures on August 9, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on August 9, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $100,000, an initial derivative expense of $18,522 and an initial derivative liability of $118,522. For the nine months ended September 30, 2019, amortization of the debt discount of $13,879 was charged to interest expense. The Company also recorded debt issue discounts of $22,650, and amortized $3,146 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $122,650, with a carrying value of $17,025, net of unamortized discounts of $105,625.

On September 12, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $160,000. The note matures on September 12, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on September 12, 2019, when the Company received proceeds of $130,050, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $130,050, an initial derivative expense of $25,433 and an initial derivative liability of $155,483. For the nine months ended September 30, 2019, amortization of the debt discount of $6,485 was charged to interest expense. The Company also recorded debt issue discounts of $29,950, and amortized $1,495 to interest expense for the nine months ended September 30, 2019. As of September 30, 2019, the note balance is $160,000, with a carrying value of $7,979, net of unamortized discounts of $152,021.

A summary of the convertible note balances as of September 30, 2019, and December 31, 2018, is as follows:

	September 30, 2019			December 31, 2018
Principal balance	$	3,168,650		$	1,277,108
Unamortized discounts		(1,754,975	)		(1,125,942	)
Ending balance, net	$	1,413,675		$	151,166

The following is a summary of the Company’s convertible notes and related discounts as of September 30, 2019:

	Principal Balance			Debt Discounts			Total
Balance at January 1, 2019	$	1,277,108		$	(1,125,942	)	$	151,166
New issuances		2,793,317			(2,792,981	)		336
Conversions		(901,775	)		—			(901,775	)
Amortization		—			2,163,948			2,163,948
Balance at September 30, 2019	$	3,168,650		$	(1,754,975	)	$	1,413,675

NOTE 13 – DERIVATIVE LIABILITIES

The Company determined that the conversion features of the convertible notes represented embedded derivatives since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed consolidated statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. See Note 12.

The Company used the Monte Carlo simulation valuation model with the following assumptions for new notes issued during the nine months ended September 30, 2019, risk-free interest rates from 1.78% to 2.59% and volatility of 172% to 387%, as of September 30, 2019, risk-free interest rates from 1.76% to 1.83% and volatility from 162% to 230%, and as of December 31, 2018, risk-free interest rates from 2.56% to 2.62% and volatility of 355% to 391%.

A summary of the activity related to derivative liabilities for the nine months ended September 30, 2019, is as follows:

	September 30, 2019
Beginning Balance	$	1,807,404
Initial Derivative Liability		3,486,443
Fair Value Change		(1,337,621	)
Reclassification for conversions		(1,180,655	)
Ending Balance	$	2,775,571

The credit for derivative liability expense of $159,617 for the nine months ended September 30, 2019, consisted of the initial derivative expense of $1,178,004 offset by the above decrease in the fair value of $1,337,621.

NOTE 14- OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 7.5%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the three and nine months ended September 30, 2019, the Company recorded $100,240 and $294,302, respectively, and $47,937 and $119,937 for the three and nine months ended September 30, 2018, respectively, as operating lease expense which is included in rent expense on the statements of operations and includes $36,000 and $108,000 of rent to a related party during the three and nine months ended September 30, 2019, and 2018, respectively.

On June 14, 2017, the company entered into a five-year lease with LLC1 (see Note 10) for approximately 6,944 square feet and a monthly rent of $12,000.

On September 10, 2018, pursuant to the Amos Audiology acquisition, the Company assumed a lease dated December 1, 2017 and expiring April 30, 2023, in Walnut Creek, California. Lease payments in the first year of the lease are $3, 988 per month and increase by 3% on December 1 each new lease year. As of December 31, 2018, the Company was in arrears of $25,182 (including late fees) in lease payments and has agreed with the landlord to pay the arrears in seven monthly payments of $3,597 in addition to the monthly lease payments for January 2019 through July 2019.

On October 15, 2018, the Company entered into lease to operate a retail hearing aid clinic in Roseville, California expiring December 31, 2023. Initial lease payments of $3,102 begin on January 1, 2019, and increase by 3% on January 1 each new lease year.

On December 1, 2018, the Company entered into lease to operate a retail hearing aid clinic in Sacramento, California expiring March 31, 2024. Initial lease payments of $3,002 begin on April 1, 2019, and increase by 3.33% on April 1, 2020 and 2021, and by 3% on April 1, 2022.

On February 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Elk Grove, California expiring January 31, 2024. Initial lease payments of $2,307 begin on February 1, 2019, and increase by an average of 2.6% on February 1, each new lease year.

On February 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Fremont, California expiring February 28, 2021. Initial lease payments of $2,019 begin on March 1, 2019, and increases by 3% on March 1, 2020.

On April 15, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Pleasanton, California expiring April 30, 2024. Initial lease payments of $3,550 begin on May 1, 2019, and increases by 3% on each new lease year throughout the term.

On June 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Hayward, California expiring December 31, 2020. Initial lease payments of $1,816 begin on June 1, 2019, and increases to $1,871 on January 1, 2020.

On June 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Santa Rosa, California expiring June 30, 2023. Initial lease payments of $2,327 begin on June 1, 2019, and increases by approximately 2.5% annually beginning on July 1, 2020.

On July 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Sacramento, California expiring June 30, 2022. Initial lease payments of $1,450 begin on July 1, 2019, and increases by approximately 5.0% annually beginning on July 1, 2020.

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. During the nine months ended September 30, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $1,473,250.

Right-of- use assets are summarized below:

	September 30, 2019
Office and retail leases	$	1,473,250
Less accumulated amortization		(199,409	)
Right-of-us assets, net	$	1,273,841

Operating lease liabilities are summarized as follows:

	September 30, 2019
Lease liability	$	1,290,348
Less current portion		(345,106	)
Long term portion	$	945,242

Maturity of lease liabilities are as follows:

	Amount
For the three months ending December 31, 2019	$	107,162
For the year ending December 31, 2020		432,415
For the year ending December 31, 2021		396,545
For the year ending December 31, 2022		317,785
For the year ending December 31, 2023		184,327
Thereafter		44,392
Total	$	1,482,626
Less: present value discount		(192,278	)
Lease liability	$	1,290,348

NOTE 15– COMMITMENTS AND CONTINGENCIES

Consulting Agreements

On ~~August~~October 93, 2018, the Company entered into a ~~monthly~~Manufacturing ~~Consulting~~Design ~~Services~~and ~~Master~~Marketing Agreement (the “~~CSMA~~Agreement”). ~~The~~with ~~CSMA~~Zounds, ~~requires~~whereby, aZounds ~~two-~~will ~~month~~provide ~~minimum~~design, ~~and~~technology, amanufacturing ~~30-~~and ~~day~~supply ~~termination~~chain ~~notice.~~services ~~Pursuant~~ to the ~~CSMA~~Company, to enable the Company isto manufacture comparable hearing aids and related components and accessories to ~~compensate~~be sold under the ~~consultant~~Company’s exclusive brand names (the “Manufacturer’s Products”) through the Company’s various marketing and distribution channels. The Company will pay Zounds One Million ($121,~~500~~000,000) ~~per~~(the ~~month~~“Technology byAccess ~~the~~Fee”). ~~issuance~~The ofTechnology ~~restricted~~Access ~~shares~~Fee, as amended will be paid in eight (8) installments of ~~common~~$75,000 ~~stock~~each, in ~~based~~four- onweek ~~the~~intervals ~~average~~until ~~closing~~$600,000 ~~trading~~is ~~prices~~paid ~~for~~and ~~the~~$400,000 ~~three~~is ~~days~~to be paid as Product Surcharges based on $200 per unit manufactured for ~~prior~~up to ~~each~~the ~~monthly~~first ~~payment~~2,000 units. ~~For~~Once ~~the~~$400,000 ~~nine~~of ~~months~~Product ~~ended~~Surcharges ~~September~~are ~~30,~~paid ~~2019~~said per unit surcharge will be discontinued. As of March 31, 2020 the Company ~~issued~~has ~~515~~paid $183,~~818~~200 ~~shares~~towards the Technology Access Fee and as of ~~common~~March ~~stock under~~31, ~~the~~2020, ~~CSMA~~$816,800 is included in accounts payable and accrued expenses. Subsequent to period end, the ~~parties~~Company ~~agreed~~determined that it was unable to ~~terminate~~substantiate the ~~CSMA~~actual fair value of the technology that was acquired, therefore, full impairment was recorded.

26NOTE 13 – STOCKHOLDERS’ EQUITY

On August 15, 2018, the Company entered into a six-month Consulting Agreement (the “CA”). Pursuant to the CA, the Company agreed to issue 2,500,000 shares of restricted common stock to the consultant.

On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds, whereby, Zounds will provide design, technology, manufacturing and supply chain services to the Company, to enable the Company to manufacture comparable hearing aids and related components and accessories to be sold under the Company’s exclusive brand names (the “Manufacturer’s Products”) through the Company’s various marketing and distribution channels. The Company will pay Zounds One Million ($1,000,000) (the “Technology Access Fee”). The Technology Access Fee, as amended will be paid in eight (8) installments of $75,000 each, in four- week intervals until $600,000 is paid and $400,000 is to be paid as Product Surcharges based on $200 per unit manufactured for up to the first 2,000 units. Once $400,000 of Product Surcharges are paid said per unit surcharge will be discontinued. During the nine months ended September 30, 2019, the Company has paid $280,800 towards the Technology Access Fee and as of September 30, 2019, and December 31, 2018, approximately $536,000 and $816,800 is included in accounts payable and accrued expenses, respectively.

On October 31, 2018, the Company entered into a three-year Joint Development Agreement (the “JD Agreement”) and an Exclusive Distribution Agreement (the “ED Agreement”) with Erchonia Corporation (“Erchonia”). As part of the JD Agreement, the Company and Erchonia will conduct FDA clinical research and trials for the purposes of obtaining 510k FDA Clearances for devices, technologies, methods and techniques used in the treatment of hearing relating conditions and disorders such as Tinnitus, Sensorineural hearing Loss, dizziness and other disorders. The agreements give the Company the exclusive worldwide rights for all designs and any newly developed Erchonia 3LT lasers and related technologies and gives the Company the rights to license and distribute such products worldwide. Pursuant to the JD Agreement, the Company has agreed to issue 1,000,000 shares of common stock. The Company valued the common stock to be issued at $60,000, based on the market price of the common stock on the date of the JD Agreement, to be amortized over the three-year term. For the three and nine months ended September 30, 2019, the Company amortized $5,000 and $18,333, respectively, as stock-based compensation. As of September 30, 2019, there remains $41,667, of deferred stock compensation on the condensed consolidated balance sheet, to be amortized over the three-year contract term.

On December 7, 2018, the Company entered into a one- year consulting agreement (the “Media Consulting Agreement”) with a third- party consultant (the “Consultant”). The Consultant will provide communication and broadcast services, as well as strategic planning services. Pursuant to the Media Consulting Agreement, the Company has agreed to issue the Consultant 3,125,000 shares of restricted common stock. On December 7, 2018, the Company recorded 3,125,000 shares of common stock to be issued. The Company valued the common stock to be issued at $125,000 based on the market price of the common stock on the date of the Media Consulting Agreement, to be amortized over the term of the agreement. The Company issued 1,712,329 of the shares and there remain 1,412,671 shares to be issued. The Company amortized $31,250 and $93,750 for the three and nine months ended September 30, 2019, respectively, and is included in Professional fees on the condensed consolidated Statement of operations. As of September 30, 2019, there remains $23,611 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019.

On April 1, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the conception and implementation of the Company’s business development plan, as well as other strategic planning services. Pursuant to the agreement, the Company issued the Consultant 2,000,000 shares of restricted common stock. The Company valued the common stock at $128,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $64,000 and $128,000, respectively for the three and nine months ended September 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations..

On April 3, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the conception and implementation of the Company’s marketing plans, promoting the goals and objectives of the Company. Pursuant to the agreement, the Company paid $20,000 and issued 1,000,000 shares of restricted common stock to the Consultant. The Company valued the common stock at $75,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $37,500 and $75,000, respectively, for the three and nine months ended September 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations.

On April 17, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the corporate communications. Pursuant to the agreement, the Company issued 1,000,000 shares of restricted common stock to the Consultant. The Company valued the common stock at $67,500 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $33,750 and $61,875, respectively, for the three and nine months ended September 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations. As of September 30, 2019, there remains $5,625 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019.

Legal Matters

On May 26, 2017, Helix Hearing Care (California), Inc. a California corporation (“Helix”), filed a complaint (the “Complaint”) against the InnerScope and the Moores, in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, that includes a rescission of the Consulting Agreement and a demand that all monies paid pursuant to the Consulting Agreement be returned, on the basis that an injunction against certain Officers and Directors renders the Consulting Agreement impossible to perform. The Company had previously received $1,250,000 under the Consulting Agreement. InnerScope was not named as an enjoined party in such previous litigation, and the services contemplated under the Consulting Agreement are not within the scope of the injunction, thus InnerScope believes the accusation by the third party is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated. InnerScope and the Moores filed their Answer and Affirmative Defenses to the Complaint on June 27, 2017. On the same date, InnerScope, the Moores, and MFHC filed a counterclaim. On February 27, 2018, the Counterclaim was amended to include four claims for breach of contract, one claim for anticipatory breach of contract, one claim for negligent misrepresentation, and one claim for account stated. On August 13, 2018, Helix, the Company and the Moores signed a Settlement Agreement, whereby, the Company received $450,000, both parties dismissing all claims against the other party with prejudice and Matthew, Mark and Kimberly have been released from their covenant not to compete agreement signed in August 2016 with Helix.

NOTE 16 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has 25,000,000 authorized shares of $0.0001 preferred stock.

Series A Preferred Stock

On June 4, 2018, the Company filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series A Preferred Stock. 9,510,000 shares were designated as Series A Preferred Stock. The Series A Preferred Stock has mandatory conversion rights, whereby each share of Series A Preferred Stock will convert two (2) shares of common stock upon the Company filing Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, increasing the authorized shares of common stock. The Series A Preferred Stock has voting rights on an is if converted basis. The Series A Preferred Stock does not have any right to dividends. On June 4, 2018 the Company issued 3,170,000 shares of Series A Preferred Stock each to Matthew, Mark and Kimberly, in exchange for each of them cancelling and returning to treasury 6,340,000 shares of common stock. The issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the shareholders are accredited investors, there was no general solicitation, and the transaction did not involve a public offering. On August 8, 2018, Matthew, Mark and Kim each converted 3,170,000 shares of Series A Preferred Stock for 6,340,000 shares of common stock. The common stock issued replaced the 19,010,000 shares in the aggregate that the Moore’s cancelled in June 2018. As of ~~September~~March 3031, ~~2019~~2020, and December 31, ~~2018~~ 2019, there were no shares of Series A Preferred Stock issued and outstanding.

Series B Preferred Stock

On June 4, 2018, the Company also filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series B Preferred Stock. 900,000 shares were designated as Series B Preferred Stock. The Series B Preferred Stock is not convertible into common stock, nor does the Series B Preferred Stock have any right to dividends and any liquidation preference. The Series B Preferred Stock entitles its holder to a number of votes per share equal to 1,000 votes. OnAs ~~June 4, 2018, the Company issued 300,000 shares~~ of ~~its~~March ~~Series B Preferred Stock each to Matthew~~31, ~~Mark and Kimberly~~2020, ~~in consideration of $45,000 of accrued expenses, the Company’s failure to timely pay current~~ and past salaries, and the willingness to accrue unpaid payroll and non-reimbursement of business expenses without penalty or action for all amounts. The issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the shareholders are accredited investors, there was no general solicitation, and the transaction did not involve a public offering. The Company determined that fair value of the Series B Preferred Stock issued to the Company’s CEO was $817,600. The fair value was determined as set forth in the Statement of Financial Accounting Standard ASC 820-10-35-37, Fair Value in Financial Instruments. As of September 30, 2019, and December 31, ~~2018~~2019, there were 900,000 shares of Series B Preferred Stock issued and outstanding.

Common Stock

On ~~August~~ ~~26,~~January ~~2019~~30, ~~the Company filed Amended and Restated Articles of Incorporation (the “Amendment”) with the Nevada Secretary of State~~2020, ~~pursuant to which~~ the Company increased ~~the~~a ~~authorized~~number ~~shares~~ of ~~capital~~authorized ~~stock~~common ofshares ~~the Company~~ to 114,~~000,000,000, consisting of~~ 975,000,000. ~~shares~~As of ~~common~~March ~~stock~~31, ~~par value $0.0001~~2020, ~~and~~there 25are 2,~~000~~074,~~000~~183,163 shares of ~~preferred~~ common stock, ~~par value $0~~outstanding.~~0001.~~

~~The Company~~During ~~has~~the ~~975,000,000~~period ~~authorized~~end March ~~shares of $0.0001 common stock. As of September 30, 2019, and December~~ 31, ~~2018~~2020, ~~there~~the ~~are 220,613,389~~Company ~~and~~issued ~~120~~1,~~425~~732,~~344~~065,028 ~~respectively,~~ shares of common stock ~~outstanding~~for partial conversion of principal and accrued interest.

On January 24, 2019, the Company issued 515,818 shares of restricted common stock pursuant to the CSMA (See Note 15). The shares were valued at $12,500 based on the average closing price for the three days prior to the effective date of the CSMA.

During the nine months ended September 30, 2019, the Company issued 3,961,177 shares of common stock that were classified as common stock to be issued as of December 31, 2018.

During the nine months ended September 30, 2019, the Company issued 75,528 shares of common stock to an employee as part of their compensation. The Company agreed to issue $10,000 of stock, over a twelve- month period starting November 2018 based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $2,500 and $5,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein.

During the nine months ended September 30, 2019, the Company issued 208,332 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock, over a twelve- month period based on continual employment, based on the highest closing price of the Company’s common stock for the 5 days prior to employment, and accordingly recorded stock-based compensation of $5,000 and $10,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein.

During the nine months ended September 30, 2019, the Company issued 168,540 shares of common stock to an employee as part of their compensation. The Company agreed to issue $10,000 of stock, over a twelve- month period based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $2,500 and $5,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein.

During the nine months ended September 30, 2019, the Company issued 128,808 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock over a six- month period starting November 2018 based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $5,000 and $10,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein.

During the nine months ended September 30, 2019, the Company issued 128,808 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock over a six- month period starting November 2018 based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment. This employee was terminated in July 2019. The Company recorded stock-based compensation of $5,000 and $10,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein.

During the nine months ended September 30, 2019, the Company issued 227,274 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock, over a twelve- month period based on continual employment, based on the highest closing price of the Company’s common stock for the 5 days prior to employment, and accordingly recorded stock-based compensation of $5,000 and $10,000 for the three and nine months ended September 30, 2019, included in Compensation and benefits in the consolidated statement of operations, included herein.

On April 1, 2019, the Company issued the to a consultant 2,000,000 shares of restricted common stock. The Company valued the common stock at $128,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement.

On April 2, 2019, the Company issued 625,000 shares of restricted common stock in settlement of $25,000 of accounts payable owed. The Company valued the stock at $40,625 based on the market price of the common stock on the date of the agreement. The Company recorded a loss on debt extinguishment of $15,625 related to the issuance of 625,000 shares.

On April 3, 2019, the Company issued 1,000,000 shares of restricted common stock to a consultant. The Company valued the common stock at $75,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement.

On April 17, 2019, the Company issued 1,000,000 shares of restricted common stock to a consultant. The Company valued the common stock at $67,500 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement.

On May 22, 2019, the Company issued 666,666 shares of restricted common stock to a consultant for financial services provided. The Company valued the common stock at $32,000 based on the market price of the common stock on the date of the agreement, and is included in stock-based compensation expense for the nine months ended September 30, 2019.

During the nine months ended September 30, 2019, the Company issued 88,751,413 shares of common stock for conversion of $901,775 of principal and $55,685 of accrued interest and fees, for a total of $957,460.

Common Stock to be issued

~~During~~As ~~the~~of ~~nine~~March ~~months ended September 30~~31, ~~2019,~~2020 ~~the~~there ~~Company~~are ~~issued 3~~2,~~961~~415,~~177~~671 shares of common stock ~~that were classified as common stock~~ to be issued ~~as of December 31, 2018~~.

~~During the~~NOTE ~~nine~~14 ~~months~~– ~~ended~~RISKS ~~September~~AND 30, 2019, the Company recorded 654,240 shares of common stock to be issued to employees as part of their compensation. The Company agreed to issue stock, over a twelve- month period based on continual employment, based on their offer of employment, and, accordingly, recorded $25,000 for the three and nine months ended September 30, 2019, for the common stock to be issued (issued on October 9, 2019).UNCERTAINTIES

AsThe Company's business and operations are sensitive to general business and economic conditions in the United States. A host of ~~September~~factors ~~30,~~beyond ~~2019~~the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, ~~there~~downturn ~~were~~or 3otherwise,~~066,912~~ ~~shares~~local ofcompetition ~~common~~or ~~stock~~changes toin beconsumer taste. ~~issued~~These adverse conditions could affect the Company's financial condition and the results of its operations.

~~NOTE~~In December 2019, a novel strain of coronavirus 17(COVID-19) –was ~~SUBSEQUENT~~reported ~~EVENTS~~in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies, and financial markets, leading to a global economic downturn. As a result, the Company experienced a negative impact to its operating results. Regarding future operations, the related financial impact and duration cannot be reasonably estimated at this time.

~~From August~~NOTE 1,15 ~~2019,~~– ~~through~~SUBSEQUENT November 11, 2019, the Company received conversion notices for the issuances of 26,886,621 shares of common stock for conversion of $83,333 of principal and $5,679 of accrued interest on convertible notes.EVENTS

30Subsequent to period end, the Company received conversion notices for the issuance of 4,749,544,256 shares of common stock for conversion of $3,651,848 of principal and $1,067,034 of accrued interest on convertible notes.

OnSubsequent ~~October~~to 3,period ~~2019~~end, the Company issued ~~an 8% convertible promissory note (the “Master Note”) in the aggregate principal amount of up to $150~~66,~~000 in exchange for an aggregate purchase price of up to $135~~410,~~000~~092 with an original issue discount of $15,000 to cover the Investor’s accounting fees, due diligence fees, monitoring and other transactional costs incurred in connection with the purchase and sale of the Master Note, which is included in the principal balance of the Note. On October 3, 2019, the Investor funded the first tranche under the Master Note, and the Company received $65,000 (after payment of $2,000 of the Investor’s legal fees) for this first tranche of $75,000 under the Master Note and on the same date, the Company issued the Note to the Investor. The Note is convertible into shares of ~~the Company’s~~ common stock, atas apart ~~conversion price equal to the lesser~~ of ~~(1)~~compensation ~~70% of~~for ~~the~~services ~~lowest~~based ~~trading price or lowest closing bid price during the previous 15 trading day period ending~~ on the ~~last~~market ~~completed trading date prior to the issuance of the Master Note and (2) 70% multiplied by the lower of the lowest trading~~ price ~~or lowest closing bid price~~ of the ~~Company’s~~ common stock ~~during the 15 day trading period ending~~ on the ~~latest~~date ~~completed trading day of~~ the ~~common~~Company ~~stock~~agreed ~~prior~~ to ~~the~~issue ~~date of conversion of~~ the ~~Master Note~~shares.

~~On October~~Subsequent 9,to ~~2019~~period end, the Company issued ~~654~~65,~~240~~000,000 shares of ~~restricted~~ common stock tofor ~~employees~~cash ~~(see~~for ~~note~~a ~~16)~~total value of $650,000.

OnSubsequent ~~October~~to ~~18,~~period ~~2019~~end, the Company issued ~~to a third-party investor a convertible redeemable note (the “Note”) with a face value of $100~~127,~~000~~653,805 ~~with~~shares ~~an original issue discount~~ of ~~$10,000, The note matures on October 18, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's~~ common stock, ~~based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior~~ to ~~conversion. The note was funded on October~~ ~~18,~~settle ~~2019,~~payables ~~when~~in the ~~Company~~amount ~~received proceeds~~ of $85651,~~500, after disbursements for the lender’s transaction costs, fees and expenses~~034.

OnSubsequent ~~November 1, 2019, the Company issued~~ to aperiod ~~third-party investor a convertible redeemable note (the “Note”) with a face value of $57~~end,~~750,~~ ~~with an original issue discount of $5~~216,~~250~~000,000 ~~The note matures on November 1, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's~~ common ~~stock,~~shares ~~based on~~were ~~a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion~~cancelled. ~~The note was funded on November 1, 2019, when the Company received proceeds of $50,000, after disbursements for the lender’s transaction costs, fees and expenses.~~

~~On November~~Subsequent 1,to ~~2019, the Company entered into a Payment Rights Purchase and Sale Agreement for $87,000 with a third- party, whereby~~period ~~the Company received $58~~end,~~260,~~ ~~after disbursements for~~ the ~~lender’s~~technology ~~transaction~~fee ~~costs,~~was ~~fees~~fully ~~and expenses on November 1~~impaired, ~~2019. The~~resulting ~~agreement~~in ~~requires~~impairment ~~the~~expense ~~Company to make daily payments~~ of $~~791~~775,000 ~~over~~(Note ~~the 5 month term of the agreement~~4).

At various times subsequent to period end, the Company entered into convertible promissory notes with principal amounts totaling $3,132,504 with a third parties for which the proceeds were used for operations. The convertible promissory notes incur interest at rates from 8% to 12% per annum and mature on dates ranging from March 2021 to December 2022. The convertible promissory notes are convertible to shares of the Company’s common stock 6 months after issuance. The conversion price per share is equal to 65-90% of the lowest trading prices of the Company’s common stock during the fifteen (15) trading days immediately preceding the applicable conversion date. The trading price is defined within the agreement as the closing bid price on the applicable trading market. The convertible promissory notes include various default provisions for which the default interest rate increases to 24%.

At various times subsequent to period end, the Company entered into convertible promissory notes with principal amounts totaling $1,640,000 with a third parties for which the proceeds were used for operations. The convertible promissory notes incur interest at rates from 8% to 12% per annum and mature on dates ranging from March 2021 to February 2023. The convertible promissory notes are convertible to shares of the Company’s common stock 6 months after issuance. The conversion price is set at price of $0.01 per shares. The convertible promissory notes include various default provisions for which the default interest rate increases to 24%.

At various times subsequent to period end, the Company entered into promissory notes with principal amounts totaling $2,435,210 with a third parties for which the proceeds were used for operations. The promissory notes incur interest at rates from 8% to 10% per annum and mature on dates ranging from June 2023 to August 2023. The convertible promissory notes are convertible to shares of the Company’s common stock 6 months after issuance. The conversion price is set at price of $0.01 per shares. The promissory notes include various default provisions for which the default interest rate increases to 14-24%.

Subsequent to period end, convertible promissory notes in the total principal amount of $3,432,300 and accrued interest of $192,294 were forgiven.

Subsequent to period end, promissory notes in the total principal amount of $2,435,210 and accrued interest of $68,793 were forgiven.

On November 22, 2021, the Company purchased Hearing Assist II, LLC. The Company acquired 100% interest in the entity for a total consideration of 591,209,963 common shares valued at $8,513,423 on the day of purchase. As part of the acquisition, the Company assumed assets in the amount of $15,713,000, consisting of trademarks, domains, customer lists, customer contracts, licenses, royalties, other contracts, and liabilities in the amount of $7,199,678.

On September 30, 2021, the Company entered into an Asset Purchase agreement with iHear Medical, Inc. pursuant to which the Company received a number of intangible assets, equipment, customer database and inventory for a total consideration of 400,000 preferred series C shares and $1,000,000 convertible note. Preferred shares valued at $666,667 on the day of purchase. As part of the acquisition, the Company assumed assets in the amount of $1,666,667, consisting of inventory, equipment, customer lists, patents and other technology-based intangibles.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.

3118

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto for the ~~years~~year ended December 31, ~~2018~~2019 and ~~2017 and~~ filed by the Company on Form 10-K with the Securities and Exchange Commission on ~~April~~September 1614, ~~2019~~2022.

This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

While our financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, our independent auditor’s report on our financial statements for the years ended December 31, ~~2018~~2020 and ~~2017~~2019 includes a “going concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Management’s plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 4 to the unaudited condensed consolidated financial statements.

Corporate History and Current Business

InnerScope Hearing Technologies, Inc. (“Company”, “InnerScope”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business in Roseville, California. The Company was originally named InnerScope Advertising Agency, Inc. and was formed to provide advertising and marketing services to retail establishments in the hearing device industry. On August 25, 2017, the Company changed its name to InnerScope Hearing Technologies, Inc. to better reflect the Company’s current direction as a technology driven company with a scalable business to business (BTB) solution and business to consumer (and BTC) solution. The Company also competes in the DTC (Direct-to-Consumer) markets with its own line of “Hearables”, and “Wearables”, including APPs on the iOS and Android markets. On September 10, 2018, the Company acquired all of the assets and assumed certain liabilities of Kathy L Amos Audiology (“Amos Audiology”) in exchange for 340,352 shares of common stock (the “Acquisition”). Amos Audiology provides retail hearing aid sales and audiological services in the East Bay area of San Francisco. Additionally, the Company has opened 9 retail hearing device clinics, manages two clinics owned by a related party and plans on using management’s unique and successful talents on acquiring and opening additional audiological brick and mortar clinics to be owned and operated by the Company.

Results of Operations

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020 compared to the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019 revenues.

Revenues for the three months ended March 31, 2020 were $81,139 compared to $186,529 for the three months ended March 31, 2019. The revenue decrease was primarily due to COVID-19.

Revenues for the three and nine months ended September 30, 2019 were $250,781 and $656,983, respectively, compared to $59,724 and $165,715 for the three and nine months ended September 30, 2018, respectively. The revenue increase was primarily the result of the sales from retail clinics during the three and nine month periods ending September 30, 2019, partially offset by a decrease in direct print and mail services for the three and nine months ending September 30, 2019. The Company is focusing on the higher margins associated with the sales of hearing aids and hearing aid products. A breakdown of the net increase in sales is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Retail clinic sales	$	234,480	$	—	$	617,381	$	—
Online sales		16,301		44,724		24,602		63,247
Direct print, mail services and product		—		—		—		35,449
Sub total		250,781		44,724		641,983		98,696
Related party- direct print and mail services		—		—		—		22,019
Related party-Marketing and consulting fee		—		15,000		15,000		45,000
Sub total		—		15,000		15,000		67,019
Total revenues	$	250,781	$	59,724	$	656,983	$	165,715

Retail clinic sales

Retail clinic sales will continue to grow as the Company has opened 8 retail clinics in 2019, bringing the current total to 9 clinics.

Online sales

Beginning in the second quarter of 2018, the Company began to market a line of PSAP hearables and wearables and during the third quarter of 2018, expanded their line of products to include FDA registered hearing aid devices. Online sales are down in the current periods due to the marketing resources being reallocated to the Retail Centers sales operations. Online marketing platforms are ready to go with the potential of revenue increases, once the company has the proper capital resources to be allocated to online marketing. Online sales will be a major part and focus of management once the company is properly capitalized.

Related Party

On December 24, 2016, Moore Holdings, LLC. (“Moore Holdings”) acquired two retail stores from the buyer of the MFHC stores. On March 1, 2017, the Company entered into a twelve- month Marketing Agreement with each of the stores to provide telemarketing and design and marketing services for $2,500 per month per store, resulting in $~~15,000~~0 ~~of revenues for the nine months ended September 30, 2019,~~ and $15,000 ~~and~~of ~~$45,000~~revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018,~~2020 ~~respectively~~and 2019. The Marketing ~~Agreement~~ isAgreement ~~currently~~was onterminated aduring ~~month~~year toending ~~month~~December ~~basis. As of April 1~~31, 2019~~, the Company stopped recording the marketing income and will only record such income going forward based on payments received from the related party~~. ~~For the nine months ended September 30, 2018, the Company also provided direct print and mailing services for the two retail sales and recognized revenue of $22,019, for the services.~~

Cost of sales

The Company records cost of sales on products sold in the retail clinics on delivery to the customer and for online sales, when shipped. We recognize the costs of designing, producing, printing and mailing advertisements for our client’s direct mail marketing campaigns in cost of sales in the month of the mailing as well as the licensing of telemarketing software. Cost of sales for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019,~~2020 ~~was $103,010~~ and ~~$284~~2019,~~837,~~ ~~respectively, compared to~~ was $2948,~~085~~852 and $9982,~~751 for the three and nine months ended September 30, 2018, respectively~~364.

Operating Expenses

Operating expenses were $1473,~~002,985~~854 and $3976,~~118,674~~731 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019,~~2020 ~~respectively, compared to $482,705~~ and ~~$2,085,980 for the three and nine months ended September 30, 2018, respectively~~2019. The increase in expenses in the current periods was as follows:

Operating Expenses:	March 31, 2020		March 31, 2019
Compensation and benefits (including stock-based fees of $0 and $14,084, respectively)		210,769		363,737
Advertising and promotion		9,689		167,784
Professional fees (including stock-based fees of $0 and $110,416, respectively)		67,037		137,394
Rent, including related party		80,963		95,929
Investor relations		12,797		75,248
Depreciation and Amortization expense		31,302		—
Other general and administrative		60,737		136,639
Total operating expenses		473,294		976,731

	Three months ended September 30,				Nine months ended September 30,
Description	2019		2018		2019		2018
Compensation and benefits	$	462,770	$	177,778	$	1,261,954	$	1,263,084
Stock compensation service providers		171,500		62,597		479,791		126,837
Professional fees		26,232		112,355		95,258		279,021
Advertising and promotion		92,966		62,937		404,550		137,736
Investor relations		11,297		11,482		176,073		87,901
Rent, including related party of $36,000 for three months (2018 and 2019) and $108,000 for nine months (2018 and 2019)		100,240		39,998		294,302		111,988
Other General and administrative		137,980		15,568		407,105		79,413
Total	$	1,002,985	$	482,705	$	3.118,674	$	2,085,980

Overall decrease in operating expenses across the board was mainly due to shutdowns related to COVID-19.

~~Compensation and~~Increase ~~benefits increased~~ in ~~the current three month period and was substantially the same for the nine months ended September 30,~~depreciation 2019 compared to the nine months ended September 30, 2018. The Company acquired Amos Audiology in September 2018 as well as having opened two retail clinics in 2018, compared to having a total of nine clinics as of September 30, 2019, all of which required staffing as well as additional office support staff. Included in compensation and ~~benefits~~amortization is ~~stock~~mainly ~~issued~~related toamortization employees for $25,000 and $75,000 for the three and nine months ended September 30, 2019, respectively, and $772,600 for the nine months ended September 30, 2018. On June 4, 2018, the Company issued 300,000 shares of ~~its Series B Preferred Stock each to Matthew, Mark and Kimberly, in consideration of $45,000 of accrued expenses,~~ the ~~Company’s~~Technology ~~failure~~Fee ~~to timely pay current and past salaries, and the willingness to accrue unpaid payroll and non-reimbursement of business expenses without penalty or action for all amounts~~Access. The Company determined that fair value of the Series B Preferred Stock issued to the Company’s CEO was $817,600, and accordingly $772,600 is included in stock compensation expense for the three and six months ended June 30, 2018. The fair value was determined as set forth in the Statement of Financial Accounting Standard ASC 820-10-35-37, Fair Value in Financial Instruments.

Stock based compensation to service providers of $171,500 and $479,791 for the three and nine months ended September 30, 2019, respectively, is comprised of:

• The amortization of deferred stock compensation of $171,500 and $435,291 for the three and nine months ended September 30, 2019.

• On January 24, 2019, the Company issued 515,818 shares of restricted common stock pursuant to a consultant agreement. The shares were valued at $12,500 and included in stock- based compensation expense for the nine months ended September 30, 2019, based on the average closing price for the three days prior to the effective date of the consultant’s agreement.

• On May 22, 2019, the Company issued 666,666 shares of restricted common stock for financial services performed. The shares were valued at $32,000 and included in stock-based compensation expense for the nine months ended September 30, 2019.

Stock based compensation for the three and nine months ended September 30, 2018, is comprised of:

• On February 23, 2018, the Company issued 111,111 shares of common stock to a marketing consultant. The shares were valued at $7,778, based on the market price of the common stock on January 31, 2018, the date the Company agreed to issue the shares and are included in the nine months ended September 30, 2018.

• On February 23, 2018, the Company issued 10,397 shares of common stock to an employee. The shares were valued at $728, based on the market price of the common stock on January 31, 2018, the date the Company agreed to issue the shares and are included in the nine months ended September 30, 2018.

• On February 28, 2018, the Company recorded 133,067 shares of common stock to be issued to a marketing consultant (see Note 12) and recorded $8,117 of stock-based compensation expense (based on the market price of the common stock on that date) and are included in the nine months ended September 30, 2018.

• On March 31, 2018, the Company recorded 133,333 shares of common stock to be issued to the same marketing consultant and recorded $9,067 of stock-based compensation expense (based on the market price of the common stock on that date) and are included in the nine months ended September 30, 2018.

• The amortization of deferred stock compensation of $25,000 is included in the nine months ended September 30, 2018.

• On April 30, 2018, the Company recorded 166,667 shares of common stock to be issued to the same marketing consultant and recorded $6,883 of stock-based compensation expense (based on the market price of the common stock on that date) and is included in the nine months ended September 30, 2018.

• On May 31, 2018, the Company recorded 380,952 shares of common stock to be issued to the same marketing consultant and recorded $6,667 of stock-based compensation expense (based on the market price of the common stock on that date) and is included in the nine months ended September 30, 2018.

• On August 27, 2018, the Company issued 100,000 shares of restricted common stock to a consultant pursuant to the CPRM Agreement (See Note 13). The shares were valued at $8,430 of stock-based compensation expense (based on the market price of the common stock on that date) and is included in the three and nine months ended September 30, 2018.

• On August 27, 2018, the Company issued 129,534 shares of restricted common stock pursuant to the CSMA (See Note 13). The shares were valued at $12,500 based on the average closing price for the three days prior to the effective date of the CSMA and is included in the three and nine months ended September 30, 2018.

• On August 27, 2018, the Company issued 2,500,000 shares of restricted common stock pursuant to the CA (See Note 13). The shares were valued at $175,000 based on the market price of the common stock, and were recorded as deferred stock compensation on the condensed consolidated balance sheet presented herein, and will be amortized to stock compensation expense over the term of the CA. For the three and nine months ended September 30, 2018, the Company amortized $29,167 to stock compensation expense.

• On September 7, 2018, the Company recorded 129,534 shares of restricted common stock to be issued pursuant to the CSMA (See Note 13). The shares were valued at $12,500 based on the average closing price for the three days prior to the effective date of the CSMA and is included in the three and nine months ended September 30, 2018. The shares were certificated om October 9, 2018.

Professional fees, excluding stock based compensation to service providers discussed above, for the three and nine months ended September 30, 2019, were $26,232 and $95,258, respectively, compared to $112,355 and $279,021 for the three and nine months ended September 30, 2018, respectively. Professional fees consisted of:

	Three months ended September 30,				Nine months ended September 30,
Description	2019		2018		2019		2018
Legal fees	$	1,094	$	38,893	$	10,322	$	106,061
Business consulting		—		51,250		1,455		95,374
Accounting and auditing fees		25,000		18,500		79,000		65,500
Information technology		138		3,712		4,481		12,086
Total	$	26,232	$	112,355	$	95,258	$	279,021

Advertising and marketing expenses increased in the three and nine months ended September 30, 2019, as a result of the Company heavily promoting their retail clinics. The costs include direct mail advertising as well as newspaper print advertising.

Rent, including related party, increased for the three and nine months ended September 30, 2019, compared to the three and nine months ended September 30, 2018 as a result of the eight leases related to the Company’s retail clinics in the 2019 periods, none of which were open during the 2018 periods.

Other income (expense), net

Other expenses, net, were $~~616~~5,~~833 and $2~~758,~~233,968~~ 943 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020, ~~respectively,~~ compared to other ~~income,~~expenses ~~net~~ of $~~661~~1,~~739 and other expense~~130,472 ~~net of $321,281~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018, respectively~~2019. ~~Interest~~ Interest expense of $1747,~~109~~007,~~565~~ ~~and $2,344,763, respectively,~~ including amortization of debt discounts increased significantly compared to interest expense of $~~399~~506,~~278~~742 ~~and $713,070~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018, respectively~~2019. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020, a ~~credit to~~ derivative ~~expenses~~loss of $~~501~~5,~~977 and $159~~027,~~617,~~581 ~~respectively,~~ compared to derivative expenses of $~~270~~577,~~849~~838 ~~and $940,819~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018, respectively~~2019. Also included in other expenses for the ~~nine~~ three months ended ~~September~~March 3031, 2019, was a loss on extinguishment of debt of $44,393. Included in other income for the three and nine months ended September 30, 2018 was $1,297,223 as a result of the Helix settlement, whereby the Company recognized $847,223 previously classified as deferred revenues and $450,000 of cash received from the settlement. There was a gain on debt extinguishment of $33,775 for the three and nine months ended September 30, 2018.

$44,852. There was a gain on equity investment in the amount of $15,645 during three months ended March 31, 2020 and a loss of $1,040 during three months ended March 31, 2019.

Net loss

Net loss for the three ~~and nine~~ months ended ~~September~~March 3031,~~2019~~ 2020, was $16,~~472~~200,~~047~~510 ~~and $4,980,496, respectively,~~ compared to net ~~income of $209,673 and net~~ loss of $2,~~341~~003,~~296~~038 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as a result of the changes in operating and other expenses as described above.

Capital Resources and Liquidity

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs to pay ongoing obligations. As of ~~September 30~~March 31, ~~2019~~2020, we had cash of $1011,~~477~~868, aan ~~decrease~~ increase of $777,~~348~~409, from $874,~~826~~459 as of December 31, ~~2018~~2019. As of ~~September~~March 3031, ~~2019~~2020, we had current liabilities of $613,~~305~~354,~~030~~401 (including derivative liabilities of $28,~~775~~204,~~571~~211) compared to current assets of $~~700~~168,~~298~~375 which resulted in working capital deficit of $513,~~604~~186,~~732~~026. The current liabilities are comprised of accounts payable, accrued expenses, notes payable, convertible notes payable, operating lease liabilities, customer deposits, salaries and taxes payable, and derivative liabilities.

Our ability to operate over the next twelve months, is contingent upon continuing to realize sales revenue sufficient to fund our ongoing expenses. If we are unable to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our working capital, or other cash requirements. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. Since September 30, 2019, we generated cash flows of $248,500, from the issuance of $232,750 of convertible notes and $60,000 note payable and approximately $75,000 received from the sales of hearing aid products. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time.20

Our ability to operate over the next twelve months, is contingent upon continuing to realize sales revenue sufficient to fund our ongoing expenses. If we are unable to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our working capital, or other cash requirements. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time.

Operating Activities

Cash used in operating activities was $2194,~~282,036~~019 for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 compared to $~~628~~785,~~362~~106 for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019. For the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020, the cash used in operations was a result of the net loss of $46,~~980~~200,~~496~~510, a ~~credit~~loss toon ~~derivative~~fair ~~expense~~value of derivatives of $~~159~~5,~~617~~027,582, amortization ~~and~~of ~~the~~debt ~~changes~~discount in ~~operating~~the ~~assets~~amount ~~and liabilities~~ of $~~248~~628,~~817~~163, ~~partially offset~~depreciation byand ~~the~~amortization ~~non-~~in ~~cash~~the ~~expense~~amount ~~items~~ of ~~depreciation~~$31,300, ~~amortization~~gain ~~and~~on ~~amortization~~equity ofinvestment in ~~debt~~the ~~discounts~~amount of $215,~~500,782~~645 and ~~stock- based~~the ~~compensation~~changes in operating assets and liabilities of $~~554~~335,~~791~~091. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2018~~2019, the cash used in operations was a result of the net loss of $2,~~341~~003,~~296~~038, ~~the~~a ~~recognition~~loss on fair value of derivatives of $~~847~~577,~~223~~838, amortization of ~~deferred~~debt ~~revenue~~discount in the amount of $456,030, depreciation and ~~increases~~amortization in ~~assets~~the amount of $66111,~~063~~226, ~~offset~~loss byon ~~increases~~ equity investment in ~~liabilities~~the amount of $~~200~~1,~~161~~040, ~~and~~loss ~~the~~on ~~non-~~debt ~~cash~~extinguishment ~~expense~~in ~~items~~the amount of ~~depreciation~~$44,852, ~~and~~non-cash ~~amortization~~interest expense of $~~621~~2,~~189~~500, ~~derivative~~stock-based ~~expense~~compensation of $~~940~~124,~~819~~500 and ~~stock-~~the ~~based~~changes ~~compensation~~in operating assets and liabilities of $~~899~~100,~~437~~054.

Investing Activities

Cash used in investing activities was $732,~~095~~672 for the ~~nine~~three months ended ~~September~~March 3031, ~~2019,~~2020 and consisted of purchases of equipment of $492,~~614~~672. ~~and~~Cash ~~payments~~used ofin investing activities was $2326,~~481~~503 for ~~security~~the ~~deposits.~~three ~~There~~months ~~was~~ended noMarch ~~investing~~31, ~~activity~~2019 ~~for~~and ~~the~~consisted ~~nine~~of ~~months~~purchases ~~ended~~of ~~September 30~~equipment of $17,322 ~~2018~~and payment of security deposit of $9,181.

Financing Activities

For the ~~nine~~three months ended ~~September 30~~March 31, ~~2019~~2020, cash provided by financing activities was $2204,~~277,783~~100 compared to $~~608~~758,~~526~~697 for the ~~nine~~ three months ended ~~September~~March 3031, ~~2018~~2019. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2019~~2020, the Company has received $2199,~~308~~650,~~775,~~ net of debt issuance costs, from the issuance of ~~$2,793,117 of~~ convertible notes. ~~and~~Further a ~~cash of~~ $894,~~100,~~450 ~~net~~change ofin ~~debt~~bank ~~issuance~~overdraft ~~costs,~~occurred ~~from~~during ~~the issuance~~three ~~of note payables of $115,473. For the nine~~ months ~~ended~~ending ~~September~~March 3031, ~~2019, the Company made payments of $102,530 on notes payable and net payments to shareholders of $17,562~~2020. For the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, the Company has received $~~772~~813,~~500~~475 from the issuance of $~~860~~996,~~300~~670 of convertible notes, and cash of $327,~~600~~400 from the issuance of a note ~~of $43,358, and related party notes~~ payable ~~issued~~ of ~~in the aggregate of~~ $328,~~600~~584. For the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, the Company made ~~principal~~ payments of $~~149~~20,~~546~~784 on ~~convertible~~ notes, ~~$55~~payable,~~578~~ onand ~~notes~~net ~~payable~~repayments ~~and~~of $641,~~000~~394 ~~paid~~to ona related party ~~notes~~resulting ~~payable~~in net cash provided by financing activities of $758,697.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

Critical Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"). The condensed consolidated financial statements of the Company include the consolidated accounts of InnerScope and its’ wholly owned subsidiaries ILLC and Intela-Hear, a California limited liability company. All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations. Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. The Company accepts prepayments on hearing aids and records the amount received as customer deposits on its’ balance sheet. When the Company delivers the hearing aid to the customer, revenue is recognized as well as the corresponding cost of sales.

Income taxes

The Company uses the liability method of accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance can be provided for a net deferred tax asset, due to uncertainty of realization.

Net loss per common share

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and he determined that our disclosure controls and procedures were not effective due to control deficiencies. During the period we did not have additional personnel to allow segregation of duties to ensure the completeness or accuracy of our information. The Company does not have an Audit Committee to oversee management activities, and the Company is dependent on third party consultants for the financial reporting function.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended ~~September~~Match 3031, ~~2019,~~ 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

InnerScope and the Moores filed their Answer and Affirmative Defenses to the Complaint on June 27, 2017. On the same date, InnerScope, the Moores, and MFHC filed a counterclaim. On February 27, 2018, the Counterclaim was amended to include four claims for breach of contract, one claim for anticipatory breach of contract, one claim for negligent misrepresentation, and one claim for account stated. On August 13, 2018, Helix, InnerScope and the Moores executed a Settlement Agreement.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities 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

~~On July~~During ~~5, 2019,~~ the ~~Company~~period ~~issued~~end ~~64,404~~March ~~shares of common stock each to two employees as part of their compensation. The Company~~31, ~~agreed to issue $20~~2020,~~000~~ ofthe ~~stock~~Company ~~over~~issued ~~a twelve- month period based on continual employment~~1, ~~to each~~732,065,028 ~~based~~shares ~~on the average closing price~~ of ~~the Company’s~~ common stock for ~~the~~partial 3conversion ~~days~~of ~~prior~~principal toand ~~employment~~accrued interest.

OnThe issuances described above were ~~July~~made 5,in ~~2019,~~reliance on the ~~Company~~exemption ~~issued~~from ~~104,166~~registration ~~shares~~provided by Sections 3(a)(9) and 4(a)(1) of the Securities Act as the common stock was toissued anin ~~employee~~exchange asfor ~~part~~debt securities of ~~their~~the ~~compensation. The~~ Company ~~agreed to~~held ~~issue~~by ~~$20~~each shareholder,~~000~~ ofthere ~~stock~~was no additional consideration for the exchange, there ~~over~~was ano ~~twelve-~~remuneration ~~month~~for ~~period~~the ~~based~~solicitation onof ~~continual~~the ~~employment~~exchange, ~~based~~the onshareholders ~~the~~were ~~highest~~not ~~closing~~affiliates, ~~price~~and ofthey had held the underlying ~~Company’s~~debt ~~common~~securities ~~stock~~ for the 5required ~~days~~time. ~~prior~~The holders provided legal opinions pursuant to ~~employment~~Section 4(a)(1) of Securities Act, or Rule 144 promulgated thereunder.

~~On July~~Item ~~5, 2019, the Company issued 84,270 shares of common stock to an employee as part of their compensation~~3. ~~The~~Defaults ~~Company~~upon ~~agreed to~~Senior ~~issue $10,000 of stock, over a twelve- month period based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment.~~Securities

~~On July 5, 2019, the Company issued 37,764 shares of common stock to an employee as part of their compensation~~None. The Company agreed to issue $10,000 of stock, over a twelve- month period based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment.

~~On July~~Item ~~5, 2019, the Company issued 113,637 shares of common stock to an employee as part of their compensation~~4. ~~The~~Mine ~~Company~~Safety ~~agreed to issue $20,000 of stock, over a twelve- month period based on continual employment, based on the average closing price of the Company’s common stock for the 5 days prior to employment.~~Disclosures

~~The issuances~~Not described above related to the issuance of shares for services and are pursuant to agreements, were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) of the Securities Actapplicable.

~~On July~~Item 2,5. ~~2019,~~Other the Company issued 1,058,482 shares of restricted common stock to Eagle Equities, LLC (“Eagle”) in partial satisfaction of its obligations under, and the holder's election to convert a $18,000 principal portion and $968 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018.Information

On July 8, 2019, the Company issued 1,230.450 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $20,000 principal portion and $1,102 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018.23

39Item 6. Exhibits

On July 9, 2019, the Company issued 4,347,284 shares of restricted common stock to GS Capital Partners, LLC (“GS Capital”) in partial satisfaction of its obligations under, and the holder's election to convert a $62,500 principal portion and $2,014 of interest, of, the Company's convertible promissory note issued to GS Capital on December 4, 2018.

Exhibit Number		Description of Exhibit
3.1*		Articles of Incorporation
3.2*		Bylaws of InnerScope Advertising Agency, Inc.
3.3*		Amended and Restated Articles of Incorporation
3.4*		Amended and Restated Articles of Incorporation dated August 25, 2017
3.5*		Certificate of Designation Series A Preferred Stock dated June 4, 2018
3.6*		Certificate of Designation Series B Preferred Stock dated June 4, 2018
3.7*		Amended and Restated Articles of Incorporation dated August 7, 2018
4.3*		Private Placement Offering Memorandum
10.2*		InnerScope, Inc. Marketing Agreement between the Company and Moore Family Hearing Company, Inc.
10.3*		Acquisition Agreement and Plan of Share Exchange dated June 20, 2012, between the Company and InnerScope Advertising Agency, LLC
10.4*		Acquisition Agreement and Plan of Share Exchange dated November 1, 2013, between the Company and Intela-Hear, LLC
10.5*		Promissory Note dated April 1, 2013, between the Company and Matthew Moore
10.6*		Promissory Note dated June 25, 2013, between the Company and Matthew Moore
10.7*		June 2012 Business Consulting Agreement
10.8+*		GN ReSound Sales Agreement
10.9+*		Store Expansion Consulting Agreement
10.10+*		Consulting Agreement
10.11#*		Employment Agreement with Matthew Moore, CEO
10.12#*		Employment Agreement with Kimberly Moore, CFO
10.13*		Financial Consulting Agreement between the Company and Venture Equity, LLC
10.14*		Consulting and Representation Agreement between the Company and CorporateAds.com
10.15*		Business Loan Agreement, dated May 5, 2017, between InnerScope Advertising Agency, Inc. and Moore Holdings, LLC and First Community Bank.
10.16*		Commercial Security Agreement, dated May 5, 2017, between InnerScope Advertising Agency, Inc. and Moore Holdings, LLC and First Community Bank.
10.17*		U.S. Small Business Administration Note.
10.18*		Deed of Trust, dated May 5, 2017, among InnerScope Advertising Agency, Inc. and Moore Holdings, LLC. and First Community Bank and Placer Title Company.
10.19*		Securities Purchase Agreement dated October 5, 2017 by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.20*		Convertible Promissory Note dated October 5, 2017, by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.21*		Securities Purchase Agreement dated November 10, 2017, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.22*		Convertible Promissory Note dated November 10, 2017, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.23*		Securities Purchase Agreement dated February 8, 2018 by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.24*		Convertible Promissory Note dated February 8, 2018, by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.

On July 10, 2019, the Company issued 1,230,969 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $20,000 principal portion and $1,111 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018.24

~~On July~~10.25* ~~16,~~Securities ~~2019,~~Purchase ~~the~~Agreement ~~Company~~dated ~~issued~~April 18,~~372,583~~ ~~shares of restricted common stock to Eagle in partial satisfaction of its obligations under~~2018, by and ~~the~~between ~~holder's~~InnerScope ~~election~~Hearing ~~to convert a $20~~Technologies,~~000~~ ~~principal~~Inc. ~~portion~~ and ~~$1,138~~Carebourn ~~of interest~~Capital, ~~of, the Company's convertible promissory note issued to Eagle on November 2, 2018~~L.P.

On July 18, 2019, the Company issued 1,431,731 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $20,000 principal portion and $1,147 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018.

10.26*		Convertible Promissory Note dated April 8, 2018, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.27*		Securities Purchase Agreement dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.28*		Convertible Promissory Note dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.29*		Convertible Back- End Promissory Note dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.30*		Mutual Settlement Agreement and Release with Helix Hearing Care (California), Inc.
10.31*		Manufacturing Design and Marketing Agreement.
10.32*		Securities Purchase Agreement between InnerScope Hearing Technologies, Inc. and Eagle Equities, LLC, dated November 2, 2018.
10.33*		Form of 8% Convertible Redeemable Notes issued by Company to Eagle Equities, LLC, dated November 2, 2018.
10.34*		$255,500 Principal Amount 8% Collateralized Secured Promissory Note issued by Eagle Equities, LLC.
10.35*		First Amendment to Manufacturing Design and Marketing Agreement (the “Zounds Agreement”) between InnerScope Hearing Technologies, Inc. and Zounds Hearing, Inc., a Delaware corporation (“Zounds”), dated November 2, 2018
10.36*		Joint Development Agreement between InnerScope Hearing Technologies, Inc. and Erchonia Corporation.
10.37*		Exclusive Distributor Agreement between InnerScope Hearing Technologies, Inc. and Erchonia Corporation.
31.1**		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2**		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1**		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS**		XBRL Instance
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase
101.LAB**		XBRL Taxonomy Extension Labels Linkbase
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

~~On July~~* ~~23,~~Previously 2019, the Company issued 2,362,599 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $25,000 principal portion and $1,461 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018filed.

On+ ~~July~~Confidential ~~24,~~Treatment ~~2019,~~has ~~the~~been ~~Company~~requested ~~issued~~for ~~4,223,875~~certain ~~shares~~portions ofthereof ~~restricted~~pursuant ~~common stock~~ to GSConfidential ~~Capital~~Treatment inRequest ~~partial~~under ~~satisfaction~~Rule of406 ~~its obligations~~promulgated under, ~~and~~ the ~~holder's~~Securities ~~election~~Act. toSuch ~~convert~~provisions ~~a $38,000 principal portion~~ and ~~$1,916~~attachments ofhave ~~interest,~~been ~~of,~~filed with the ~~Company's~~Securities ~~convertible promissory~~and ~~note~~Exchange ~~issued to GS Capital on December 4, 2018~~Commission.

~~On July~~** ~~29,~~Filed 2019, the Company issued 2,838,690 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $30,000 principal portion and $1,793 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018.Herewith

~~On August~~# 5,Denotes ~~2019,~~management ~~the~~contract ~~Company~~or ~~issued 4,342,803 shares of restricted common stock to Eagle in partial satisfaction of its obligations~~compensatory ~~under,~~plan ~~and~~or ~~the holder's election to convert a $40,100 principal portion and $2,459 of interest, of, the Company's convertible promissory note issued to Eagle on November 2, 2018~~arrangement.

On August 9, 2019, the Company issued 3,013,333 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $20,000 principal portion and $1,093 of interest, of, the Company's convertible promissory note issued to Eagle on December 4, 2018.SIGNATURES

~~On August~~Pursuant 9,to ~~2019,~~ the ~~Company~~requirements ~~issued 7,829,104 shares~~ of ~~restricted~~Section ~~common~~13 ~~stock~~or to15(d) of GSthe ~~Capital~~Securities inExchange ~~partial~~Act ~~satisfaction~~ of ~~its obligations under~~1934, ~~and~~ the ~~holder's~~Registrant ~~election~~has toduly ~~convert~~caused athis ~~$52,000~~report ~~principal~~to ~~portion~~be ~~and~~signed ~~$2,804~~on ofits ~~interest,~~behalf ~~of,~~by the ~~Company's~~undersigned, ~~convertible~~thereunto ~~promissory~~duly ~~note issued to GS Capital on December 4, 2018~~authorized.

~~On August~~Dated: ~~14,~~January ~~2019~~26, the Company issued 3,016,509 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $10,000 principal portion and $1,116 of interest, of, the Company's convertible promissory note issued to Eagle on December 4, 2018.2023

40INNERSCOPE HEARING TECHNOLOGIES, INC.

~~On September~~By: ~~11, 2019, the Company issued 5,172,078 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder'~~/s/ ~~election~~Matthew ~~to convert a $45,000 principal portion and $2,790 of interest, of, the Company's convertible promissory note issued to Eagle on December 4, 2018.~~Moore

~~On September~~Matthew 19, 2019, the Company issued 5,065,608 shares of restricted common stock to Eagle in partial satisfaction of its obligations under, and the holder's election to convert a $40,000 principal portion and $2,551 of interest, of, the Company's convertible promissory note issued to Eagle on December 4, 2018.Moore

~~On September~~Chief ~~24,~~Executive ~~2019,~~Officer ~~the Company issued 3,762,376 shares of restricted common stock to GS Capital in partial satisfaction of its obligations under, and the holder's election to convert a $25,000~~ (principal ~~portion~~executive ~~and $1,600 of interest, of, the Company's convertible promissory note issued to GS Capital on December 4, 2018.~~officer)

~~On September~~By: ~~24, 2019, the Company issued 6,019,802 shares of restricted common stock to GS Capital in partial satisfaction of its obligations under, and the holder'~~/s/ ~~election to convert a $40,000 principal portion and $2,560 of interest, of, the Company's~~Kimberly ~~back end convertible promissory note issued to GS Capital on December 4, 2018.~~Moore

~~The issuances~~Kimberly described above were made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(1) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, the shareholders were not affiliates, and they had held the underlying debt securities for the required time. The holders provided legal opinions pursuant to Section 4(a)(1) of Securities Act, or Rule 144 promulgated thereunder.Moore

~~Item 3.~~Chief ~~Defaults~~Financial ~~upon~~Officer ~~Senior~~(principal ~~Securities~~financial and accounting officer)

~~None.~~25

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Item 6. Exhibits

Exhibit Number		Description of Exhibit
3.1*		Articles of Incorporation
3.2*		Bylaws of InnerScope Advertising Agency, Inc.
3.3*		Amended and Restated Articles of Incorporation
3.4*		Amended and Restated Articles of Incorporation dated August 25, 2017
3.5*		Certificate of Designation Series A Preferred Stock dated June 4, 2018
3.6*		Certificate of Designation Series B Preferred Stock dated June 4, 2018
3.7*		Amended and Restated Articles of Incorporation dated August 7, 2018
4.3*		Private Placement Offering Memorandum
10.2*		InnerScope, Inc. Marketing Agreement between the Company and Moore Family Hearing Company, Inc.
10.3*		Acquisition Agreement and Plan of Share Exchange dated June 20, 2012, between the Company and InnerScope Advertising Agency, LLC
10.4*		Acquisition Agreement and Plan of Share Exchange dated November 1, 2013, between the Company and Intela-Hear, LLC
10.5*		Promissory Note dated April 1, 2013, between the Company and Matthew Moore
10.6*		Promissory Note dated June 25, 2013, between the Company and Matthew Moore
10.7*		June 2012 Business Consulting Agreement
10.8+*		GN ReSound Sales Agreement
10.9+*		Store Expansion Consulting Agreement
10.10+*		Consulting Agreement
10.11#*		Employment Agreement with Matthew Moore, CEO
10.12#*		Employment Agreement with Kimberly Moore, CFO
10.13*		Financial Consulting Agreement between the Company and Venture Equity, LLC
10.14*		Consulting and Representation Agreement between the Company and CorporateAds.com
10.15*		Business Loan Agreement, dated May 5, 2017, between InnerScope Advertising Agency, Inc. and Moore Holdings, LLC and First Community Bank.
10.16*		Commercial Security Agreement, dated May 5, 2017, between InnerScope Advertising Agency, Inc. and Moore Holdings, LLC and First Community Bank.
10.17*		U.S. Small Business Administration Note.
10.18*		Deed of Trust, dated May 5, 2017, among InnerScope Advertising Agency, Inc. and Moore Holdings, LLC. and First Community Bank and Placer Title Company.
10.19*		Securities Purchase Agreement dated October 5, 2017 by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.20*		Convertible Promissory Note dated October 5, 2017, by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.21*		Securities Purchase Agreement dated November 10, 2017, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.22*		Convertible Promissory Note dated November 10, 2017, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.23*		Securities Purchase Agreement dated February 8, 2018 by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.24*		Convertible Promissory Note dated February 8, 2018, by and between InnerScope Hearing Technologies, Inc. and Power Up Lending Group, LTD.
10.25*		Securities Purchase Agreement dated April 8, 2018, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.

10.26*		Convertible Promissory Note dated April 8, 2018, by and between InnerScope Hearing Technologies, Inc. and Carebourn Capital, L.P.
10.27*		Securities Purchase Agreement dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.28*		Convertible Promissory Note dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.29*		Convertible Back- End Promissory Note dated May 11, 2018, by and between InnerScope Hearing Technologies, Inc. and One44 Capital LLC
10.30*		Mutual Settlement Agreement and Release with Helix Hearing Care (California), Inc.
10.31*		Manufacturing Design and Marketing Agreement.
10.32*		Securities Purchase Agreement between InnerScope Hearing Technologies, Inc. and Eagle Equities, LLC, dated November 2, 2018.
10.33*		Form of 8% Convertible Redeemable Notes issued by Company to Eagle Equities, LLC, dated November 2, 2018.
10.34*		$255,500 Principal Amount 8% Collateralized Secured Promissory Note issued by Eagle Equities, LLC.
10.35*		First Amendment to Manufacturing Design and Marketing Agreement (the “Zounds Agreement”) between InnerScope Hearing Technologies, Inc. and Zounds Hearing, Inc., a Delaware corporation (“Zounds”), dated November 2, 2018
10.36*		Joint Development Agreement between InnerScope Hearing Technologies, Inc. and Erchonia Corporation.
10.37*		Exclusive Distributor Agreement between InnerScope Hearing Technologies, Inc. and Erchonia Corporation.
31.1**		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2**		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1**		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS**		XBRL Instance
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase
101.LAB**		XBRL Taxonomy Extension Labels Linkbase
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

*	Previously filed.
+	Confidential Treatment has been requested for certain portions thereof pursuant to Confidential Treatment Request under Rule 406 promulgated under the Securities Act. Such provisions and attachments have been filed with the Securities and Exchange Commission.
**	Filed Herewith
#	Denotes management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 14, 2019

INNERSCOPE HEARING TECHNOLOGIES, INC.

By: /s/ Matthew Moore

Matthew Moore

Chief Executive Officer (principal executive officer)

By: /s/ Kimberly Moore

Kimberly Moore

Chief Financial Officer (principal financial and accounting officer)

Filing Compare · INNERSCOPE HEARING TECHNOLOGIES, INC.