~~See~~ AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018


REVENUE	$	159,159		$	-		$	236,785		$	-

COST OF GOODS SOLD		128,390			-			175,432			-

GROSS PROFIT		30,769			-			61,353			-

SELLING, GENERAL AND ADMINISTRATIVE
Research and development		41,845			56,110			91,911			119,328
Professional fees		74,569			87,755			225,744			207,473
Sales and marketing expenses		21,670			38,193			81,468			69,268
Occupancy expenses		19,018			8,151			64,768			44,477
General and administrative expenses		108,977			177,616			430,504			440,841
TOTAL SELLING, GENERAL AND ADMINISTRATIVE		266,079			367,825			894,395			881,387

LOSS FROM OPERATIONS		(235,310	)		(367,825	)		(833,042	)		(881,387	)

OTHER INCOME (EXPENSE):
Interest expense		(13,765	)		(74,076	)		(32,789	)		(158,367	)
Other income		-			-			-			18,186
Other expense		(596	)		-			(596	)		-
Foreign currency transaction loss		(127	)		-			(127	)		-
TOTAL OTHER EXPENSE		(14,488	)		(74,076	)		(33,512	)		(140,181	)

LOSS BEFORE INCOME TAXES		(249,798	)		(441,901	)		(866,554	)		(1,021,568	)

PROVISION FOR INCOME TAXES		-			-			-			-

NET LOSS		(249,798	)		(441,901	)		(866,554	)		(1,021,568	)

OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustment		(345	)		-			(29	)		-
TOTAL COMPREHENSIVE LOSS	$	(250,143	)	$	(441,901	)	$	(866,583	)	$	(1,021,568	)

NET LOSS PER COMMON SHARE
Basic and diluted	$	(0.01	)	$	(0.04	)	$	(0.05	)	$	(0.10	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic and diluted		19,232,292			10,908,049			19,212,328			10,210,154

The accompanying notes toare an integral part of these unaudited condensed consolidated financial statements.

Brain Scientific Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Accumulated			Comprehensive
	Shares		Amount		Capital			Deficit			Income		Total

Balance at December 31, 2017		9,906,526	$	9,907	$	321,522		$	(1,242,110	)	$	-	$	(910,681	)
Fair value of warrants issued in connection with convertible debt		-		-		277			-			-		277
Net loss		-		-		-			(313,424	)		-		(313,424	)
Balances at March 31, 2018		9,906,526		9,907		321,799			(1,555,534	)		-		(1,223,828	)
Fair value of warrants issued in connection with convertible debt		-		-		513			-			-		513
Net loss		-		-		-			(266,243	)		-		(266,243	)
Balances at June 30, 2018		9,906,526		9,907		322,312			(1,821,777	)		-		(1,489,558	)
Conversion of convertible notes and accrued interest to common stock		5,687,630		5,688		2,269,362			-			-		2,275,050
Fair value of warrants issued in connection with convertible debt		-		-		1,814			-			-		1,814
Issuance of common stock for services		83,384		83		2,118			-			-		2,201
Effect of reverse recapitalization		3,505,000		3,505		(3,496	)		-			-		9
Net loss		-		-		-			(441,901	)		-		(441,901	)
Balances at September 30, 2018		19,182,540	$	19,183	$	2,592,110		$	(2,263,678	)	$	-	$	347,615

										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Income			Total

Balance at December 31, 2018		19,205,624	$	19,206	$	2,595,034	$	(2,668,212	)	$	-		$	(53,972	)
Fair value of stock options vested		-		-		4,334		-			-			4,334
Issuance of common stock for services		13,334		13		547		-			-			560
Net loss		-		-		-		(410,259	)					(410,259	)
Balances at March 31, 2019		19,218,958		19,219		2,599,915		(3,078,471	)		-			(459,337	)
Fair value of stock options vested		-		-		4,874		-			-			4,874
Issuance of common stock for services		13,334		13		547		-			-			560
Capital contribution - related party		-		-		153		-			-			153
Foreign currency translation adjustment		-		-		-		-			316			316
Net loss		-		-		-		(206,497	)		-			(206,497	)
Balances at June 30, 2019		19,232,292		19,232		2,605,489		(3,284,968	)		316			(659,931	)
Fair value of stock options vested		-		-		1,976		-			-			1,976
Issuance of common stock for services		18,334		19		742		-			-			761
Foreign currency translation adjustment		-		-		-		-			(345	)		(345	)
Net loss		-		-		-		(249,798	)		-			(249,798	)
Balances at September 30, 2019		19,250,626	$	19,251	$	2,608,207	$	(3,534,766	)	$	(29	)	$	(907,337	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~ALL SOFT GELS INC.~~

Brain Scientific Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(UNAUDITED)~~

For the For the
Nine Months Ended Nine Months Ended
September 30, September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (68,290 ) $ (69,373 )
Adjustments to reconcile net loss to net cash used in operating activities:
Imputed interest 4,065 -
Changes in assets and liabilities:
Accounts receivable (57 ) -
Inventory 1,160 -
Accounts payable 927 30,360
Due to related parties 11,095 39,063

Net cash used in operating activities (51,100 ) 50

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from officer loan 16,400 -
Proceeds from convertible notes payable 34,600 -

Net cash provided by financing activities 51,000 -

Net decrease in cash and cash equivalents (100 ) 50

Cash and cash equivalents at beginning of period 160 50

Cash and cash equivalents at end of period $ 60 $ 100

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ - $ -
Income taxes paid $ - $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Offset officer salary payable against subscription receivable $ - $ 10,000

~~See~~

(Unaudited)

	Nine Months Ended September 30,
	2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(866,554	)	$	(1,021,568	)
Change in net loss to net cash used in operating activities:
Depreciation and amortization expense		985			488
Amortization of debt discount		12,342			77,889
Fair value of stock options vested		11,184			-
Common stock issued for services		1,880			2,201
Changes in operating assets and liabilities:
Accounts receivable		(6,939	)
Inventory		-			(26,650	)
Other liabilities		(4,491	)		(11,157	)
Prepaid expenses and other current assets		(7,868	)		4,524
Accounts payable and accrued expenses		124,150			247,271
Accounts payable - related party		(31,900	)		-
NET CASH USED IN OPERATING ACTIVITIES	$	(767,211	)	$	(727,002	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	$	(1,005	)	$	-
NET CASH USED IN INVESTING ACTIVITIES	$	(1,005	)	$	-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable	$	380,000		$	964,120
Proceeds from related party loans		247,000			50,000
Payments of related party loans		-			(34,252	)
Capital contribution - related party		154			-
NET CASH PROVIDED BY FINANCING ACTIVITIES	$	627,154		$	979,868

Effect of exchange rate changes on cash		(29	)		-

NET CHANGE IN CASH		(141,091	)		252,866

CASH AT BEGINNING OF THE PERIOD		163,563			297,528
CASH AT END OF THE PERIOD	$	22,472		$	550,394

Supplemental Disclosure of Cash Flow Information

Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Discounts related to warrants issued in connection with convertible debentures	$	-		$	2,604
Conversion of convertible notes and accrued interest to common stock				$	2,275,050
Financing fees payable to a related party related to the issuance of convertible debentures	$	18,400		$	-

The accompanying notes toare an integral part of these unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~ALL SOFT GELS INC.~~

~~Notes to Financial Statements~~

~~(Unaudited)~~

~~Note~~BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

NOTE 1 – ~~Nature of Business and Significant Accounting Policies~~

~~Reclassifications~~

~~Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings, financial position, or cash flows.~~

~~Nature of Business~~

~~ALL SOFT GELS INC. (“the Company”~~ORGANIZATION AND NATURE OF OPERATIONS

Brain Scientific Inc. (the “Company”), was incorporated inunder the laws of the state of Nevada on November 18, 2013 ~~(“Inception”), to market a soft gel Kre-Alkalyn capsule.~~

under the name All Soft Gels Inc. The Company on September 21, 2018 acquired MemoryMD, Inc. (“MemoryMD”), a privately held Delaware corporation formed in February 2015. Upon completion of the acquisition, MemoryMD is treated as the surviving entity and accounting acquirer although the Company was the legal acquirer. Accordingly, the Company’s historical financial statements are those of MemoryMD, the surviving entity and accounting acquirer. MemoryMD is a ~~production stage company. All Soft Gels, Inc. has commenced~~cloud computing, data analytics and medical device technology company in the NeuroTech and brain monitoring industries seeking to commercialize its ~~operations of having one product, a soft-gel capsule named All Soft Gels Kre-Alkalyn Liquid Gels, manufactured by an unaffiliated outside provider (Soft Gel Technologies, Inc. (SGTI)~~EEG devices and caps. The Company is headquartered in New York, New York.

Reverse Merger and Corporate Restructure

On September 21, 2018, the Company ~~has one major order distributed~~entered into a merger agreement (the “Merger Agreement”) with MemoryMD and ~~sold over 400 Bottles~~AFGG Acquisition Corp. to acquire MemoryMD (the “Acquisition”). The transactions contemplated by the Merger Agreement were consummated on September 21, 2018 and, pursuant to the terms of the Merger Agreement, all outstanding shares of MemoryMD were exchanged for shares of the Company’s common stock. Accordingly, the Company acquired 100% of MemoryMD in exchange for the issuance of shares of the Company’s common stock and MemoryMD became the Company’s wholly owned subsidiary. The Company issued an additional 4,083,252 shares of its common stock upon the automatic conversion at the closing of an aggregate of $1,507,000 principal amount plus accrued interest of outstanding convertible promissory notes issued by MemoryMD, and it further issued an additional 1,604,378 shares of its common stock upon the automatic conversion immediately subsequent to the closing of an aggregate of $640,000 principal amount plus accrued interest of outstanding convertible promissory notes issued by MemoryMD. Furthermore, as of the ~~date~~closing, Mr. Amer Samad, the sole director and executive officer until the consummation of ~~this report.~~the Acquisition, committed to tender for cancellation 6,495,000 shares of the Company’s common stock as part of the conditions to closing, of which 6,375,000 have been cancelled at December 31, 2018 and 120,000 are expected to be cancelled as soon as practicable. Total shares issued as a result of the Acquisition was 13,421,752.

The Acquisition has been accounted for as a reverse recapitalization of Brain Scientific by MemoryMD, but in substance as a capital transaction, rather than a business combination since Brain Scientific had nominal or no operations and assets prior to and as of the closing of the Acquisition. The transaction is deemed a reverse recapitalization and the accounting is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should be recorded. For accounting purposes, MemoryMD is treated as the surviving entity and accounting acquirer although Brain Scientific was the legal acquirer. Accordingly, the Company’s historical financial statements are those of MemoryMD.

All references to common stock, share and per share amounts have been retroactively restated to reflect the reverse recapitalization as if the transaction had taken place as of the beginning of the earliest period presented.

Assignment and Assumption Agreement

As of immediately prior to the closing of the Acquisition, the Company entered into an Assignment and Assumption Agreement with Chromium 24 LLC, pursuant to which Chromium 24 LLC assumed all of the Company’s remaining assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, Brain Scientific had no assets or liabilities other than the shares of MemoryMD acquired in the Acquisition.

Name Change and Increase in Authorized Shares

On September 18, 2018, the Company filed an amendment to its certificate of incorporation with the Nevada Secretary of State to change its name to Brain Scientific Inc. On September 18, 2018, FINRA approved of the name change as well as a ticker symbol change, which was effective as of September 19, 2018. In addition, the Company increased its authorized shares of common stock from 50,000,000 to 200,000,000 and created and authorized 10,000,000 shares of undesignated preferred stock.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Unaudited Interim Financial Information

The Company has prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in the Company’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of its balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2019. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with ~~United States generally accepted accounting principles~~GAAP.

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810 Consolidation (“ASC 810”).

The consolidated financial statements include the accounts of the Company and ~~reflect all adjustments which,~~its subsidiaries, MemoryMD and MemoryMD - Russia. The operations of the newly formed 100% wholly owned subsidiary, MemoryMD – Russia, are included beginning April 1, 2019. All significant consolidated transactions and balances have been eliminated in consolidation.

Reclassifications to Prior Period Financial Statements and Adjustments

Certain reclassifications have been made in the ~~opinion~~Company’s financial statements of ~~management, are necessary for a fair~~the prior year to conform to the current year presentation. ~~All such adjustments are of a normal recurring nature.~~

~~The Company has adopted a fiscal year end of December 31st.~~

$11,000 and $30,000 in professional fees in the three and nine months ended September 30, 2019, respectively, were reclassified from general and administrative expenses to professional fees. These reclassifications have no impact on previously reported net income.

Use of Estimates

The preparation of financial statements in ~~conformity~~accordance with ~~accounting principles generally accepted in the United States~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and ~~the disclosure~~disclosures 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.

Significant estimates include the useful life of property and equipment and assumptions used in the valuation of options and warrants.

Cash and Cash Equivalents

~~Cash and equivalents include~~

The Company considers all highly liquid temporary cash investments with ~~initial maturities~~an original maturity of three months or ~~less.~~ less to be cash equivalents. At September 30, 2019 and December 31, 2018, the Company had no cash equivalents.

The ~~Company maintains its~~Company’s cash ~~balances at credit-worthy~~is held with financial institutions, ~~that are insured by~~and the account balances may, at times, exceed the Federal Deposit Insurance Corporation ~~(“FDIC”)~~(FDIC) insurance limit. Accounts are insured by the FDIC up to ~~$250,000. Deposits~~$250,000 per financial institution. The Company has not experienced any losses in such accounts with these ~~banks may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.~~financial institutions. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~no cash equivalents.~~

~~Accounts Receivable~~

~~Trade accounts receivable~~$0 and $0, respectively, in excess over the FDIC insurance limit.

Inventory

Inventory consists of finished goods that are ~~periodically evaluated for collectability based on past credit history with customers and their current financial condition. Bad debts expense~~valued at lower of cost or ~~write offs~~market. As of ~~receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic conditions. During the periods ended~~ September 30, ~~2017~~2019 and ~~September 30, 2016,~~December 31, 2018, the Company ~~wrote off accounts receivable~~had inventory totaling $0 and $0, respectively. ~~There were no allowances~~

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Property, Equipment and Depreciation

Property and equipment are recorded at cost, less depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for ~~doubtful accounts recorded~~repair and maintenance are charged to operations as incurred. Property and equipment consisted of computer equipment, with an estimated useful life of three years. Depreciation expense was $985 and $488 for the ~~period~~nine months ended September 30, ~~2017 or the year ended December 31, 2016.~~

~~Income Taxes~~

2019 and 2018, respectively.

Convertible Notes Payable

The Company ~~accounts for income taxes using~~has issued convertible notes, which contain variable conversion features, whereby the ~~asset~~outstanding principal and ~~liability method,~~accrued interest automatically convert into common shares at a fixed price which may be at a discount to the common stock at the time of conversion. The conversion features of these notes are contingent upon future events, whereby, the holder agreed not to convert until the contingent future event has occurred.

Revenue Recognition

On January 1, 2018, the Company adopted ASC Topic 606 Revenue from Contracts with Customers. This guidance requires an entity to recognize revenue by applying the ~~establishment of deferred tax assets~~following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and ~~liabilities for~~(5) recognize revenue when each performance obligation is satisfied. Once the ~~temporary differences between the financial reporting basis and the tax basis~~steps are met, revenue is recognized, generally upon delivery of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent deferred tax assets may not be recoverable after consideration of the future reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income.

~~Fair Value of Financial Instruments~~

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have aproduct. There has been no material effect on the Company’s financial statements as ~~reflected herein. The carrying amounts~~a result of ~~cash and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments.~~ adopting Topic 606.

The ~~Company had no items that required fair value measurement on a recurring basis.~~

~~Table of Contents~~

~~ALL SOFT GELS INC.~~

~~Notes to Financial Statements~~

~~(Unaudited)~~

~~Revenue recognition~~

~~For revenue from product sales, the~~ Company recognizes revenue ~~using four basic criteria~~from the sale of its NeuroCaps, Universal Cables, electrodes and its proprietary software connected to its cloud-based computing system that ~~must be met before revenue~~that can ~~be recognized: (1) persuasive evidence~~assist in diagnosis by assessing pathology, abnormalities, and other factors.

Research and Development Costs

The Company expenses all research and development costs as they are incurred. Research and development includes expenditures in connection with in-house research and development salaries and staff costs, application and filing for regulatory approval of ~~an arrangement exists; (2) delivery has occurred; (3)~~proposed products, regulatory and scientific consulting fees, as well as contract research, data collection, and monitoring, related to the ~~selling price~~research and development of the cloud infrastructure, data imaging, and proprietary products and technology. Research and development costs recognized in the statement of operations for the nine months ended September 30, 2019 and 2018 were $91,911 and $119,328, respectively.

Sales and Marketing

Advertising and marketing costs are expensed as incurred. Advertising and marketing costs recognized in the statement of operations for the nine months ended September 30, 2019 and 2018 were $81,468 and $69,268, respectively.

Stock-based Compensation

The Company measures and recognizes compensation expense for all stock-based payments at fair value over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and warrants. Equity-based compensation expense is ~~fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are~~recorded in administrative expenses based on ~~management’s judgment regarding~~ the ~~fixed nature~~classification of the ~~selling prices~~employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the ~~products delivered~~awards, and ~~the collectability of those amounts. Provisions for discounts~~actual and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

projected employee stock option exercise behaviors.

Basic and Diluted Net Loss Per Common Share

~~The basic~~

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares ~~outstanding. Diluted net loss per common share is computed by dividing~~outstanding for the ~~net loss adjusted on an “as~~period and, if ~~converted” basis, by the weighted average number of~~dilutive, potential common shares outstanding ~~plus potential~~during the period. Potentially dilutive ~~securities. For~~securities consist of the ~~periods presented, there were no outstanding potential~~incremental common shares issuable upon exercise of common stock equivalents such as stock options, warrants and ~~therefore~~convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result, the basic and diluted ~~earnings~~ per share ~~result in the same figure.~~

~~Stock-based compensation~~

~~The Company adopted FASB guidance on stock based compensation upon inception at November 18, 2013. Under FASB ASC 718-10-30-2,~~amounts for all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company did not issue any stock or options for services or compensation forperiods presented are identical. In the nine months ended September 30, ~~2017 and~~ 2019, 1,402,250 anti-dilutive securities were excluded from the computation.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2016.~~

~~Our employee stock-based compensation awards~~2019

(unaudited)

Fair Value of Financial Instruments

The Company’s financial instruments are ~~accounted for under the~~measured and recorded at fair value ~~method of accounting, as such, we record the related expense~~ based on inputs and assumptions that market participants would use in pricing an asset or a liability. Fair value is defined as the ~~more reliable~~price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, management considers the principal or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

Fair value is determined for assets and liabilities using a three-tiered value hierarchy into which these assets and liabilities are grouped based upon significant inputs as follows:

●

Level 1 - Quoted prices in active markets for identical assets or liabilities.

●

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

●

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. When a determination is made to classify a financial instrument within Level 3, the determination is based upon the lack of significance of the observable parameters to the overall fair value measurement. However, the fair value determination for Level 3 financial instruments may consider some observable market inputs.

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The carrying values of cash, prepaid expenses and other current assets, convertible notes, accounts payable, loans payable and due to others approximate fair value due to the short-term nature of these items.

The Company did not have any other Level 1, Level 2 or Level 3 assets or liabilities as of September 30, 2019 and December 31, 2018.

Income Taxes

The Company accounts for income taxes using the asset-and-liability method in accordance with ASC Topic 740, “Income Taxes”. 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 and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.

The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the ~~services provided, or~~amount to be recognized. Tax positions that meet the ~~fair market value~~more-likely-than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the ~~stock issued multiplied~~taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more likely than not to be sustained by the ~~number~~relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. As of ~~shares awarded.~~

~~We account~~September 30, 2019 and December 31, 2018, the Company had no unrecognized uncertain income tax positions.

On December 22, 2017, the passage of legislation commonly referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted and significantly revised the U.S. income tax law. The TCJA includes changes, which reduce the corporate income tax rate from 34% to 21% for ~~our employee stock options under~~years beginning after December 31, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued and allows a company to recognize provisional amounts when it does not have the ~~fair value method~~necessary information available, prepared or analyzed, including computations, in reasonable detail to complete its accounting for the change in tax law. SAB 118 provides for a measurement of ~~accounting using a Black-Scholes valuation model~~up to ~~measure stock option expense at~~one year from the date of ~~grant. We do not backdate, re-price,~~enactment.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Recent Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or ~~grant stock-based awards retroactively. As~~other standard setting bodies that the Company adopts as of the ~~date~~specified effective date. Unless otherwise discussed, the Company does not believe that the impact of ~~this report, we have not issued any stock options.~~

~~Recently Issued Accounting Pronouncements~~

~~There are various other updates~~ recently issued ~~most of which represented technical corrections to the accounting literature or application to specific industries and~~standards that are not ~~expected to a~~yet effective will have a material impact on the Company’s ~~consolidated~~ financial position or results of operations ~~or cash flows.~~

~~Note 2~~upon adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. The Company adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard update:

●

The option to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019.

●

Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less.

●

The option to not separate lease and non-lease components for certain equipment lease asset categories such as freight car, vehicles and work equipment.

●

The package of practical expedients applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases.

The Company has inventoried all leases where the Company is a lessee as of the initial date of application and has examined other contracts with suppliers, vendors, customers and other outside parties to identify whether such contracts contain an embedded lease as defined under the new guidance. The Company’s lease population comprises lease for corporate office space and a warehouse that are year-to-year basis with monthly rent ranging from approximately $200 to $3,200 and qualify under the practical expedient of short-term leases. The Company does not have exclusive rights of control to any assets in the customer and vendor contracts reviews and does not have any financing leases as of the date of adoption of ASC 842.

As a result of the above, the adoption of ASC 842 did not have a material effect on the consolidated financial statements. The Company will review for the existence of embedded leases in future agreements

In June 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation – ~~Going Concern~~

~~As shown in~~Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company ~~has incurred recurring~~as a going concern for a period of one year from the issuance of these financial statements. For the nine months ended September 30, 2019, the Company had $236,785 in revenues, a net ~~losses from~~loss of $866,554 and had net cash used in operations ~~resulting in an accumulated deficit~~ of ~~$159,073, cash of $60, and a working capital deficit of ($144,770)~~$767,211. Additionally, as of September 30, ~~2017. These factors~~2019, the Company had working capital deficit, stockholders’ deficit and accumulated deficit of $907,940, $907,337 and $3,534,766 respectively. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going ~~concern. Management is actively pursuing new ventures to increase revenues. In addition,~~concern for a period of twelve months from the ~~Company is currently seeking additional sources~~date of ~~capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that~~ the ~~Company will be successful, therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.~~ issuance of these financial statements.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The financial statements do not include any adjustments ~~that might result from~~to reflect the ~~outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to~~possible future effect on the recoverability and classification of ~~recorded asset amounts,~~assets or the amounts and classifications of liabilities that ~~might~~may result from the outcome of this uncertainty.

Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s patent applications and ultimately achieving a level of sales adequate to support the Company’s cost structure. However, there can be ~~necessary should~~no assurances that the Company will be ~~unable~~able to ~~continue as a going concern.~~

~~Note 3 – Accounts receivable~~

Accounts receivable was $57 and $0 at September 30, 2017 and December 31, 2016, respectively. There was no allowance for uncollectible amounts on the Company’s balance sheet at September 30, 2017 as the balance is considered fully collectible.

~~Table of Contents~~

~~ALL SOFT GELS INC.~~

~~Notes to Financial Statements~~

~~(Unaudited)~~

~~Note 4 – Inventory~~

~~Inventory consists of soft-gel capsules produced by~~secure additional equity investments or achieve an ~~independent third- party vendor. At September 30, 2017 and December 31, 2016, inventory consisted of the following:~~

September 30, December 31,
2017 2016
Finished goods inventory $ 2,260 $ 3,420

~~Inventory is valued at the lower of cost or market, and is determined by the first-in, first-out method.~~

adequate sales level.

~~Note~~

NOTE 4 – CONVERTIBLE NOTES PAYABLE

In January 2019, the Company commenced an offering of up to $500,000 pursuant to which the Company will issue convertible notes to investors. On January 18, 2019, February 5, ~~– Convertible Notes Payable~~

~~In November 2016,~~2019 and July 23, 2019, the Company issued athree such convertible ~~note~~notes payable to three investors for $100,000, $130,000 and $150,000, respectively. The notes bear interest at a ~~third party investor for cash proceeds in~~fixed rate of 10% per annum, computed based on a 360-day year and mature on the ~~amount~~earlier of ~~$35,000 (the “November 2016 Convertible Note”. The November 2016 Convertible Note was originally due 90 days~~one year from the date of issuance or the ~~note, but was further extended to December 1, 2017. At the discretion~~consummation of an equity or equity-linked round of financing of the ~~investor, this note is also~~Company in excess of $1,000,000 (“Qualified Financing”) or other event pursuant to which conversion shares are to be issued pursuant to the terms of the note.

The notes are convertible into common stock of the Company ~~90 days after issuance~~following events on the following terms: with no action on the part of the note holder upon the consummation of a Qualified Financing, the debt will be converted to new round stock based on the product of the outstanding principal and accrued interest multiplied by 1.35, then divided by the accrual per share price of the new round common stock. If a change of control occurs or if the Company completes a firmly underwritten public offering of its common stock prior to the Qualified Financing the notes would, at the election of the holders of a majority of the outstanding principal of the notes, be either payable on demand as of the closing of such change of control or Initial Public Offering (‘IPO”) or convertible into shares of common stock immediately prior to such change of control transaction or IPO transaction at a ~~rate of $0.002~~price per share equal to the lesser of the per share value of the common stock as determined by the Company’s Board of Directors or the per share consideration to be received by the holders of the common stock in such change of control or IPO transaction. Based on the terms of the conversion, the holders may receive a discount, and the notes are considered to have a contingent beneficial conversion feature. If conversion of the debt occurs, the Company will recognize an expense related to the intrinsic value. The Company recorded $18,545 of accrued interest and has a total outstanding principal balance of $380,000 as of September 30, 2019.

In the event that the Company consummates a financing prior to the Maturity Date, other than a Qualified Financing, and the economic terms thereof are more favorable to the investors in such financing than the terms of the note, the note shall automatically be amended to reflect such more favorable economic terms.

The Company recorded a total debt discount of $18,400 related to the above convertible notes. Amortization of the debt discount is recorded as interest expense and a total of ~~17,500,000 shares. Since the conversion price of the November 2017 Convertible Note~~$6,058 was above the stock price of $0.001 established in recent transactions, there was no beneficial conversion feature or discount associated with this note. The Company calculated imputed interest at the rate of 8% per year on this note, and charged the amount of $706 and $2,093 to operations and credited additional paid-in capitalamortized during the ~~three and~~ nine months ended September 30, ~~2017.~~

2019.

NOTE 5 – OTHER LIABILITIES

In ~~January 2017,~~ 2016, the Company ~~issued~~recorded a ~~convertible note payable~~liability in connection with the ~~amount~~sale of ~~$34,600 (the “January~~two Electroencephalograms (“EEG”) machines as it provided a guarantee to the customer’s financing company (See Note 2). In June 2017, ~~Convertible Note”). This note~~the customer defaulted on its payments and an additional $19,107 was ~~originally due 90 days from~~booked as a liability and recognized as a loss on the ~~date~~sale of the ~~note, but was further extended~~assets for interest and some taxes related to the transaction. As of September, 30, 2019 and December ~~1, 2017.~~ At31, 2018, total liability to the ~~discretion~~financing company reflected in Other Liabilities is $8,058 and $12,549, respectively.

Future minimum commitments related to the EEG liability consisted of the ~~investor, this note is also convertible into common stock of the Company 90 days after issuance~~following at a rate of $0.002 per share, or a total of 17,300,000 shares. Since the conversion price of the January 2017 Convertible Note was above the stock price of $0.001 established in recent transactions, there was no beneficial conversion feature associated with this note. The January 2017 Convertible Note was not funded until January 13, 2017, and therefore was recorded on the books on January 13, 2017. The Company calculated imputed interest at the rate of 8% per year on this note, and charged the amount of $697 and $1,972 to operations and credited additional paid-in capital during the three and nine months ended September 30, ~~2017.~~2019:

Years ended December 31,	Amount (USD)
Remainder 2019		1,500
2020		6,558
Total	$	8,058

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

~~Note~~

NOTE 6 – ~~Related Party Transactions~~

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2018, an entity controlled by Mr. Vadim Sakharov, former CEO of the Company and current director and executive officer, provided a $50,000 non-interest-bearing, no-term loan to the Company. As of September 30, 2019, and December 31, 2018, the balance was $50,000 and $50,000, respectively.

During the nine months ended September 30, ~~2017,~~2019 and 2018, the ~~Company’s CEO, Gene Nelson, was paid the net amount~~Company had expenses related to consulting fees of ~~$30,000 as partial payment of accrued salary. At September 30, 2017,~~$0 and $67,877, respectively, to Mr. ~~Nelson is owed the amount of $53,958 for accrued salary.~~

Sakharov.

During the nine months ended September 30, ~~2017,~~2019 and 2018, the Company had expenses related to research and development costs of $43,235 and $0, respectively, to an entity controlled by Mr. Sakharov.

In April 2019 and September 2019, an affiliate of Boris Goldstein, the Company’s ~~CEO, Gene Nelson, advanced~~Chairman of the ~~company $16,400~~Board, provided $25,000 and $15,000, respectively, in a non-interest-bearing, no-term loan to ~~fund operations. These amounts bear interest at~~ the ~~rate of 3% per annum, and are due on demand.~~

~~Note 7 – Stockholders’ Equity~~

~~The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. The Company has 10,000,000 common shares issued and outstanding as~~Company. As of September, 30, ~~2017 and December~~2019, the balance was $40,000.

On September 1, 2018, the Company entered into a sublease agreement with a company controlled by the Company’s Chairman, whereby the Company makes payments to the related party for shared office space. This lease was terminated on March 31, ~~2016.~~

2019. For the nine months ended September 30, 2019, the Company has made approximately $4,900 in rent payments to the related party.

During the nine months ended September 30, ~~2017,~~2019, an affiliate of Nickolay Kukekov, a director of the Company, ~~calculated imputed interest expense on its notes payable~~provided an aggregate total of $207,000 in non-interest-bearing, no-term loans to the ~~aggregate amount~~Company. As of ~~$4,065; this amount~~September, 30, 2019, the balance was ~~charged~~$207,000.

During the nine months ended September 30, 2019 and 2018, the Company had expenses related to ~~additional paid-in capital.~~

~~Note 8~~marketing and sales costs of $0 and $15,000, respectively, to entities controlled by the Company’s Chairman.

NOTE 7 – ~~Revenue~~

STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company has ~~recorded revenue~~authorized 10,000,000 shares of ~~$7,022~~undesignated preferred stock with a $0.001 par value. As of September 30, 2019, no preferred shares have been issued and these shares are considered blank check preferred shares with no terms, limitations, or rights associated with them.

Common Stock

The Company has authorized 200,000,000 shares of common stock with a $0.001 par value per share. The holders of common stock are entitled to one vote for each share of common stock held at the time of vote. As of September 30, 2019, the Company had 19,250,626 shares outstanding or deemed outstanding.

Shares Issued for Services

On August 28, 2018, the Company entered into a one-year agreement with an advisor for consulting services. Pursuant to ~~unaffiliated third parties for bottles~~the agreement, as amended, the Company has the right to pay $5,000 or issue the advisor a maximum of ~~Creatinine Gels.~~6,667 shares of common stock on a quarterly basis, beginning the quarter ended December 31, 2018. The Company ~~has sold approximately 407 units~~elected to issue 20,001 shares for the services provided during the nine months ended September 30, ~~2017.~~2019 at a value of $0.04 per share or $840.

On September 1, 2019, the Company entered into a four-month agreement with an advisor for consulting services. Pursuant to the agreement, the Company shall pay the advisor 5,000 shares of common stock a month. As of September 30, 2019, the Company has issued 5,000 shares for services provided by the advisor at a value of $0.04 per share or $200.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Warrants

The following table summarized the warrant activity for the nine months ended September 30, 2019:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Term		Value
Balance Outstanding, December 31, 2018		402,250	$	0.40		4.72	$	-
Granted		-		-		-		-
Forfeited		-		-		-		-
Exercised		-		-		-		-
Expired		-		-		-		-
Balance Outstanding, September 30, 2019		402,250	$	0.40		3.98	$	-

Exercisable, September 30, 2019		402,250	$	0.40		3.98	$	-

Options

On January 14, 2019, the Board of Directors approved the issuance of options to purchase an aggregate of 800,000 and 200,000 share of common stock to Boris Goldstein and Vadim Sakharov, respectively. The options have an exercise price of $0.75 per share which will vest over a 24-month period as follows: 25% (or 200,000 and 50,000, respectively) shall vest six months after the grant date with the remaining options will vest on a monthly basis at a rate of 1/24^th per month. The options will expire on January 14, 2029. The aggregate fair value of $17,111 was calculated using the Black-Scholes pricing model with the following assumptions: (i) expected life 10 years, (ii) volatility of 77%, (iii) risk free rate of 2.71% (iv) dividend rate of zero, (v) stock price of $0.042, and (vi) exercise price of $0.75. The expense will be amortized over the vesting period and a total of $8,819 was recorded during the nine months ended September 30, 2019.

On January 25, 2019, the Company appointed Jesse W. Crowne as the Company’s new Chief Executive Officer. In connection with this appointment, the Company and Mr. Crowne entered into an employment agreement effective as of January 25, 2019. As part of his compensation, Mr. Crowne received options to purchase 800,000 shares of the Company’s common stock at an exercise price of $0.75 per share, of which 200,000 vest on the one year anniversary of the date of grant and the remaining 600,000 shares vest ratably on a quarterly basis over the following two years. The options will expire January 25, 2029. Under certain circumstances, the Company would be obligated to grant options to purchase an additional 200,000 shares at substantially similar terms. The fair value of $13,714 was calculated using the Black-Scholes pricing model with the following assumptions: (i) expected life 10 years, (ii) volatility of 77%, (iii) risk free rate of 2.76% (iv) dividend rate of zero, (v) stock price of $0.042, and (vi) exercise price of $0.75. On May 31, 2019, Mr. Crowne resigned as Chief Executive Officer, but remains as a director on the Company’s Board. As a result of his resignation, his options were cancelled. The fair value of the stock option expense was amortized over the vesting period and a total of $2,366 was recorded through May 31, 2019.

The following table summarized the option activity for the nine months ended September 30, 2019:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
Options	Shares			Price		Term		Value
Balance Outstanding, December 31, 2018		-		$	-		-	$	-
Granted		1,800,000			0.75		10		-
Forfeited		(800,000	)		-		-		-
Exercised		-			-		-		-
Expired		-			-		-		-
Balance Outstanding, September 30, 2019		1,000,000		$	0.75		9.30	$	-

Exercisable, September 30, 2019		375,000		$	0.75		9.30	$	-

For future periods, the remaining value of the stock options totaling approximately $5,927 will be amortized into the statement of operations consistent with the period for which the services will be rendered.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Financial Advisory Agreement

On February 1, 2017, the Company entered into a one-year agreement with a third party to act as the Company’s exclusive financial advisor (the “Financial Advisor”). In consideration for services, the Company will pay a cash fee equal to 8% of the total amount of capital received by the Company from institutions and 10% of the total amount of capital received by the Company from retail. With the exception of the Bridge Private Placement Transaction, the Company will also pay a cash amount, representing a non-accountable expense allowance payable immediately upon closing of a financing equal to 3% of the aggregate gross proceeds raised in the transactions from retail. In addition to the cash consideration, the Company will also issue warrants to purchase common stock to the Financial Advisor in an amount equal to 10% of the number of shares of common stock purchased by the investors and that the investors obtain a right to acquire through purchase, conversion or exercise of convertible securities issued by the Company. Those warrants will be immediately exercisable at the price per share at which the investor can acquire the common stock. On February 5, 2018, the agreement was amended to extend the exclusivity period another 12 months through February 1, 2019, all other terms and conditions of the agreement remained the same.

Operating Leases

●

The option to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019.

●

Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less.

●

The option to not separate lease and non-lease components for certain equipment lease asset categories such as freight car, vehicles and work equipment.

●

The Company conducts its U.S. operations from one office located in New York, NY. Beginning September 1, 2018, the Company entered into a six-month agreement from September 1, 2018 through February 28, 2019 at $1,598 per month. The Company continues to rent this location on a month to month basis at a rate of $1,700 per month. In March 2019, the Company rented an additional office at this location at a rate of $1,700 per month, which was terminated on June 30, 2019.

Beginning September 1, 2018, the Company entered into a one-year lease agreement with a related party (see Note 5). The Company is paying the related party one half of the $3,000 monthly rent or $1,500 per month, plus expenses. This lease was terminated on March 31, 2019.

Beginning January 2, 2019, the Company entered into a 12-month lease agreement ending December 31, 2019, with a third party in Russia. The Company is paying rent at a rate of 17,200 Rubles ($272) per month.

BRAIN SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Beginning June 1, 2019, the Company entered into a 10-month lease agreement ending March 31, 2020 with a third party in Russia. The Company is paying rent at a rate of 12,000 Rubles ($190) per month.

Additionally, the Company also rents a warehouse. Beginning December 1, 2018, the Company entered into a 6-month warehouse rental agreement for $2,980 per month. The lease was renewed on June 1, 2019 for an additional year ending May 31, 2020, for $3,171 per month.

Total rent expense for the nine months ended September 30, 2019 and 2018 was $64,768 and $44,477 respectively.

Equity Incentive Plan

As of September 21, 2018, the Company’s board of directors adopted, and stockholders approved the 2018 Equity Incentive Plan (“the 2018 Plan”). The 2018 Plan has a 10-year term, which terminates on the day prior to the 10^th anniversary of its adoption by the Board. Under the 2018 Plan, the Company may grant equity-based incentive awards, including options, restricted stock, and other stock-based awards, to any directors, employees, advisers, and consultants that provide services to the Company. The vesting period, term and exercise price will be determined at the time of the grant. An aggregate of up to 3,500,000 of the Company’s common stock are reserved for issuance under the 2018 Plan. As of September 30, 2019, the Company has granted 1,800,000 options and has 1,000,000 options outstanding under the 2018 Plan (see Note 7).

~~Note~~

NOTE 9 – ~~Subsequent~~SUBSEQUENT EVENTS

In accordance with ASC 855 “Subsequent Events,

” Company management reviewed all material events through the date this report was issued, and the following subsequent events took place.

Issuance of a Non-Convertible Promissory Note

On October 23, 2019, an investor (the “Lender”) of the Company subscribed for a non-convertible promissory note (the “Note”) and loaned to the Company $50,000 (the “Loan”).

The Note bears interest at a fixed rate of 14% per annum, computed based on a 360-day year of twelve 30-day months, which interest will be payable quarterly until the Maturity Date. The principal amount and any accrued and unpaid interest due under the Note is payable on October 21, 2020 (the “Maturity Date”).

The Note contains customary events of default, which, if uncured, entitle the Lender to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, its Note.

Consulting Agreements

~~None.~~

~~Table of Contents~~

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

Forward Looking Statements

The following discussion should be read in conjunction with our unaudited financial statements and related notes included in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q. Certain information contained in this MD&A includes “forward-looking statements.” Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing and proposed business, including many assumptions regarding future events. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including those risks described in detail in the section entitled “Risk Factors” of this Quarterly Report on Form 10-Q.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “will,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology.

In light of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact occur. Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

Overview

We are a neurodiagnostic and predictive technology platform company seeking to provide a centralized platform for data acquisition and analysis of EEG data that combines cutting-edge medical device technologies with cloud-based telehealth services. Both our NeuroCap, a pre-gelled disposable EEG headset, and NeuroEEG, a full-montage standard encephalograph, received FDA clearance to market in 2018.

On September 21, 2018, we entered into a merger agreement (the “Merger Agreement”) with MemoryMD, Inc. and AFGG Acquisition Corp. to acquire MemoryMD, Inc. (the “Acquisition”). The transactions contemplated by the Merger Agreement were consummated on September 21, 2018 and, pursuant to the terms of the Merger Agreement, all outstanding shares of MemoryMD were exchanged for shares of our common stock. Accordingly, we acquired 100% of Memory MD, Inc. in exchange for the issuance of shares of our common stock and MemoryMD, Inc. became our wholly-owned subsidiary. We issued an additional 4,083,252 shares of our common stock upon the automatic conversion at the closing of an aggregate of $1,507,000 principal amount plus accrued interest of outstanding convertible promissory notes issued by MemoryMD Inc., and we further issued an additional 1,604,378 shares of our common stock upon the automatic conversion immediately subsequent to the closing of an aggregate of $640,000 principal amount plus accrued interest of outstanding convertible promissory notes issued by MemoryMD Inc.

As of immediately prior to the closing of the Acquisition, we entered into an Assignment and Assumption Agreement with Chromium 24 LLC, pursuant to which Chromium 24 LLC assumed all of our remaining assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, we had no assets or liabilities.

Our sole business since the Acquisition is the business of MemoryMD. Our management’s discussion and analysis below is based on the financial results of MemoryMD. Except as otherwise indicated herein, all share and per share information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section gives retroactive effect to the exchange of MemoryMD Shares for shares of our common stock in the Acquisition. The following discussion and analysis provides information which we believe to be relevant to an assessment and understanding of the results of operations and financial condition of MemoryMD, Inc.

We have very limited resources. To date, our primary activities have been limited to, and our limited resources have been dedicated to, performing business and financial planning, raising capital, recruiting personnel, negotiating with business partners and the licensors of our intellectual property and conducting development activities. Our first product, the NeuroCap, is ready for commercialization and sale and we have commenced some initial sales. Our other products are still being tested or are still under development.

~~OVERVIEW AND OUTLOOK~~

We have incurred losses since inception and had an accumulated deficit of $3,534,766 as of September 30, 2019, primarily as a result of expenses incurred in connection with our research and development programs and from general and administrative expenses associated with our operations and the Acquisition. We expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future.

Historically, our primary source of cash has been proceeds from the sale of convertible promissory notes and other borrowings. For the nine months ended September 30, ~~2017,~~2019 and the year ended December 31, 2018, we ~~had~~issued convertible promissory notes for aggregate gross proceeds of $380,000 and $1,059,500, respectively, to fund our operations. Additionally, we borrowed an aggregate of $270,000 from an affiliate of Nickolay Kukekov, a ~~net loss~~director of ~~$68,290,~~the Company, in the nine months ended September 30, 2019. Additionally, we borrowed an aggregate of $40,000 from an affiliate of Boris Goldstein, the Company’s Chairman of the Board in the nine months ended September 30, 2019. Additionally, on October 23, 2019, an investor of the Company subscribed for a non-convertible promissory note and loaned the Company $50,000.

We need to obtain substantial additional funding in connection with our continuing operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. However, we may be unable to raise additional funds when needed on favorable terms or at all. Our failure to raise such capital as and when needed would have a negative impact on our financial condition and our ability to develop and commercialize our products and future products and our ability to pursue our business strategy. See “–Liquidity and Capital Requirements” below.

Financial Overview

Revenue

From inception to September 30, 2019, we have generated approximately $237,000 of revenue with respect to the sale of our NeuroCap product and our electrodes, along with data analysis services. We do not expect to generate recurring, material revenue unless or until we successfully commercialize our products. If we fail to successfully commercialize our developed products or fail to complete the development of any other product candidate we may pursue in the future, in a timely manner, or fail to obtain regulatory approval, we may not be able to generate any further revenue.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs for personnel in functions not directly associated with research and development activities. Other significant costs include legal fees relating to corporate matters, intellectual property costs, professional fees for consultants assisting with regulatory, clinical, product development and financial matters, and product costs. We anticipate that our general and administrative expenses will significantly increase in the future to support our continued research and development activities, commercialization of our products and the increased costs of operating as a public company. These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional services, as well as other public-company related costs.

Research and Development

Research and development expenses consist of expenses incurred in performing research and development activities in developing our products. Research and development expenses include compensation and benefits for research and development employees, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to consultants, and other outside expenses. Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to remain substantially the same for the next six to nine months as we continue to develop and commercialize our products. As we develop our cloud-based computing system, we expect our research and development expenses to significantly increase.

Interest Expense

Interest expense primarily consists of amortized note issuance costs and interest costs related to the convertible notes we issued in 2019. The convertible notes bear interest at a fixed rate of 10% per annum.

Results of Operations

The following table sets forth the results of operations of the Company for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended September 30,				Period to Period			Nine Months Ended September 30,				Period to Period
	2019		2018		Change			2019		2018		Change
Revenue	$	159,159	$	-	$	159,159		$	236,785	$	-	$	236,785
Cost of goods sold	$	128,390	$	-	$	128,390		$	175,432	$	-	$	175,432
Research and development	$	41,845	$	56,110	$	(14,265	)	$	91,911	$	119,328	$	(27,417	)
Professional fees	$	74,569	$	87,775	$	(13,186	)	$	225,744	$	207,473	$	18,271
Sales and marketing expenses	$	21,670	$	38,193	$	(16,523	)	$	81,468	$	69,268	$	12,200
General and administrative	$	108,977	$	177,616	$	(68,639	)	$	430,504	$	440,841	$	(10,337	)
Interest expense	$	13,765	$	74,076	$	(60,311	)	$	32,789	$	158,367	$	(125,578	)

Three Months Ended September 30, 2019 vs. September 30, 2018

Revenue and cost of goods sold

Revenue for the three months ended September 30, 2019 was $159,159, compared to ~~a net loss~~$0 for the three months ended September 30, 2018, related to data analysis of ~~$69,373~~the EEG software and hardware and the sale of electrodes. Cost of goods sold for the three months ended September 30, 2019 was $128,390, compared to $0 in the three months ended September 30, 2018.

Research and development expenses

Research and development expenses were $41,845 for the three months ended September 30, 2019, compared to $56,110 for the nine months ended September 30, ~~2016, respectively.~~ 2018. The decrease was primarily due to a decrease in development activities and a focus on growth of the operations of the Company.

Professional fees

Professional fees were $74,569 for the three months ended September 30, 2019, compared to $87,775 for the three months ended September 30, 2018. The decrease was primarily due to a reduction in legal fees in the current year.

General and administrative expenses

General and administrative expenses were $108,977 for the three months ended September 30, 2019, compared to $177,616 for the three months ended September 30, 2018. The decrease is primarily due to the decrease in consulting expense in the 3 months ended September 30, 2019.

Interest expense

Interest expense for the three months ended September 30, 2019 was $13,765, consisting of interest expense of $8,581 and amortization of debt issuance costs of $4,638 related to the Company’s convertible promissory notes totaling $380,000, as well as interest expense related to a lease of $546.

Nine Months Ended September 30, 2019 vs. September 30, 2018

Revenue and cost of goods sold

Revenue for the nine months ended September 30, 2019 was $236,785, compared to $0 for the nine months ended September 30, 2018 related to data analysis of the EEG software and hardware and the sale of electrodes. Cost of goods sold for the nine months ended September 30, 2019 was $175,432, compared to $0 in the nine months ended September 30, 2018.

Research and development expenses

Research and development expenses were $91,911 for the nine months ended September 30, 2019, compared to $119,328 for the nine months ended September 30, 2018. The decrease was primarily due to a decrease in development activities and a focus on growth of the operations of the Company.

Professional fees

Professional fees were $225,744 for the nine months ended September 30, 2019, compared to $207,473 for the nine months ended September 30, 2018. The increase was primarily due an increase in accounting fees offset by a decrease in legal fees.

Sales and marketing expenses

Sales and marketing expenses were $81,468 for the nine months ended September 30, 2019, compared to $69,268 in the nine months ended September 30, 2018. The increase was primarily due to a decrease in development activities and an increased focus on marketing and sales.

General and administrative expenses

General and administrative expenses were $430,504 for the nine months ended September 30, 2019, compared to $440,841 for the nine months ended September 30, 2018. The over-all expenses were in line for the comparative quarters although in the current year to date we relied less on consultants and saw an increase in payroll costs.

Interest expense

Interest expense for the nine months ended September 30, 2019 was $32,789, consisting of interest expense of $18,545 and amortization of debt issuance costs of $12,342 related to the Company’s convertible promissory notes totaling $380,000, as well as interest expense related to a lease of $1,902.

Liquidity and Capital Resources

While we have commenced generating revenue in 2019, we anticipate that we will continue to incur losses for the foreseeable future. We anticipate that our expenses will increase substantially as we develop our products and pursue pre-clinical testing and clinical trials, seek any further regulatory approvals, contract to manufacture any products, establish our own sales, marketing and distribution infrastructure to commercialize our products, hire additional staff, add operational, financial and management systems and operate as a public company.

Historically, our primary source of cash has been proceeds from the sale of convertible promissory notes. Through November 12, 2019, we sold an aggregate principal amount of approximately $2.55 million in multiple tranches of convertible promissory notes, of which $380,000 remains outstanding and unconverted. We have also from time to time issued shares of our common stock to individuals and entities as payment for services rendered to us in lieu of cash. During the nine months ended September 30, 2019 and through September 26, 2019, an affiliate of Nickolay Kukekov, a director of the Company, provided an aggregate of $207,000 in non-interest-bearing, no-term loans to the Company. Additionally, in April 2019 and September 2019, an affiliate of Boris Goldstein, the Company’s Chairman of the Board, provided an aggregate total of $40,000, in non-interest-bearing, no-term loans to the Company.

All of our then-outstanding convertible promissory notes, in the aggregate principal amount plus interest through September 21, 2018 of $2,275,050, converted into aggregate of 5,687,630 shares of our common stock upon or immediately after the closing of the Acquisition.

In connection with the private placement of the convertible promissory notes, we paid the placement agent a cash fee of $117,880, in addition to equity compensation in the form of common stock purchase warrants.

While we have commenced generating revenue in 2019, we do not expect to continue to generate material, recurring revenue to cover our expenses and sustain our activities as presently conducted until, and unless, we successfully commercialize and sell our products. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third-party partners, we may have to relinquish valuable rights to our technologies, future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, we may be required to delay, limit, reduce or terminate our product development, future commercialization efforts, or grant rights to develop and market our technology that we would otherwise prefer to develop and market ourselves.

Our ~~accumulated deficit~~independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of ~~September 30,~~and for the years ended December 31, 2018 and 2017, ~~was $159,073. These conditions raise~~noting the existence of substantial doubt about our ability to continue as a going ~~concern over~~concern. This uncertainty arose from management’s review of our results of operations and financial condition and its conclusion that, based on our operating plans, we did not have sufficient existing working capital to sustain operations for a period of twelve months from the ~~next twelve months.~~

~~Results~~date of ~~Operations~~the issuance of these financial statements.

We believe our existing cash and cash equivalents, without raising additional funds or generating revenues, will be insufficient to fund our operating expenses for the ~~Three Months Ended September 30, 2017~~foreseeable future. We need to raise additional capital to fund our operating expenses; however, we cannot give any assurance at this time that we will successfully raise all or some of such capital or any other capital.

In January 2019, we commenced a convertible note offering for up to $500,000, of which we have raised $380,000 through November 12, 2019. In October 2019, we borrowed $50,000 from an investor evidenced by a non-convertible promissory note. We are also seeking to obtain additional financing of up to approximately $1,000,000 through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies, which if successful will enable us to continue operations based on our current burn rate for at least another six to nine months. However, we may not be able to raise such additional capital on terms acceptable to us, or at all, and ~~September 30, 2016~~

~~Revenues~~

any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

The ~~Company had $272~~development of ~~revenue during~~our products is subject to numerous uncertainties, and we have based these estimates on assumptions that may prove to be substantially different than we currently anticipate and could use our cash resources sooner than we expect. Additionally, the ~~three months ended September 30, 2017;~~process of developing medical devices is costly, and the ~~Company had no revenue during the three months ended September 30, 2016.~~

~~Cost~~timing of ~~goods sold~~

~~The Company had~~progress in pre-clinical tests and clinical trials is uncertain. Our ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support our cost ~~of goods sold of $20 during the three months ended September 30, 2017; the Company had no cost of goods sold during the three months ended September 30, 2016.~~

~~General and administrative expenses~~

General and administrative expenses were $27,908 for the three months ended September 30, 2017 compared to $24,282 for the three months ended September 30, 2016. General and administrative expense for the three months ended September 30, 2017 and September 30, 2016 consisted primarily of officer salary, legal and accounting fees, filing fees and bank service charges.

~~Interest expense~~

The Company had interest expense of $1,403 during the three months ended September 30, 2017; the Company had no interest expense during the three months ended September 30, 2016. Interest expense is attributable to interest on the Company’s convertible debt.

structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Net ~~loss~~

~~For the reasons above, our net loss for the three months ended September 30, 2017~~cash used in operating activities

Net cash used in operating activities was ~~$29,059 compared to $24,282 for the three months ended September 30, 2016.~~

~~Results of Operations for the Nine Months Ended September 30, 2017 and September 30, 2016~~

~~Revenues~~

~~The Company had revenue of $7,022 during the nine months ended September 30, 2017; the Company had no revenue during the six months ended September 30, 2016.~~

~~Cost of goods sold~~

~~The Company had cost of goods sold of $1,160 during the nine months ended September 30, 2017; the Company had no cost of goods sold during the nine months ended September 30, 2016.~~

~~General and administrative expenses~~

~~General and administrative expenses were $70,087~~$767,211 for the nine months ended September 30, ~~2017~~2019 compared to ~~$69,373~~$727,002 for the nine months ended September 30, ~~2016. General~~2018. This fluctuation is primarily due to a decrease in net loss of approximately $155,000 along with a decrease in amortization of debt discount of approximately $66,000 and ~~administrative expense~~a decrease in the change in accounts payable of approximately $123,000.

Net cash used in investing activities

Net cash used in investing activities was $1,005 for the nine months ended September 30, ~~2017 and September 30, 2016 consisted of primarily of officer salary, legal and accounting fees, filing fees and bank service charges.~~

~~Interest expense~~

The Company had interest expense of $4,065 during the nine months ended September 30, 2017; the Company had no interest expense during the nine months ended September 30, 2016. Interest expense is attributable2019, compared to ~~interest on the company’s convertible debt.~~

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~~Net loss~~

~~For the reasons above, our net loss~~$0 for the nine months ended September 30, ~~2017~~2018. The increase is due to the purchase of fixed assets.

Net cash provided by financing activities

Net cash provided by financing activities was ~~$68,290 compared to $69,373~~$627,154 for the nine months ended September 30, ~~2016.~~

~~Liquidity and Capital Resources~~

~~The following table summarizes total current assets, liabilities and working capital at September 30, 2017 compared to December 31, 2016.~~

September 30, 2017 December 31, 2016

Current Assets $ 2,377 $ 3,580

Current Liabilities $ 147,147 $ 84,125

Working Capital (Deficit) $ (144,770 ) $ (80,545 )

~~During~~2019, which consisted of the sale of the Company’s convertible promissory notes for aggregate gross proceeds of $380,000 as well as proceeds from a related party loan of $247,000.

Net cash provided by financing activities was $979,868 for the nine months ended September 30, ~~2017, the Company had cash used in operating activities of $51,100. This~~2018, which primarily consisted of the sale of the Company’s ~~net loss~~convertible promissory notes for aggregate gross proceeds of ~~$68,290, increased~~$964,120, along with proceeds from related party loans of $50,000 offset by ~~imputed interest expense~~the payment of ~~$4,065 and by net change in the components of working capital in the net amount of $13,125. Also during the nine months ended September 30, 2017, we had cash flow from financing activities~~related party loans in the amount of ~~$51,000 consisting~~$34,252.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of $34,600 from the issuance of convertible notes payable, $16,400 from advances from the Company’s CEO Gene Nelson. There was no cash flow from investing activities during the nine months ended September 30, 2017.

During the nine months ended September 30, 2016, the Company had cash used in operating activities of $50. This consisted of Company’s net loss of $69,373, decreased by net change in the components of working capital in the net amount of $69,423. There was no cash flow from financing or investing activities during the nine months ended September 30, 2016.

~~As of September 30, 2017 we had cash of $60 and had working capital deficit of ($144,770). We do not have sufficient working capital to pay~~ our expenses for the next 12 months. Our plan for satisfying our cash requirements and to remain operational for the next 12 months is through sale of shares of our capital stock or convertible debt. We anticipate revenue during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. We cannot assure you we will be successful in meeting our working capital needs.

Should we not be able to continue to secure additional financing when needed, we may be required to slow down or suspend our business activities or reduce the scope of our current operations, any of which would have a material adverse effect on our business.

Our future capital requirements will depend on many factors, including the development of our business; the cost and availability of third-party financing for development; and administrative and legal expenses.

We anticipate that we will incur operating losses in the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model; recognition of revenue sources; and the management of growth. To address these risks, we must, among other things, expand our customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of ~~operations.~~

~~Satisfaction of~~operations is based on our ~~cash obligations for the next 12 months.~~

As of September 30, 2017, we had cash of $60. Our plan for satisfying our cash requirements for the next twelve months is through sales-generated income, sale of shares of our common stock, third party financing, and/or traditional bank financing. We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to secure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.

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~~Going concern.~~

~~Our~~ financial statements, ~~are~~which have been prepared ~~using~~in accordance with accounting principles generally accepted in the United States of America, ~~applicable~~or GAAP. The preparation of these financial statements requires us to ~~a going concern, which contemplate~~make estimates, judgments and assumptions that affect the ~~realization~~reported amounts of assets and ~~liquidation~~liabilities, disclosure of ~~liabilities in the normal course of business. We have incurred continuous losses from operations, have an accumulated deficit of $159,073,~~contingent assets and ~~have working capital deficit of ($144,770)~~liabilities as of ~~September 30, 2017,~~the dates of the balance sheets and ~~have~~the reported ~~negative cash flows~~amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from ~~operations since inception. In addition, we do not currently have the cash resources to meet~~ our ~~operating commitments for the next twelve months. The Company’s ability to continue as a going concern must be considered~~estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the ~~problems, expenses,~~date of the change in estimate.

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and ~~complications frequently encountered by entrance into established markets~~judgments.

Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the ~~competitive nature~~reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include the estimates of useful lives for depreciation.

Fair Value of Financial Instruments: Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

●

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

●

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and borrowings. The fair value of current financial assets and current financial liabilities approximates their carrying value because of the short-term maturity of these financial instruments.

Income Taxes. The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes, ASC 740. 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 basis, as well as net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which ~~we operate.~~

~~Our ability~~those temporary differences are expected to ~~continue as~~be recovered or settled. The effect on deferred tax assets and liabilities of a ~~going concern~~change in tax rates is ~~dependent on our ability~~recognized in income in the period that includes the enactment date.

Stock Based Compensation. The Company accounts for the grant of restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.” ASC 718 requires companies to ~~generate sufficient cash from~~recognize in the statement of operations the grant-date fair value of equity based compensation. The expense is recognized over the period during which the employee is required to ~~meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. There can be no assurance, however, that we~~provide service in exchange for the compensation. Any remaining unrecognized balance will be ~~successful~~recognized ratably over the life of the vesting period and is a reduction of stockholders’ equity.

The Company accounts for non-employee share-based awards in ~~our efforts~~accordance with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to ~~raise additional debt~~Non-Employees.”

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or ~~equity capital and/~~services to customers in an amount that reflects the consideration that the Company expects to receive for those goods or ~~that our cash generated by our future operations~~services. The standard will be ~~adequate~~effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company has adopted Topic 606 with no material effect on its financial statements.

In November 2016, FASB issue ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash (ASU 2016-18), requiring restricted cash and cash equivalents to ~~meet our needs. These factors, among others, indicate~~be included with cash and cash equivalents of the statement of cash flows. The new standard is effective for fiscal years, and interim periods within that ~~we may~~year, beginning December 15, 2017, with early adoption permitted. The Company adopted this new ASU at January 1, 2018 and it has had no material impact on its financial statements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be ~~unable to continue as a going concern for a reasonable period of time.~~

~~Summary of product and research and development that we will perform~~effective for the ~~term~~Company on January 1, 2020. The Company is currently evaluating the method of ~~our plan.~~

~~We are not anticipating significant research~~adoption and ~~development expenditures in~~ the ~~near future.~~

~~Expected purchase or sale~~potential impact that this standard may have on its financial position and results of ~~plant~~operations.

In June 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and ~~significant equipment.~~

~~We do not anticipate the purchase or sale of any plant or significant equipment as such items are not required by us at this time.~~

~~Significant changes in the number of employees.~~

~~Assuming we are able~~complexity and to ~~pursue revenue through the commencement of sales of products, we anticipate an increase of personnel and may need~~improve financial reporting for share-based payments issued to ~~hire employees. In the interim, we intend to use the services of independent consultants and contractors to perform various professional services when appropriate. We believe the use of third-party~~non-employees (for example, service providers, ~~may enhance our ability~~external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to ~~control general~~employees, to also include share-based payments issued to non-employees for goods and ~~administrative expenses~~services. Consequently, the accounting for share-based payments to non-employees and ~~operate efficiently.~~

employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The adoption of this ASU had no material impact on the Company’s consolidated financial statements.

Off-Balance Sheet Arrangements

We ~~do not~~ have ~~any~~no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results orof operations, liquidity, capital expenditures or capital ~~resources that are material to investors.~~

resources.

~~Recently Issued Accounting Standards~~

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Item 3. Quantitative and Qualitative ~~Disclosure~~Disclosures About Market ~~Risk.~~

~~This item is not~~Risk

Not applicable ~~as we are currently considered a~~for smaller reporting ~~company.~~

companies.

Item 4. Controls and ~~Procedures.~~

Procedures.

Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures ~~are~~(as defined in Rule 13a-15(e) under the Exchange Act). As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our Board of Directors and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and ~~other~~ procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2019. Based on that ~~are designed~~review and evaluation, the Board of Directors and Chief Financial Officer, along with the management of the Company, have determined that as of September 30, 2019, the disclosure controls and procedures were not effective to ~~ensure~~provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit ~~pursuant to~~under the ~~requirements of the Securities~~ Exchange Act ~~of 1934~~ is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and ~~forms. Disclosure controls~~forms and ~~procedures include, among other things, controls and procedures designed~~were not effective to ~~ensure~~provide reasonable assurance that such information ~~required to be disclosed by us in the reports that we file under the Exchange Act~~ is accumulated and communicated to our management, including our principal executive officer and principal financial ~~officers,~~officer, as appropriate to allow timely decisions regarding required ~~disclosure.~~

~~Evaluation of Disclosure Controls and Procedures~~

~~Our Chief Executive Officer and Chief Financial Officer, Gene Nelson, has evaluated~~disclosures. Specifically, we have identified the ~~effectiveness of~~following material weakness in our disclosure ~~controls~~controls: insufficient written policies and procedures ~~(as defined in Rule 13a-15(e)~~to ensure timely filing of reports that the Company files or submits under the ~~Securities~~ Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on the evaluation, Mr. Gene Nelson concluded that our disclosure controls and procedures are not effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings and ensuring that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure, for the following reasons:

●	~~The Company does not have an independent board of directors or audit committee or adequate segregation of duties;~~

●	~~All of our financial reporting is carried out by our financial consultant;~~

●	~~We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to the limited nature and resources of the Company.~~

~~We plan to rectify these weaknesses by implementing an independent board of directors and hiring additional accounting personnel once we have additional resources to do so.~~

Act.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during our ~~most recent~~last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II –

OTHER INFORMATION

Item 1. Legal Proceedings.

~~We know of no material pending~~

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to ~~which our company~~inherent uncertainties, and an adverse result in these or ~~subsidiary is~~other matters may arise from time to time that may harm business.

We are not currently a party in any legal proceeding or ~~of which any of their property is the subject. In addition,~~governmental regulatory proceeding nor are we ~~do not know~~currently aware of any ~~such proceedings contemplated by any~~pending or potential legal proceeding or governmental ~~authorities.~~

We know of no material proceedings in which any director, officer or affiliate of our company, or any registered or beneficial stockholder of our company, or any associate of any such director, officer, affiliate, or stockholder is a party adverseregulatory proceeding proposed to ~~our company or subsidiary or has~~be initiated against us that would have a material ~~interest~~ adverse toeffect on us or our ~~company or subsidiary.~~

business.

Item 1A. Risk Factors.

~~This item is not applicable as we are currently considered~~

Not required for a ~~smaller reporting company.~~

Smaller Reporting Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~

All unregistered issuances of equity securities during the period covered by this quarterly report have been previously disclosed on our Current Reports on Form 8-K. Please see Item 5- Other Information regarding unregistered issuances of equity securities during the period subsequent to the period covered by this quarterly report.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

~~None.~~

Not applicable.

Item 5. Other Information.

On August 8, 2018, the Company entered into a one-year agreement with an advisor for consulting services. Pursuant to the agreement, as amended, the Company has the right to pay $5,000 or issue the advisor a maximum of 6,667 shares of common stock on a quarterly basis, beginning the quarter ended December 31, 2018. On October 21, 2019, the Company issued an aggregate of 20,001 shares of common stock for services provided. The issuance of the shares was, or will be as the case may be, exempt from registration under Section 4(a)(2) under the Securities Act of 1933, as amended and the rules promulgated thereunder (the “Securities Act”) as a transaction not involving a public offering, as the issuance thereof was made to a single person as compensation for services rendered.

On August 28, 2018, the Company entered into a one-year agreement with an advisor for consulting services. Pursuant to the agreement, as amended, the Company has the right to pay $5,000 or issue the advisor a maximum of 6,667 shares of common stock on a quarterly basis, beginning the quarter ended December 31, 2018. On October 21, 2019, the Company issued an aggregate of 20,001 shares of common stock for services provided. The issuance of the shares was, or will be as the case may be, exempt from registration under Section 4(a)(2) under the Securities Act as a transaction not involving a public offering, as the issuance thereof was made to a single person as compensation for services rendered.

On September 1, 2019, the Company entered into agreement with an advisor for consulting services. Pursuant to the agreement, the Company shall pay the advisor 5,000 shares of common stock a month. On October 21, 2019, the Company issued 10,000 shares of common stock for services provided. The issuance of the shares was, or will be as the case may be, exempt from registration under Section 4(a)(2) under the Securities Act as a transaction not involving a public offering, as the issuance thereof was made to a single person as compensation for services rendered.

On October 1, 2019, the Company entered into a three-month agreement with an advisor for consulting services. Pursuant to the agreement, the Company shall pay the advisor 4,000 shares of common stock a month. On October 21, 2019, the Company issued 4,000 shares of common stock for services provided. The issuance of the shares was, or will be as the case may be, exempt from registration under Section 4(a)(2) under the Securities Act as a transaction not involving a public offering, as the issuance thereof was made to a single person as compensation for services rendered.

On October 7, 2019, the Company entered into a three-month agreement with an advisor for consulting services. Pursuant to the agreement, the Company shall pay the advisor 7,500 shares of common stock a month. On October 21, 2019, the Company issued 7,500 shares of common stock for services provided. The issuance of the shares was, or will be as the case may be, exempt from registration under Section 4(a)(2) under the Securities Act as a transaction not involving a public offering, as the issuance thereof was made to a single person as compensation for services rendered.

~~None.~~

~~Table of Contents~~

Item 6. ~~Exhibits.~~

Exhibits

The exhibits listed below are hereby furnished to the SEC as part of this report:

10.1

Form of Subscription Agreement (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on October 25, 2019)

10.2

~~Incorporated~~Form of Note (Incorporated by reference

~~Exhibit~~

~~Exhibit Description~~

~~Filed herewith~~

to the Registrant’s Current Report on Form

~~Period ending~~

~~Exhibit~~

~~Filing date~~

8-K filed on October 25, 2019)

31.1

Certification ~~by the Chief Executive Officer pursuant to Section 302~~of Boris Goldstein, Chairman of the ~~Sarbanes-Oxley Act~~Board

31.2

Certification ~~by the Principal~~of Mark Corrao, Chief Financial Officer ~~pursuant to Section 302 of the Sarbanes-Oxley Act~~

32.1

Certification byof Boris Goldstein, Chairman of the ~~Chief Executive Officer and Principal Financial Officer~~Board, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Mark Corrao, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101.1

XBRL ~~Instance Document~~

Instance.

101.SCH

XBRL Taxonomy Extension ~~Schema Document~~

Schema.

101.CAL

XBRL Taxonomy Extension ~~Calculation Linkbase Document~~

Calculation.

101.DEF

XBRL Taxonomy Extension ~~Definition Linkbase Document~~

Definition.

101.LAB

XBRL Taxonomy Extension ~~Label Linkbase Document~~

Labels.

101.PRE

XBRL Taxonomy Extension ~~Presentation Linkbase Document~~

Presentation.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements 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.~~

authorized, this 12th day of November, 2019.

	~~ALL SOFT GELS~~BRAIN SCIENTIFIC INC.

~~Date: November 14, 2017~~	By:	/s/ ~~Gene Nelson~~Boris Goldstein
	Name:	Boris Goldstein
	Title:	Chairman of the Board
		(Interim Principal Executive Officer)

	By:	~~Gene Nelson~~/s/Mark Corrao
	Name:	Mark Corrao
	Title:	Chief Financial Officer
		~~President, Chief Executive Officer~~ (Principal Financial and Accounting Officer)

Nevada		81-0876714
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~ Incorporation or ~~organization)~~Organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Large accelerated filer ☐	Accelerated filer ☐	~~Accelerated filer~~ ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~ ☒	Smaller reporting company ☒
Emerging growth company ☐	☒

Part I – Financial Information	~~Page~~


~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS~~Item 1 – Financial Statements	31

~~PART I. FINANCIAL INFORMATION~~
~~Item 1.~~	~~Financial Statements~~	4
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018	41
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ~~ended~~Ended September 30, ~~2017~~2019 and 2018 (unaudited)	2
Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended as of September 30, 2019 and September 30, ~~2016~~2018 (unaudited)	53
	Condensed Consolidated Statements of Cash Flows for the Nine Months ~~ended~~Ended September 30, ~~2017~~2019 and ~~September 30, 2016~~2018 (unaudited)	64
	Notes to ~~the~~ Condensed Consolidated Financial Statements	75
Item 2.	2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	1015
Item 3.	3 – Quantitative and Qualitative Disclosures About Market Risk	1322
Item 4.	4 – Controls and Procedures	1322

~~PART II. OTHER INFORMATION~~Part II – Other Information

Item 1.	1 – Legal Proceedings	1423
Item ~~1A.~~	~~Risk Factors~~	14
~~Item 2.~~	2 – Unregistered Sales of Equity Securities and Use of Proceeds	1423
Item 3.	3 – Defaults Upon Senior Securities	1423
Item 4.	4 – Mine Safety Disclosures	1423
Item 5.	5 – Other Information	1423
Item 6.6 – Exhibits	~~Exhibits~~	1524
Signatures
~~SIGNATURES~~		1625

	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	22,472		$	163,563
Accounts receivable		6,939			-
Prepaid expenses and other current assets		22,420			14,552

TOTAL CURRENT ASSETS		51,831			178,115

Property and equipment, net		2,019			1,999

TOTAL ASSETS	$	53,850		$	180,114

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	263,787		$	139,637
Accounts payable and accrued expenses - related party		18,400			31,900
Convertible notes payable, net		373,942			-
Other liabilities - short term		6,642			5,454
Loans payable - related party		297,000			50,000
TOTAL CURRENT LIABILITIES:		959,771			226,991

Other liabilities		1,416			7,095

TOTAL LIABILITIES		961,187			234,086

Commitments and contingencies		-			-

STOCKHOLDERS’ DEFICIT

Preferred stock, $0.001 par value; 10,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		-			-
Common stock, $0.001 par value; 200,000,000 shares authorized, 19,250,626 and 19,205,624 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		19,251			19,206
Additional paid in capital		2,608,207			2,595,034
Accumulated deficit		(3,534,766	)		(2,668,212	)
Accumulated other comprehensive income		(29	)		-
TOTAL STOCKHOLDERS’ DEFICIT		(907,337	)		(53,972	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	53,850		$	180,114

	September 30,			December 31,
	2017			2016
ASSETS
Current assets
Cash and cash equivalents	$	60		$	160
Accounts Receivable		57			-
Inventory		2,260			3,420
Total current assets		2,377			3,580
Total Assets		2,377			3,580

LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS’ EQUITY
Current liabilities

Accounts payable		7,189			6,262
Due to related parties		70,358			42,863
Convertible notes payable		69,600			35,000
Total current liabilities		147,147			84,125

Commitments and contingencies		-			-

Stockholders’ equity (deficit)

Common stock, $0.001 par value, 50,000,000 shares authorized, 10,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016.		10,000			10,000
Additional paid-in capital		4,303			238
Accumulated deficit		(159,073	)		(90,783	)
Total (deficiency in) stockholders’ equity		(144,770	)		(80,545	)

Total liabilities and stockholders’ equity	$	2,377		$	3,580

	For the Three Months Ended September 30, 2017			For the Three Months Ended September 30, 2016			For the Nine Months Ended September 30, 2017			For the Nine Months Ended September 30, 2016




Revenue	$	272		$	-		$	7,022		$	-
Cost of good sold	$	(20	)		-			(1,160	)		-
Gross Profit		252			-			5,862			-

Operating expenses:
General and administrative		27,908			24,282			70,087			69,373

Total operating expenses		27,908			24,282			70,087			69,373

Net Operating Loss		(27,656	)		(24,282	)		(64,225	)		(69,373	)

Other income (expense):
Interest expense		(1,403	)		-			(4,065	)		-
Total other expense		(1,403	)		-			(4,065	)		-

Loss before provision for income taxes		(29,059	)		(24,282	)		(68,290	)		(69,373	)

Provision for income taxes		-			-			-			-

Net loss	$	(29,059	)	$	(24,282	)	$	(68,290	)	$	(69,373	)

Net loss per share – basic & diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average shares outstanding – basic & diluted		10,000,000			10,000,000			10,000,000			9,895,000

	For the			For the
	Nine Months Ended			Nine Months Ended
	September 30,			September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(68,290	)	$	(69,373	)
Adjustments to reconcile net loss to net cash used in operating activities:
Imputed interest		4,065			-
Changes in assets and liabilities:
Accounts receivable		(57	)		-
Inventory		1,160			-
Accounts payable		927			30,360
Due to related parties		11,095			39,063

Net cash used in operating activities		(51,100	)		50

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from officer loan		16,400			-
Proceeds from convertible notes payable		34,600			-

Net cash provided by financing activities		51,000			-

Net decrease in cash and cash equivalents		(100	)		50

Cash and cash equivalents at beginning of period		160			50

Cash and cash equivalents at end of period	$	60		$	100

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Offset officer salary payable against subscription receivable	$	-		$	10,000

	September 30, 2017			December 31, 2016

Current Assets	$	2,377		$	3,580

Current Liabilities	$	147,147		$	84,125

Working Capital (Deficit)	$	(144,770	)	$	(80,545	)