NOTE 4 – EQUITY METHOD INVESTMENT

During November 2018, the Company invested $50,000 for a 19.9% Class B limited liability membership interest in EPH and recorded this transaction as an equity method investment due to the Company’s ability to exercise significant influence over EPH. The carrying value of the investment in EPH was reduced to zero after recording the proportionate share of the investee’s net loss for the 2018 fiscal year. In January 2019, the Company committed an additional $21,588 through a subscription payable to maintain its 19.9% Class B limited liability interests in EPH, after additional Class A units were sold to investors. The Class B units only receive value after all Class A unit holders receive a full return on their investment plus an 8% annual PIK dividend. The $21,588 remains due at September 30, 2020 and December 31, 2019 and is included in accounts payable and accrued expenses on the unaudited condensed consolidated balance sheets. The carrying value of the investment remains at zero at September 30, 2020 and December 31, 2019 due to continued losses incurred by EPH. There were no distributions received from the equity method investment in 2020 or 2019.

In 2019 and 2020, EPH issued an additional 317,784 Class A Units in consideration for $2,796,500 additional investments. The Company did not purchase additional Class B Units during this time, and as a result, its equity stake in EPH has been diluted to approximately 18%. Management expects this equity percentage to be significantly diluted in the following reporting periods as EPH raises additional capital to further its acquisition strategy. While the Company can invest alongside these new investments, management does not anticipate the Company will have the funds to do so.

For the nine months ended September 30, 2020, EPH generated unaudited revenue of $7,736,370 and recorded an unaudited net loss of $1,765,240.

See Note 5 for transactions with our equity method investment during the nine months ended September 30, 2020 and 2019.