NOTE 11. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

NOTE 11. COMMITMENTS AND CONTINGENCIES

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Legal Matters

A complaint against the Company, dated February 5, 2020, has been filed in Hennepin County, Minnesota, by Jean Mork Bredeson, the former President and former owner of Service 800, making certain claims related to the Company's acquisition of Service 800, seeking in excess of $1.6 million in damages. On March 16, 2020, the Company and Service 800 filed an answer, counterclaim and third-party claim against Ms. Bredeson and defendants Allen Bredeson and Jeff Schwedinger, former employees of Service 800. Answers and Affirmative and Additional Defenses to Third Party Claims were filed by Mr. Bredeson on April 7, 2020 and by Mr. Schwedinger on April 9, 2020 and, on April 24, 2020, Ms. Bredeson filed a Motion to Dismiss. The Court denied in full Ms. Bredeson’s motion to dismiss or for a more definite statement.  Subsequently, using a wholly owned entity she controls, Ms. Bredeson filed another matter, captioned Green Valley Associates Inc. vs Service 800 Inc., 27-CV-20-13800.  Although Ms. Bredeson is seeking to have the matters handled by separate judges, the Company is seeking consolidation of the two matters before Judge Klein, the judge who denied Ms. Bredeson's motion to dismiss.  Ms. Bredeson also has since filed, and then withdrawn, other motions, without allowing them to reach Judge Klein. Discovery is ongoing, but we expect the matter will continue for another six months before substantive motions.  An early attempt at mediation was unsuccessful, but another attempt at the end of discovery may be more fruitful. In the interim, the Company is continuing to vigorously defend itself against this lawsuit.

The Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 5, states that a firm must distinguish between losses that are probable, reasonably probable or remote. If a contingent liability is deemed probable, it must be directly reported in the financial statements. In July, 2010 the FASB issued ASC 450-20 that updated the Standard and uses “probable,” “reasonably possible,” and “remote” to determine the likelihood of the future event that will confirm a loss, an impairment of an asset, or the incurrence of a liability. Accrual of a loss contingency is required when (1) it is probable that a loss has been incurred at the date of the financial statements and (2) the amount can be reasonably estimated. No accrual has been made in the above matter as the determination is that a loss is not probable as of December 31,2020 nor can a loss be reasonably estimated.

There is an outstanding issue with Iliad, a former noteholder that claims warrants as being issued and outstanding that could result in 86,474,501 or 44,111,160 shares being issued. The disputed shares to be issued is based on a $32,500 warrant principal that is exercisable based on the lesser of the $0.15, or the average of the three lowest closing bid prices in the prior 20 trading days multiplied by a 45% discount.

In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus as a “pandemic”. First identified in late 2019 and known now as COVID-19, the outbreak has impacted thousands of individuals worldwide. In response, many countries have implemented measures to combat the outbreak which have impacted global business operations. 

The majority of the states within the United States have issued a stay at home order to its residents. Accordingly, the Company’s revenues associated with our business model has drastically declined through date of the financial statements and its results of operations, cash flows and financial condition have been negatively impacted by the pandemic.

The impact of the disease outbreak, as of the date of the financial statements, remains highly fluid and uncertain.  The Company is unable to predict, with any sort of certainty the timing for the end of the restrictions. Accordingly, the financial impact on the results of operations, cash flows and financial condition cannot be reasonably estimated at this time.  No impairments were recorded as of the balance sheet date; however, due to significant uncertainty surrounding the situation, management's judgment regarding this could change in the future.

The Company continues to maintain the business working with customers to fit their needs - We are also offering COVID type services. We have clients in the medical field and are offering to do survey work for them regarding their response for the COVID outbreak so they can document how they are doing as a company. We are in touch with our customers daily, we have even discussed switching them from phone calls to web surveys until this has passed. Along with the above, the Company Service 800 was approved for $500,000 from the Paycheck Protection funds to assist in maintaining our employee base.

Operating Lease

We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169.  We pay an annual fee of $120 for this lease. There is also a location in Minnesota for Service 800, Inc. on February 20, 2020 the company moved Service 800, Inc. to 110 Cheshire Lane, Minnetonka Minnesota 55305. Service 800 leases 3,210 square feet of office space under an operating lease agreement with Carlson Center East LLC. The lease, which expires June 30, 2023, requires base monthly rents of $4,160, plus operating expenses.

The public entity guidance in Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) requires lessees to recognize substantially all leases on their balance sheets as lease liabilities with a corresponding right-of-use asset. We will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet.

The Company leases office space under an operating lease. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease, right-of-use assets, and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates with the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgement. The company determines its incremental borrowing rate for each lease using its then-current borrowing rate. Certain of the Company’s leases may include options to extend or terminate the lease. The Company establishes the number of renewal options periods used in determining the operating lease term based upon its assessment at the inception of the operating lease. The option to renew the lease may be automatic, at the option of the Company, or mutually agreed to between the landlord and the Company. Once the facility lease term has begun, the present value of the aggregate future minimum lease payments is recorded as a right-of-use asset. Lease expense is recognized on a straight-line basis over the term of the lease. There are no options to extend or terminate the leases.  The Company has no other leases yet to commence

The components of lease cost were as follows:	As of December 31, 2020
Operating Lease Cost	$   33,277
Right of Use Assets obtained in exchange for new operating lease obligations	$0
Other Information	As of December 31, 2020
Weighted Average Remaining Lease Term  - Operating Leases	2.3 years
Weighted Average Discount Rate – Operating Leases	11.02%

Maturities of lease liabilities were as follows:
Year ending December 31,
Operating lease payments, 2021	51,163
Operating lease payments, 2022	52,698
Operating lease payments, 2023	22,462

Reconciliation of operating lease liabilities/ payments to operating lease liabilities
Total operating lease liabilities/ payments	155,441
Operating lease liabilities – current (included in Accrued Expenses)	41,326
Operating lease liabilities – long term	66,421
Present value adjustment	50,864