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REVIV3 PROCARE COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 1 – Organization

Reviv3 Procare Company (the “Company”) was incorporated in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC which was organized on July 31, 2013. The Company is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care products throughout the United States, Canada, Europe and Asia.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The unaudited financial statements for the sixthree and nine months ended November 30, 2017February 29, 2020 and 2016February 28, 2019 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of November 30, 2017February 29, 2020 and 2016,February 28, 2018, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been or omitted. The unaudited financial statements should be read in conjunction with the audited financial statements as of and notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2017 and footnotes thereto included in the Company’s Report on Form S-1/A filed with the SEC on December 1, 2017.2019. The results of operations for the sixthree months and nine months ended November 30, 2017February 29, 2020 are not necessarily indicative of the results to be expected for the full year.

Going Concern

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $228,027 and $352,135, respectively,$172,582 for the sixnine months ended November 30, 2017.February 29, 2020, and used cash from operating activities of $191,974 for the nine months ended February 29, 2020.  Additionally, the Company has an accumulated deficit of $4,373,655$4,810,724 at November 30, 2017.February 29, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to implementcontinue its business plan, raise capital, and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company isbe unable to continue as a going concern.

Use of estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations, the useful life of property and equipment, the valuation of intangible assets, the valuation of deferred tax assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances. 

Cash and cash equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.  The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Accounts receivable and allowance for doubtful accounts

The Company has a policy of providing on allowance for doubtful accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.  The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt.  Account balances deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Prepaid expenses and other current assets

Prepaid expenses and other current assets of $4,116$1,290 and $18,089$2,993 at November 30, 2017February 29, 2020 and May 31, 2017,2019, respectively, consist primarily of costs paid for future services which will occur within a year.year and cash prepayment to vendors. Prepaid expenses primarily included prepayments in common stock for consulting services which are being amortized over the terms of their respective agreements.  

REVIV3 PROCARE COMPANY

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017

Advances to suppliers

Advances to a supplier represents the cash paid in advance for installment payments for the purchase of inventory. The advances to a supplier are interest free and unsecured. As of November 30, 2017at February 29, 2020 and May 31, 2017, advances2019 primarily included cash prepayment to the Company’s major supplier amounted $21,784 and $16,135, respectively. Upon shipment of the purchase inventory, the Company reclassifies such advances to supplier into inventory.vendors.   

Inventory

The Company values inventory, consisting of finished goods and raw materials, at the lower of cost and net realizable value. Cost is determined using an average cost method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its net realizable value. The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classifies inventory markdowns in the statement of operations as a component of cost of goods sold. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included in the statement of operations.

Revenue recognition

Effective June 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606, “Revenue From Contracts With Customers”, which is effective for public business entities with annual reporting periods beginning after December 15, 2017.  This new revenue recognition standard (new guidance) has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures and there was no cumulative effect of the adoption of ASC 606.

The Company follows paragraph 605-10-S99-1sells a variety of the FASB Accounting Standards Codification for revenue recognition.hair and skin care products. The Company will recognizerecognizes revenue for the agreed upon sales price when ita purchase order is realized or realizablereceived from the customer and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii)subsequently the product has beenis shipped (iii)to the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

customer, which satisfies the performance obligation. Consideration paid to the customer to promote and sell the Company’s products to customers is typically recorded as a reduction in revenues in accordance with Accounting Standard Codification (“ASC”) ASC 605-50-45-2, Revenue Recognition—Customer Payments and Incentives.revenues. See Note 11 for revenue disaggregation disclosures.

Cost of Sales

The primary components of cost of sales include the cost of the product and shipping fees.freight-in.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification.ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in marketing and selling expense were $16,112$11,292 and $22,954$11,900 for the sixthree months ended November 30, 2017February 29, 2020 and 2016,February 28, 2019, respectively. Shipping costs included in marketing and selling expense were $31,898 and $30,601 for the nine months ended February 29, 2020 and February 28, 2019, respectively.

Marketing, selling and advertising

Marketing, selling and advertising costs are expensed as incurred.

Customer Deposits

Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of products in compliance with its revenue recognition policy.

REVIV3 PROCARE COMPANY

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017

Fair value measurements and fair value of financial instruments

The Company adopted Accounting Standards Codification (“ASC”)ASC 820, “Fair“Fair Value Measurements and Disclosures”Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: 

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The estimated fair value of certain financial instruments, including prepaid expenses, deposits, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Income Taxes

The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting“Accounting for Income Taxes”Taxes” (“ASC 740-10”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company follows the provision of ASC 740-10 related to “Accounting for Uncertain Income Tax Positions.Positions”. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

The Company has adopted ASC 740-10-25, “Definition“Definition of Settlement”Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.  The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

Impairment of long-lived assets  

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record anyrecorded impairment losses of $474 as an operating expense in the accompanying financial statements, during the sixnine months ended November 30, 2017 and 2016.February 29, 2020.

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation“Compensation — Stock Compensation”Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, “Equity“Equity Based Payments to Non-employees”Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the measurement date. The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

REVIV3 PROCARE COMPANY

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017

Net loss per share of common stock

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares during the period. Diluted net loss per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. At November 30, 2017February 29, 2020 and 2016,February 28, 2019, the Company has none and 430,000, respectively,had no potentially dilutive securities outstanding related to common stock warrants. Those potentially dilutive common stock equivalents were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss.outstanding.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recently Issued Accounting PronouncementsChanges

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The new standard requires“Leases”, which require lessees to apply a dual approach, classifying leases as either finance or operating leases basedreport on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to recordtheir balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. Under the new guidance, codified as ASC Topic 842,Leases, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. As permitted, the Company adopted ASC Topic 842 effective May 1, 2019 using the optional cumulative-effect transition method. The Company, signed a lease for all leases with a3 years on December 1, 2019 and will record the initial lease liability and right-of-use asset, in the same aggregate amount. The Company’s right-of-use asset relates to the lease involving office space and will be amortized over the lease term of greater than 12 months regardlessthree years. The adoption of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods and is applied retrospectively. Early adoption is permitted. The Company doesASC Topic 842 did not believe the guidance willotherwise have a material impact on itsthe Company’s financial statements.

Recently Issued Accounting Pronouncements

In January 2017,August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement” (Topic 820) which modifies the disclosure requirements on fair value measurements under ASC Topic No. 2017-4, “Intangibles – Goodwill820, Fair Value Measurement, as amended (“ASC 820”). For public companies, ASU 2018-13 removes (a) the prior requirement to disclose the amount and Other” (Topic 350): Simplifying the Testreason for Goodwill Impairment, which eliminates Steptransfers between Level 1 and Level 2 from the goodwill impairment test. When an indication of impairment was identified after performing the first step of the goodwill impairment test, Step 2 required that an entity determine the fair value athierarchy (please see Note 3 below for discussion of the impairment testing datethree-level hierarchy for measuring fair value), (b) the policy for timing of its assetstransfers between levels, and liabilities (including unrecognized assets and liabilities) using(c) the same procedure that would be required in determining thevaluation processes used for level 3 fair value measurements. For public companies, ASU 2018-13 also adds, among other things, a requirement to disclose the range and weighted average of assets acquired and liabilities assumedsignificant unobservable inputs used in a business combination. Under the amendments in ASU No. 2017-4, an entity would perform its annual, or interim, goodwill impairment test by comparing theLevel 3 fair value of a reporting unit with its carrying value. An entity would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. In addition, an entity must consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. A public business entity thatmeasurements. This amendment is a SEC filer should adopt the amendments in ASU No. 2017-4 for its annual, or any interim, good will impairment tests in fiscal years beginning after December 15, 2019. The Company does not believe the guidance will have a material impact on its financial statements.

In May 2017, the FASB released ASU 2017-09, “Compensation - Stock Compensation”. The update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. An entity shall account for the effects of a modification described in ASC paragraphs 718-20-35-3 through 35-9, unless all the following are met: (1) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The provisions of this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. TheCompany does not believe the guidance will have a material impact on its financial statements.

In July 2017, the FASB issued ASU 2017-11 “Earnings Per Share” (Topic 260). The amendments in the update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.2019. Early adoption was permitted upon issuance of ASU 2018-13. The Company has not adopted ASU 2018-13 and, based on its preliminary assessment, does not believe the guidanceimpact of adoption will have abe material impact on its financial statements.

statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 3 – Accounts Receivable

Accounts receivable, consisted of the following:

The Company recorded bad debt recovery of ($2,342) and bad debt expense of $1,204 and $0$2,786 during the sixnine months ended November 30, 2017February 29, 2020 and 2016,February 28, 2019, respectively.

Note 4 – Inventory

Inventory consisted of the following:

In the six months ended November 30, 2017At February 29, 2020 and 2016, the Company did not write down inventory for any obsolescence or slow-moving inventory. At November 30, 2017,May 31, 2019, inventory held at third party locations amounted to $102,414.$580 and $13,176, respectively. At February 29, 2020 and May 31, 2019, inventory in- transit amounted to $0 and $3,450, respectively.

During the nine months ended February 29, 2020 the Company sold some of the slow- moving inventory which had been written off and recovered $769. During the nine months ended February 28, 2019, the Company wrote down inventory for obsolescence of $636 which is included in cost of sales.

Note 5 – Property and Equipment

Property and equipment, stated at cost, consisted of the following:

Depreciation expense amounted to $1,204$2,459 and $367$1,582 for the sixthree months ended February 29, 2020 and February 28, 2019, respectively. Depreciation expense amounted to $7,998 and $3,625 for the nine months ended February 29, 2020 and February 28, 2019, respectively.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 6 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses comprised of the following:

Note 7 – Equipment Financing Payable

During the year ended May 31, 20172019, the Company purchased a forklift under an installment purchase plan. The loan amount was $16,500 payable in 60 monthly installment payments of $317 comprising of principal payment of $275 and 2016, respectively. interest payment of $42. As of February 29, 2020, and May 31, 2019, the balance outstanding on the loan was $12,925 and $15,210. $3,300 of the loan is payable within one year and the balance $9,625, is payable after one year from February 29, 2020. The Company recorded an interest expense of $31 and $10, respectively on the loan in the accompanying unaudited financial statements for the three months and nine months ended February 29, 2020. The Company recorded an interest expense of $42 on the loan in the accompanying unaudited financial statements for the three months and nine months ended February 28, 2019.

The amounts of principal payments due in the next five years ended February 28, are as follows:

Note 68 – Stockholders’ Equity

Shares Authorized

The authorized capital of the Company consists of 100,000,000 shares of common stock, par value $0.0001 per share and 20,000,000 shares of preferred stock, par value $0.0001 per share.

Preferred Stock

The preferred stock may be issued from time to time in one or more series. The Board of Directors of the Company is expressly authorized to provide for the issuance of all or any of the shareshares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter, for each such series, such voting powers, full or limited, or no voting powers and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed ununtil the resolution adopted by the Board of Directors providing the issueissuance of such shares. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

As of February 29, 2020, no shares of preferred stock were issued and outstanding.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2017FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 8 – Stockholders’ Equity (continued)

Common Stock

In June 2017,As of February 29, 2020, 41,285,891 shares of common stock were issued and outstanding. 

No stock was issued during the nine months ended February 29, 2020.

During the nine months period ended February 28, 2019, the Company issued an aggregate of 80,000760,000 shares of the Company’s common stock for $304,000 cash proceeds to various consultants pursuantthird party investors at $0.40 per share.

During the nine months period ended February 28, 2019, the Company recorded 12,500 shares of common stock for shares earned by third party consultant for services provided to consulting agreements related to marketing and business advisory services.the Company. The term of the consulting agreements ranges from 2 months to 6 months. The Companyshares were valued these common shares at the fair value of $20,000$0.40 per share or $5,000, based on the sale ofrecent common stock in the recent private placements at $0.25 per common share. In connection with the issuance of these common shares, the Company recorded stock based compensation of $18,885 and prepaid expense of $1,115 remained at November 30, 2017 to be amortized over the remaining term of its respective consulting agreements.sales.

On September 26, 2017, the Company sold 100,000 shares of its common stock at $0.25 per common share for proceeds of $25,000.

Between September 27, 2017 and October 2, 2017, the Company sold an aggregate of 271,000 shares of its common stock at $0.40 per common share for proceeds of $108,400.

On September 29, 2017, the Company sold 375,000 shares of its common stock to an affiliated company at $0.40 per common share for proceeds of approximately $150,000. The affiliated company is managed by the brother of the Company’s Chief Executive Officer.

Note 79 – Commitments and Contingencies

In September 2016,Leases

As discussed in Note 2 above, the Company executedadopted ASU No. 2016-02, “Leases”on June 1, 2019, which require lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. The Company has a lease agreement in connection with its office and warehouse facility in California under an operating leaseslease which expired in October 2019. On December 1, 2019, the Company signed an extension of the lease for 3 years. The rent will be $7,567.34 per month for the first year and increase by a certain amount each year.

The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of 37 months commencingtime in October 2016exchange for consideration, or the Company directs the use of the asset and expiringobtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in October 2019. a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.

The Company shall payreviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

Lease expense is recognized on a monthly basestraight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a remeasurement of lease liabilities. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

Note 9 – Commitments and Contingencies (continued)

Pursuant to the new standard, the Company recorded an initial lease liability of $235,748 and an initial right of use asset in the same amount. During the three months ended February 29, 2020, the Company recorded rent starting at $6,782 plusexpense in the amount of $23,589 for the three months ended February 29, 2020. As of February 29, 2020, the lease liability balance was $219,962 and the right of use asset balance was $219,105. A lease term of three years and a pro rata sharediscount rate of 12% was used.

Supplemental balance sheet information related to leases was as follows:

Maturities of operating expenses. The base rent is subjectlease liabilities were as follows as of February 29, 2020:

Rent expense, prior to an annual increase beginning in October 2017 as defined in the signing of the new lease agreement.agreement, amounted to $0 and $23,666 for the three months ended February 29, 2020 and February 28, 2019, respectively. Rent expense amounted to $36,266$71,105 and $26,205$71,203 for the sixnine months ended November 30, 2017February 29, 2020 and 2016,February 28, 2019, respectively. Future minimum rental payments required under this operating lease are as follows:

In November 2017, the Company executed an Agreement with a third party located in Hong Kong, China, whereby the third party shall promote, market, distribute and resell the Company’s products to end-user consumers through direct online sales or third party e-commerce platforms in the following territories: Hong Kong, Macau, and the People’s Republic of China. The term of the agreement is for 36 months from the effective date. Parties shall have the right to terminate this agreement, with or without cause, upon 60 days prior written notice. For services provided in connection with this agreement, the Company shall pay the third party 16.5% of the gross revenues generated from sales channel initiated and subsequently maintained by the third party or $3,300 per month, whichever is greater. At November 30, 2017, $11,496 of inventory was held in consignment at this third party facility.

Note 810 – Related Party Transactions

The Company’s Chief Executive Officer, from time to time, provided advances to the Company for working capital purposes. At November 30, 2017February 29, 2020 and May 31, 2017,2019, the Company had a payable to the officer of $210 and $0,$210, respectively. These advances were short-term in natureare unsecured, due on demand and non-interest bearing.

On September 29, 2017,During the nine months ended February 28, 2019, the Company sold 375,000 shares of its common stockpaid $280 to an affiliated company at $0.40 per common share for proceeds of approximately $150,000.advisory services rendered. The affiliated company is managed by the brother of the Company’s Chief Executive Officer.