United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended: JanuaryOctober 31, 2018 2019

Commission file no.: 000-55519

Force Protection Video Equipment Corp.

(Name of Small Business Issuer in its Charter)

Issuer’s telephone number: (919) 780-7897

Securities registered under Section 12(b) of the Act:

Securities registered under Section 12(g) of the Act:

Common Stock, $0.0001 par value per share

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐     No ☒

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ]☐     No [X]☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act). Yes ☐     No ☒

Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 80,658,196841,184,289 shares of common stock, par value $0.0001, were outstanding on February 27, 2018.August 24, 2020.

FORCE PROTECTION VIDEO EQUIPMENT CORP.

CORP

FORM 10-Q

TABLE OF CONTENTS

PAGE

PART I - FINANCIAL INFORMATION

ItemITEM 1. FINANCIAL STATEMENTS.

Financial Statements

Force Protection Video Equipment Corp.

Condensed Consolidated Balance Sheets as of January 31, 2018 (Unaudited)

and April 30, 2017 (audited)

1

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended

January 31, 2018 and 2017 (Unaudited)

2

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended

January 31, 2018 and 2017 (Unaudited)

3

Notes to Condensed Consolidated Financial Statements

4

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

20

Item 4.

Controls and Procedures

23

PART II - OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

28

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

(The accompanying condensed notes are an integral part of these condensed consolidated financial statements)statements

Force Protection Video Equipment Corp.

Consolidated Statements of Operations

3(Unaudited)

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

Force Protection Video Equipment Corp.

Consolidated Statements of Changes in Stockholders' Deficit

For the Three and Six Months Ended October 31, 2019 and 2018

(Unaudited)

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

Force Protection Video Equipment Corp.

Consolidated Statements of Cash Flows

(Unaudited)

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

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO CONDENSED CONSOLIDATEDUNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED JANUARYOCTOBER 31, 2018 AND 20172019

NOTENote 1 – ORAGNIZATION AND GOING CONCERN- Organization and Nature of Operations

Organization

Force Protection Video Equipment Corp., together with its wholly owned subsidiary, Cobraxtreme HD Corp. (collectively, “we”, “us”, “our” or the Company)“Company”), is in the business of sellingsells video and audio capture devices and accessories to consumers and law enforcement. Force Protection Video Equipment Corp.The Company was incorporated on March 11, 2011, under the laws of the State of Florida. Cobraxtreme HD Corp. was incorporated under the laws of the State of North Carolina on September 19, 2017 and currently is non-operating. On February 2, 2015, the Company changed its name to Force Protection Video Equipment Corp.

Going Concern

The Company’s fiscal year end is April 30.

Basis of Presentation

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements are prepared using accounting principles generally acceptedwhich reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the United Statesconsolidated results of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

During the nine months ended January 31, 2018 and year ended April 30, 2017, the Company recognized revenue of $139,182 and $86,075, respectively, and a net operating loss of $343,738 and $770,764, respectively. As of January 31, 2018, the Company had negative working capital of $318,299 and an accumulated deficit of $3,815,263.

In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These consolidated financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.periods presented.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of Force Protection Video Equipment Corp. as of January 31, 2018, and for the three and nine months ended January 31, 2018 and 2017,Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial reportinginformation and includewith the Company’s wholly-owned subsidiary, Cobraxtreme HD Corp. Accordingly,instructions to Article 8-03 of Regulation S-X.

Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United Statesinformation and notes necessary for completecomprehensive financial statements.

These unaudited consolidated financial statements and should be read in conjunction with the auditedsummary of significant accounting policies and notes to the consolidated financial statements and notes thereto for the year ended April 30, 2017,2019 of the Company which were included in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on July 24, 2020.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

Liquidity and Going Concern

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying unaudited consolidated financial statements, for the six months ended October 31, 2019, the Company had:

Additionally, at October 31, 2019, the Company had:

The Company is currently in default on certain convertible debt instruments. In September and October 2019, the Company reached an agreement to settle certain of its in-default convertible notes, loans, and related accrued interest (See Note 4 for additional changes to the Company’s convertible notes and term note). Management believes that these matters raise substantial doubt about the Company’s ability to continue as parta going concern for twelve months from the issuance date of this report.

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from the sales of its goods and services to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis.

In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flow and cash usage forecasts for the period ending October 31, 2019, and our current capital structure including equity-based instruments and our obligations and debts.

We expect that our existing cash and cash equivalents as of October 31, 2019, will not be sufficient to enable us to fund our anticipated level of operations based on our current operating plans, through the second quarter of fiscal year end 2021. Accordingly, we will require additional capital to fund our operations. We anticipate raising additional capital through the private and public sales of our equity or debt securities, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurance that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

At October 31, 2019, the Company had $3,166 in cash. If we do not raise sufficient capital in a timely manner, among other things, we may be forced scale back our operations or cease operations all together.

During the six months ended October 31, 2019, the Company was able to raise $160,356 in gross proceeds in convertible promissory notes ($132,856) and a term note ($27,500). The Company’s capital-raising efforts are ongoing, and the Company has undertaken the following to reduce its burn rate: an ongoing review and reduction of monthly operating expenses. If sufficient capital cannot be raised during fiscal year 2020, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations to the extent practicable.

Because COVID-19 infections have been reported throughout the United States, certain federal, state, and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.

The ultimate impact of the COVID-19 pandemic on the Company’s Form 10-K. Inoperations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentationduration of the interimCOVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial informationimpact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition, and results of operations.

The significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time. In light of the COVID-19 pandemic, the Company has taken proactive steps to manage its costs and discretionary spending.

These factors create substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been included. Theprepared on a basis that assumes the Company did not record an income tax provision duringwill continue as a going concern and which contemplates the periods presented due to net taxable losses. The resultsrealization of operations for any interim period are not necessarily indicativeassets and satisfaction of liabilities and commitments in the resultsordinary course of operations for the entire year.business.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

These consolidated financial statements have been prepared in accordance with US GAAP and include the accounts of the Company and its wholly owned subsidiary, Cobraxtreme HD Corp. All significant intercompany transactions and balances have been eliminated. Cobraxtreme HD Corp. was incorporated under the laws of the State of North Carolina on September 19, 2017.

EstimatesBusiness Segments

The preparation ofCompany uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s consolidatedreportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics.

Use of Estimates

In preparing financial statements requiresin conformity with generally accepted accounting principles, management is required to make estimates and use assumptions that affect the reported amounts of assets and liabilities revenues, and expenses. These estimates and assumptions are affected by management’s applicationthe disclosure of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Inventory

Our inventory is comprised of finished goods and primarily includes cameras and recording equipment. The Company’s inventory is stated at the lower of cost or market and expensed to cost of goods sold upon sale using the average-cost method. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory.

Accounts Receivable

Accounts receivable are reported at the customers' outstanding balances. The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve.

Property and Equipment

Fixed assets are carried at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.

For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. Depreciation for financial statement purposes is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred taxcontingent assets and liabilities are recognized forat the future tax consequences attributed to differences betweendate of the financial statement carrying amountsstatements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

Significant estimates during the six months ended October 31, 2019 include estimated useful life and related impairment of existingproperty and equipment, valuation of operating lease right-of-use (“ROU”) assets and liabilities and their respective tax basesthe related lease termination and tax creditsestimates of current and loss carry-forwards. Deferred tax assetsdeferred income taxes and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilitiesvaluation allowance.

Fair Value of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.Financial Instruments

Revenue Recognition

The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.

Marketing and Advertising Costs

Marketing and advertising costs are expensed as incurred. The Company recognized marketing and advertising costs of $150 and $16,979, during the three months ended January 31, 2018 and 2017, respectively, and $60,355 and $85,854 during the nine months ended January 31, 2018 and 2017, respectively.

Stock Based Compensation

The Company accountsaccounting standard for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. Themeasurements provides a framework for measuring fair value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Fair Value Measurements

and requires disclosures regarding fair value measurements. 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 at the measurement date. date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

The Company utilizesuses a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identicalclassify and disclose all assets orand liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As of January 31, 2018 and April 30, 2017, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis, oras well as assets and liabilities measured at fair value on a non-recurring basis.  basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

Fair ValueThe determination of Financial Instrumentsfair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

The Company’s financial instruments, consist ofincluding cash, and cash equivalents andnet accounts receivable, accounts payable and accrued expenses. Theexpenses, are carried at historical cost. At October 31, 2019 and April 30, 2019, the carrying amounts of the Company’s financialthese instruments approximateapproximated their fair valuevalues because of the short termshort-term nature of these instruments.

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

Concentrations of Risk

During the six months ended October 31, 2019 and 2018, the following customers accounted for greater than 10% of sales as follows:

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of these items. These fair value estimates are subjective in naturethree months or less at the purchase date and involve uncertaintiesmoney market accounts to be cash equivalents. At October 31, 2019 and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We doApril 30, 2019, the Company did not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.have any cash equivalents.

Net Income (Loss) Per Share

The computationCompany maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of basic earnings per share (“EPS”)FDIC insured levels and the Company has not experienced any losses in such accounts through October 31, 2019 and April 30, 2019, respectively.

Accounts Receivable

Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the weighted average numberCompany’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

Allowance for doubtful accounts was $0 and $0 at October 31, 2019 and April 30, 2019, respectively.

Inventory

The Company’s inventory is comprised of shares that were outstanding during the period, including shares of common stock that are issuablefinished goods and primarily includes cameras and recording equipment. The Company’s inventory is stated at the endlower of the reporting period. The computationcost or market and expensed to cost of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstandingrevenues upon sale using the treasury stockaverage-cost method. The computationCompany also makes prepayments against the future delivery of diluted net income per share does not assume conversion, exercise or contingent issuance of securitiesinventory classified as prepaid inventory. The Company plans to become a drop ship third-party seller that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, ifwill reduce the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).need to carry inventory.

Following is the computation of basic and diluted net loss per share for the three and nine months ended January

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2018 and 2017:2019

Concentrations of risk

During the three months ended JanuaryOctober 31, 2019 and 2018, two customers accountedthe Company wrote down $0 and $0, respectively, of obsolete inventory.

During the six months ended October 31, 2019 and 2018, the Company wrote down $0 and $112,736, respectively, of obsolete inventory.

Long-lived Assets

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company’s stock price for 46.2% (32.7%a sustained period of time; and 13.5%)changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of sales. these assets.

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets ranging from three to seven years.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.

On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. All related property and equipment at that time was determined to be impaired.

During the three months ended JanuaryOctober 31, 2017, two customers accounted for 64.0% (50.1%2019 and 13.9%)2018, the Company recorded impairment losses of sales. property and equipment of $0 and $0, respectively.

During the ninesix months ended JanuaryOctober 31, 2019 and 2018, two customers accountedthe Company recorded impairment losses of property and equipment of $6,274 and $0, respectively. See Notes 3 and 5.

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

Right of Use Assets and Lease Obligations

The Right of Use (“ROU”) Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the Company’s operations remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company.

Operating lease ROU assets represents the right to use the leased asset for 39.6% (11.9%the lease term and 27.7%)operating lease liabilities are recognized based on the present value of sales. During the nine months ended January 31, 2017, one customer accountedfuture minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for 28.7%minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of sales.operations.

On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. The Company had an ROU asset of $29,208 and a lease liability of $29,811 at the date of termination, resulting in a gain on lease termination of $603. See Note 5.

Derivative Liabilities

The Company relies on third parties for the supplyanalyzes all financial instruments with features of both liabilities and manufacture of its capture devices, some of which are sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. During the three months ended January 31, 2018, two suppliers accounted for 39.9% (27.9% and 12.0%equity under FASB ASC Topic No. 480, (“ASC 480”) of our inventory purchases. During the nine months ended January 31, 2018, four suppliers accounted for 64.0% (19.5%, 19.2%, 13.9% and 11.4%) of our inventory purchases. During the three months ended January 31, 2017, three suppliers accounted for 86.3% (60.8%, 15.0% and 10.5%) of our inventory purchases. During the nine months ended January 31, 2017, two suppliers accounted for 82.9% (71.8% and 11.1%) of our inventory purchases. 

Recent Accounting Pronouncements

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), “Distinguishing Liabilities from Equity (Topic 480), Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and HedgingHedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. The Company uses a Black-Scholes option pricing model to determine fair value.

Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment recognized in the Company’s consolidated statements of operations

FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED C ONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2019

The Company has adopted ASU 2017-11, “Earnings per share (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When260)”, provided that when determining whether certain financial instruments should be classified as liabilitiesliability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence ofIf a down round feature. For freestandingfeature on the conversion option embedded in the note is triggered, the Company will evaluate whether a beneficial conversion feature exists, the Company will record the amount as a debt discount and will amortize it over the remaining term of the debt.

If the down round feature in the warrants that are classified as equity classified financial instruments,is triggered, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 toCompany will recognize the effect of the down round feature when it is triggered. That effect is treated as a deemed dividend, and as a reduction ofwhich will reduce the income available to common shareholders in basic EPS. Convertiblestockholders.

At October 31, 2019 and April 2019, the Company did not have any derivative liabilities.

Stock Warrant Liability

The Company accounts for certain stock warrants outstanding as a liability at fair value and adjusts the instruments with embedded conversion options that have down round features are nowto fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the specialized guidanceCompany’s consolidated statements of operations. The fair value of the warrants issued by the Company are estimated using a Black-Scholes option pricing model, at each measurement date.

At October 31, 2019 and April 2019, the Company did not have any warrant liabilities.

Debt Discounts (Derivative Liabilities)

The Company accounts for contingent beneficialdebt discounts originating in connection with conversion features (in Subtopicthat remain embedded in the related notes (ASC 815) in accordance with ASC 470-20, Debt—Debt with Conversion and Other Options)Options. These costs are classified as a component of debt discount on the consolidated balance sheets as a direct deduction from the debt liability. The Company amortizes these costs over the term of the related debt agreement as interest expense (accretion) - debt discount, in the consolidated statements of operations.