United States
Securities and Exchange CommissionUNITED STATES
Washington,SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FormFORM 10-Q
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Januaryended July 31, 2018 2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to___________
Commission file no.: number 000-55519
Force Protection Video Equipment Corp.
(Name of Small Business Issuer in its Charter)
Force Protection Video Equipment Corp. | ||
(Exact name of registrant as specified in its charter) |
Florida |
| 45-1443512 |
(State |
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incorporation or organization) |
| (IRS Employer Identification |
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(Address of principal executive offices) |
| (Zip Code) |
Issuer’s
(919) 271-2994
(Registrant’s telephone number: (919) 780-7897number, including area code)
Securities registered underpursuant to Section 12(b) of the Act:None
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Securities registered underpursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value per share
Par Value
(Title of class)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.
Large accelerated filer |
| ☐ | Accelerated filer |
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Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |
(Do not check if a smaller reporting company) |
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Emerging growth company |
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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.September 18, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
None.
FORCE PROTECTION VIDEO EQUIPMENT CORP.
CORP
FORM 10-Q
TABLE OF CONTENTS
2 |
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)
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| July 31, 2020 |
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| April 30, 2020 |
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| (Unaudited) |
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Assets |
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Current Assets |
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Cash |
| $ | 724 |
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| $ | 2,505 |
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Accounts receivable |
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| 2,000 |
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| 2,116 |
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Total Current Assets |
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| 2,724 |
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| 4,621 |
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Total Assets |
| $ | 2,724 |
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| $ | 4,621 |
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Liabilities and Stockholders' Deficit | ||||||||
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Current Liabilities |
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Accounts payable and accrued expenses |
| $ | 252,790 |
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| $ | 237,233 |
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Related party advance |
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| 11,350 |
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| 12,150 |
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Note payable |
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| 27,500 |
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| 27,500 |
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Convertible notes payable |
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| 499,611 |
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| 463,561 |
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Total Current Liabilities |
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| 791,251 |
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| 740,444 |
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Commitments and Contingencies (Note 4) |
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Series A, Redeemable Preferred Stock - Related Party - $0.0001 par value, 20,000,000 shares authorized 5,000,000 shares issued and outstanding, respectively |
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| 5,000 |
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| 5,000 |
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Stockholders' Deficit |
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Common stock, $0.0001 par value, 20,000,000,000 shares authorized 841,184,289 shares issued and outstanding, respectively |
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| 84,119 |
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| 84,119 |
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Additional paid-in capital |
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| 3,780,562 |
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| 3,780,562 |
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Accumulated deficit |
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| (4,658,208 | ) |
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| (4,605,504 | ) |
Total Stockholders' Deficit |
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| (793,527 | ) |
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| (740,823 | ) |
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Liabilities and Stockholders' Deficit |
| $ | 2,724 |
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| $ | 4,621 |
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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.
Force Protection Video Equipment Corp. |
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Condensed Consolidated Balance Sheets |
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| January 31, |
| April 30, |
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| 2018 |
| 2017 |
ASSETS |
| (Unaudited) |
| (Audited) | ||
Current assets |
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| Cash and cash equivalents |
| $ 56,674 |
| $ 188,773 | |
| Accounts receivable |
| 17,053 |
| 1,738 | |
| Inventory |
| 121,450 |
| 104,128 | |
| Prepaids |
| 8,798 |
| 28,153 | |
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| Total current assets |
| 203,975 |
| 322,792 |
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| Property and equipment, net of accumulated depreciation of $9,421 and $5,272, respectively |
| 22,893 |
| 18,796 | |
| Operating lease ROU asset |
| 48,672 |
| - | |
| Deposits |
| 2,400 |
| 1,945 | |
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| Total assets |
| $ 277,940 |
| $ 343,533 |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Current liabilities |
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| Accounts payable and accrued expenses |
| $ 84,145 |
| $ 69,177 | |
| Operating lease liability |
| 14,840 |
| - | |
| Convertible promissory notes net of discount of $85,426 and $286,159, respectively |
| 423,442 |
| 140,969 | |
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| Total current liabilities |
| 522,427 |
| 210,146 |
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Long-term liabilities |
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| Warranty |
| 113 |
| 515 |
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| Operating lease liability |
| 33,933 |
| - |
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| Total liabilities |
| 556,473 |
| 210,661 |
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Commitments and contingencies |
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Stockholders' equity (deficit) |
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| Preferred stock, $0.0001 par value 15,000,000 shares authorized; issued and outstanding 5,000,000 and 1,000,000 at January 31, 2018 and April 30, 2017, respectively. | 500 |
| 100 | ||
| Common stock, $0.0001 par value 2,000,000,000 shares authorized; issued and outstanding 54,035,496 and 1,698,494 at January 31, 2018 and April 30, 2017, respectively. | 5,403 |
| 170 | ||
| Additional paid-in capital |
| 3,530,980 |
| 3,124,998 | |
| Accumulated deficit |
| (3,815,416) |
| (2,992,396) | |
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| Total stockholders' equity (deficit) |
| (278,533) |
| 132,872 |
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| Total liabilities and stockholders' equity (deficit) |
| $ 277,940 |
| $ 343,533 |
(The accompanying condensed notes are an integral part of these condensed consolidated financial statements)statements
Force Protection Video Equipment Corp |
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Condensed Consolidated Statements of Operations (Unaudited) |
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For the Three and Nine Months Ended January 31, 2018 and 2017 |
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| Three Months Ended |
| Nine Months Ended | ||||
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| January 31, |
| January 31, | ||||
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| 2018 |
| 2017 |
| 2018 |
| 2017 |
Income |
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| Net revenue | $ 50,669 |
| $ 44,489 |
| $ 139,182 |
| $ 77,666 | |
| Cost of goods sold | 29,510 |
| 29,805 |
| 60,377 |
| 53,582 | |
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| Gross profit | 21,159 |
| 14,684 |
| 78,805 |
| 24,084 |
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Operating expenses |
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| General and administrative | 108,662 |
| 122,512 |
| 348,279 |
| 444,819 | |
| Sales and marketing | 4,483 |
| 28,088 |
| 74,417 |
| 117,294 | |
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| Total operating expenses | 113,145 |
| 150,600 |
| 422,696 |
| 562,113 |
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| Loss from operations | (91,986) |
| (135,916) |
| (343,891) |
| (538,029) |
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Other (expense) |
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| Interest expense | (11,843) |
| (7,175) |
| (30,756) |
| (21,307) | |
| Accretion of debt discount | (67,736) |
| (144,753) |
| (448,373) |
| (567,647) | |
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| Total other (expense) | (79,579) |
| (151,928) |
| (479,129) |
| (588,954) |
Loss before taxes | (171,565) |
| (287,844) |
| (823,020) |
| (1,126,983) | ||
Provision for income taxes | - |
| - |
| - |
| - | ||
Net loss | $ (171,565) |
| $ (287,844) |
| $ (823,020) |
| $(1,126,983) | ||
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Net (loss) per common share basic and diluted | $ (0.01) |
| $ (0.35) |
| $ (0.05) |
| $ (1.99) | ||
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Weighted average common shares outstanding basic and diluted | 32,194,936 |
| 813,129 |
| 16,007,454 |
| 566,217 | ||
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(The accompanying notes are an integral part of these condensed consolidated financial statements) |
3 |
Table of Contents |
Force Protection Video Equipment Corp |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
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For the Nine Months Ended January 31, 2018 and 2017 |
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| Nine Months Ended | ||
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| January 31, | ||
Cash flows from operating activities: | 2018 |
| 2017 | ||
| Net (Loss) | $ (823,020) |
| $ (1,126,983) | |
| Adjustments to reconcile net loss to net cash provided (used in) operating activities: |
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| Depreciation and Amortization | 4,149 |
| 3,510 |
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| Accretion of debt discount | 448,373 |
| 567,647 |
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| Share based compensation expense | 600 |
| - |
| Changes in assets and liabilities: |
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| (Increase) decrease in accounts receivable | (15,315) |
| (20,143) |
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| (Increase) decrease in inventory | (17,322) |
| (61,777) |
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| (Increase) decrease in other assets | (29,772) |
| 17,009 |
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| Increase (decrease) in accounts payable and accrued expenses | 22,183 |
| 47,682 |
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| Increase (decrease) in other liabilities | 48,371 |
| (305) |
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| Net cash (used) by operating activities | (361,753) |
| (573,360) |
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Cash flows from investing activities: |
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| Purchase of equipment and vehicles | (8,246) |
| (16,480) | |
| Net cash (used) by investing activities | (8,246) |
| (16,480) | |
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Cash flows from financing activities: |
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| Proceeds from sale of common stock | 600 |
| - | |
| Proceeds from sale of preferred stock | 4,000 |
| - | |
| Proceeds from convertible promissory notes | 233,300 |
| 387,500 | |
| Net cash provided by financing activities | 237,900 |
| 387,500 | |
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Increase (decrease) in cash | (132,099) |
| (202,340) | ||
Cash and cash equivalents at beginning of period | 188,773 |
| 227,273 | ||
Cash and cash equivalents at end of period | $ 56,674 |
| $ 24,933 | ||
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Supplemental disclosures of cash flow information: |
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| Cash paid for interest | $ - |
| $ - | |
| Cash paid for income taxes | $ - |
| $ - | |
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Non-cash operating activities: |
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| Value of common stock issued in exchange for services | $ 600 |
| $ - | |
| Conversion of notes payable into 52,136,133 and 773,722 shares, respectively, of common stock | $ 203,350 |
| $ 467,987 | |
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(The accompanying notes are an integral part of these condensed consolidated financial statements) |
Force Protection Video Equipment Corp.
3Consolidated Statements of Operations
(Unaudited)
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| For the Three Months Ended July 31, |
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| 2020 |
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| 2019 |
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Revenues |
| $ | 4,608 |
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| $ | 25,148 |
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Cost of revenues |
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| 2,726 |
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| 13,420 |
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Gross profit |
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| 1,882 |
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| 11,728 |
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General and administrative expenses |
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| 25,489 |
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| 11,932 |
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Loss from operations |
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| (23,607 | ) |
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| (204 | ) |
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Other income (expense) - net |
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Interest expense |
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| (29,097 | ) |
|
| (7,272 | ) |
Impairment of property and equipment |
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| - |
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| (6,274 | ) |
Gain on lease termination |
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| - |
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| 603 |
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Total other income (expense) - net |
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| (29,097 | ) |
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| (12,943 | ) |
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Net loss |
| $ | (52,704 | ) |
| $ | (13,147 | ) |
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Loss per share - basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
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Weighted average number of shares - basic and diluted |
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| 841,184,289 |
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| 841,184,289 |
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The accompanying condensed notes are an integral part of these consolidated financial statements
4 |
Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Statements of Changes in Stockholders' Deficit
For the Three Months Ended July 31, 2020 and 2019
(Unaudited)
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| Additional |
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| Total |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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April 30, 2020 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,780,562 |
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| $ | (4,605,504 | ) |
| $ | (740,823 | ) |
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Net loss - three months ended July 31, 2020 |
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| - |
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| - |
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| - |
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| (52,704 | ) |
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| (52,704 | ) |
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July 31, 2020 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,780,562 |
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| $ | (4,658,208 | ) |
| $ | (793,527 | ) |
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April 30, 2019 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,762,039 |
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| $ | (4,573,287 | ) |
| $ | (727,129 | ) |
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Forgiveness of accrued payroll - related party |
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| - |
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| - |
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| 18,523 |
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| - |
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| 18,523 |
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Net loss - three months ended July 31, 2019 |
|
| - |
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| - |
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| - |
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| (13,147 | ) |
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| (13,147 | ) |
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July 31, 2019 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,780,562 |
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| $ | (4,586,434 | ) |
| $ | (721,753 | ) |
The accompanying condensed notes are an integral part of these consolidated financial statements
5 |
Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended July 31, |
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| 2020 |
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| 2019 |
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Operating activities |
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Net loss |
| $ | (52,704 | ) |
| $ | (13,147 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operations |
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Bad debt |
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| 756 |
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| 343 |
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Recognition of prepaid interest expense |
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| - |
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| 10,234 |
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Impairment of property and equipment |
|
| - |
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| 6,274 |
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Gain on ROU lease liability termination |
|
| - |
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| (603 | ) |
Changes in operating assets and liabilities |
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(Increase) decrease in |
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Accounts receivable |
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| (640 | ) |
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| 194 |
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Deposits and other assets |
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| - |
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| 1,650 |
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Increase (decrease) in |
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Accounts payable and accrued expenses |
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| 15,557 |
|
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| (352 | ) |
Deferred software maintenance revenue |
|
| - |
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| (1,270 | ) |
Warranty |
|
| - |
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| (136 | ) |
Net cash provided by (used in) operating activities |
|
| (37,031 | ) |
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| 3,187 |
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Financing activities |
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Repayments on related party advance |
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| (800 | ) |
|
| (300 | ) |
Proceeds from issuance of convertible promissory notes |
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| 36,050 |
|
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| - |
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Net cash provided by (used in) financing activities |
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| 35,250 |
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| (300 | ) |
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Net increase (decrease) in cash |
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| (1,781 | ) |
|
| 2,887 |
|
|
|
|
|
|
|
|
|
|
Cash - beginning of period |
|
| 2,505 |
|
|
| 397 |
|
|
|
|
|
|
|
|
|
|
Cash - end of period |
| $ | 724 |
|
| $ | 3,284 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 1,365 |
|
| $ | 9,909 |
|
Cash paid for income tax |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Forgiveness of accrued payroll - related party |
| $ | - |
|
| $ | 18,523 |
|
Termination of ROU lease asset and related liability |
| $ | - |
|
| $ | 29,208 |
|
The accompanying condensed notes are an integral part of these consolidated financial statements
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Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO CONDENSEDUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED JANUARYJULY 31, 2018 AND 20172020
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, 2017,2020 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 September 14, 2020.
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Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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 three months ended July 31, 2020, the Company had:
· | Net loss from operations of $52,704; and |
· | Net cash used in operations was $37,031 |
Additionally, at July 31, 2020, the Company had:
· | Accumulated deficit of $4,658,208, |
· | Stockholders’ deficit of $793,527; and |
· | Working capital deficit of $788,527 |
At July 31, 2020, the Company was in default on certain convertible notes and related accrued interest. In August 2020, the Company reached an agreement with its lenders to extend the due dates of its in-default convertible notes to February 1, 2021.See Note 3.
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 July 31, 2020, and our current capital structure including equity-based instruments and our obligations and debts.
At July 31, 2020, the Company had $724 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. We expect that our existing cash and cash equivalents as partof July 31, 2020, will not be sufficient to enable us to fund our anticipated level of operations based on our current operating plans, through the first quarter of fiscal year end 2022. 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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
During the first quarter of fiscal year 2021, the Company was able to raise $36,050 in 8%, convertible notes, under similar terms as its previous convertible note financings; and an additional $66,859 was raised during August and September 2020.There were no sales of equity based capital investments. 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 2021, 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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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:
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| |
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| |
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|
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 amounts of existing assetsstatements and liabilitiesrevenues and their respective tax basesexpenses during the reported period. Actual results could differ from those estimates, and tax credits and loss carry-forwards. 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 and carry-forwards are expected toestimates may be recovered 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 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.material.
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,Significant estimates during the three months ended JanuaryJuly 31, 20182020 included allowance for doubtful accounts on accounts receivable and 2017, respectively,estimates of current and $60,355deferred income taxes and $85,854deferred tax valuation allowance.
Significant estimates during the ninethree months ended JanuaryJuly 31, 20182019 included allowance for doubtful accounts on accounts receivable, estimated useful life and 2017, respectively.related impairment of property and equipment, valuation of operating lease right-of-use (“ROU”) assets and liabilities and the related lease termination and estimates of current and deferred income taxes and deferred tax valuation allowance.
Stock Based CompensationFair Value of Financial Instruments
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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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:
· | Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
· | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
· | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
Fair Value
The 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 andaccounts receivable, accounts payable and accrued expenses. Theexpenses, are carried at historical cost. At July 31, 2020 and April 30, 2020, the carrying amounts of the Company’s financialthese instruments approximateapproximated their fair valuevalues because of the short term maturityshort-term nature of these items. Theseinstruments.
ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value estimates are subjective(“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 nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We doearnings at each subsequent reporting date. The Company did not hold or issue financial instruments for trading purposes, nor do we utilize derivativeelect to apply the fair value option to any outstanding instruments.
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Net Income (Loss) Per Share
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation 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 outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if 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).CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Following is the computation of basic and diluted net loss per share for the three and nine months ended JanuaryJULY 31, 2018 and 2017:2020
|
|
| Three Months Ended |
| Nine Months Ended | ||||
|
|
| January 31, |
| January 31, | ||||
|
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
Basic and Diluted EPS Computation |
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| |
Numerator: |
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|
|
|
|
|
|
| |
| Loss available to common stockholders' |
| $ (171,565) |
| $ (287,844) |
| $ (823,020) |
| $ (1,126,983) |
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|
|
|
|
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|
Denominator: |
|
|
|
|
|
|
|
| |
| Weighted average number of common shares outstanding | 32,194,936 |
| 813,129 |
| 16,007,454 |
| 566,217 | |
|
|
|
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|
|
|
|
|
|
Basic and diluted EPS |
| $ (0.01) |
| $ (0.35) |
| $ (0.05) |
| $ (1.99) | |
|
|
|
|
|
|
|
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|
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares): | |||||||||
|
|
|
|
|
|
|
|
|
|
| Convertible promissory notes |
| 297,910,788 |
| 405,160 |
| 297,910,788 |
| 405,160 |
Concentrations of riskRisk
During the three months ended JanuaryJuly 31, 2018, two2020 and 2019, the following customers accounted for 46.2% (32.7%greater than 10% of sales as follows:
|
| Three Months Ended |
| |||||
Customer |
| July 31, 2020 |
|
| July 31, 2019 |
| ||
A |
|
| 43 | % |
|
| - |
|
B |
|
| 12 | % |
|
| - |
|
C |
|
| - |
|
|
| 26 | % |
D |
|
| - |
|
|
| 11 | % |
Total |
|
| 55 | % |
|
| 37 | % |
Cash and 13.5%)Cash Equivalents
For purposes of sales. Duringthe consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At July 31, 2020 and April 30, 2020, the Company did not have any cash equivalents.
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels and the Company has not experienced any losses in such accounts through July 31, 2020 and April 30, 2020, respectively.
Accounts Receivable
Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’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 July 31, 2020 and April 30, 2020, respectively. All outstanding accounts receivable at July 31, 2020 were collected in August 2020. For the three months ended JanuaryJuly 31, 2017, two customers accounted2020 and 2019, the Company recorded bad debt expense of $756 and $343, respectively.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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 64.0% (50.1%a sustained period of time; and 13.9%)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. Duringthese assets.
If impairment is indicated based on a comparison of the nine months ended January 31, 2018, two customers accountedassets’ 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 39.6% (11.9%repair and 27.7%)maintenance which do not materially extend the useful lives of sales. Duringproperty and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the nine months ended January 31, 2017, one customer accountedcost 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 28.7% of sales.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. The Company relies on third partiesrecorded impairment losses of property and equipment of $0 and $6,274 for the supply 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 JanuaryJuly 31, 2018, two suppliers accounted2020 and 2019, respectively.
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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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 39.9% (27.9%the lease term and 12.0%)operating lease liabilities are recognized based on the present value of our inventory purchases. During the nine months ended January 31, 2018, four suppliers 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 64.0% (19.5%, 19.2%, 13.9%minimum lease payments is amortized on a straight-line basis over the lease term and 11.4%)is included in general and administrative expenses in the consolidated statements of our inventory purchases. Duringoperations.
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 for the three months ended JanuaryJuly 31, 2017, three suppliers accounted for 86.3% (60.8%2019. See Note 4.
Derivative Liabilities
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), 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.
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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
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 July 31, 2020 and April 30, 2020, 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 July 31, 2020 and April 30, 2020, 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.
At July 31, 2020 and April 30, 2020, the Company did not have any debt discounts recorded in connection with any derivative or stock warrant liabilities.
Beneficial Conversion Features and Debt Discounts
For instruments that are not considered liabilities under ASC 480 or ASC 815, the Company applies ASC 470-20 to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock (whereby the conversion price is lower than the fair market value) into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this debt discount amount to the proceeds allocated to the convertible instrument.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Revenue Recognition
Our revenue is generated from the sale of products consisting primarily of video and audio capture devices and accessories. Payment or invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue is recorded net of discounts and promotions and is disaggregated based on significant product lines. See Note 6 for segments and geographic data.
ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows:
Identification of the contract, or contracts, with a customer
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer.
Identification of the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.
When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Determination of the transaction price
The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Variable consideration is described in detail below.
Allocation of the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.
Recognition of revenue when, or as, we satisfy a performance obligation
We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.
Principal versus Agent Considerations
When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.
Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:
We are primarily responsible for fulfilling the promise to provide the specified good or service
When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer.
We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.
The entity has discretion in establishing the price for the specified good or service
We have discretion in establishing the price our customer pays for the specified goods or services.
Contract Liabilities
Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities have been historically low and are generally recorded as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. We have no Long-term contract liabilities which would represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year.
Cost of Revenues
Cost of revenues represents costs directly related to the production, manufacturing and freight-in of the Company’s product inventory purchased from third-party manufacturers.
Income Taxes
The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of July 31, 2020, and April 30, 2020, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded for the three months ended July 31, 2020 and 2019.
Marketing and Advertising Costs
Marketing and advertising costs are expensed as incurred.
The Company recognized $749 and $2,972 in marketing and advertising costs during the three months ended July 31, 2020 and 2019, respectively, and are included as a component of general and administrative expenses on the consolidated statements of operations.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value, the Company considers the following assumptions in the Black-Scholes model:
· | Exercise price, |
· | Expected dividends, |
· | Expected volatility, |
· | Risk-free interest rate, |
· | Expected life of option; and |
· | Expected forfeiture rate |
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
There were no stock option grants during the three months ended July 31, 2020 and 2019, respectively. Additionally, there were no stock options outstanding or exercisable as of July 31, 2020 and April 30, 2020, respectively.
Common stock awards
The Company may grant common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded in accordance with ASU 2018-07 (June 2018) on the consolidated statement of operations in the same manner and charged to the same account as if such settlements had been made in cash.
There were no stock awards granted during the three months ended July 31, 2020 and 2019, respectively.
Stock Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued.
All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance if there is not a service period.
There were no warrants granted during the three months ended July 31, 2020 and 2019, respectively. Additionally, there were no warrants outstanding or exercisable as of July 31, 2020 and April 30, 2020, respectively.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Basic and diluted loss per share
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
The following potentially dilutive equity securities outstanding as of July 31, 2020 and 2019 were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:
|
| July 31, 2020 |
|
| July 31, 2019 |
| ||
|
|
|
|
|
|
| ||
Convertible notes (P&I) |
|
| 2,328,163,333 |
|
|
| 20,632,801,111 |
|
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Recently Issued Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement”, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including related EPS guidance (in Topic 260).the consideration of costs and benefits. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early2019. The Company adopted ASU 2018-13 during the quarter ended January 31, 2020 and its adoption is permitteddid not have any material impact on the Company’s consolidated financial statements.
Recent Accounting Updates Not Yet Effective
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for all entities, including adoption in an interim period. If an entity early adoptsIncome Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the amendmentsapproach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period any adjustments should be reflected asand the recognition of the beginning of the fiscal year that includes that interim period. The Company does not expect adoption of ASU 2017-11 to have a material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update providedeferred tax liabilities for outside basis differences. This guidance about which changes to the terms or conditions of a share-based payment awards requirealso requires an entity to apply modification accountingreflect the effect of an enacted change in Topic 718. The amendmentstax laws or rates in this Update areits effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for all entities for annual periods,interim and interim periods within those annual periods beginning after December 15, 2017. Early2020, with early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. permitted. We are currently evaluating the impact of this guidance.
Note 3 – Debt
Convertible Notes Payable
The Company does not expect adoption of ASU 2017-09has issued numerous convertible promissory notes. In certain cases, these notes contained conversion features that require a discount to havethe market price based upon a material impact on its consolidated financial statements.
In March 2016,formula using the FASB issuedauthoritative guidance underASU No. 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting (Topic 718)”, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year.Company’s stock prices. The Company does not expect adoption of ASU 2016-09 to have a material impact on its consolidated financial statements.
In February 2016, the FASB issued authoritative guidance under ASU 2016-02, Leases (Topic 842). ASU 2016-02 provides new comprehensive lease accounting guidance that supersedes existing lease guidance. Upon adoption of ASU 2016-02, the Company will be required to recognize leases with terms in excess of twelve months on its balance sheet at the beginning of the earliest comparative period presented with a corresponding adjustment to stockholders’ equity (deficit). ASU 2016-02 requires the Company to capitalize most current operating lease obligations as right-of-use assets with a corresponding liability based on the present value of future operating leases. Criteria for distinguishing leases between finance and operating are substantially similar to criteria for distinguishing between capital leases and operating leases in existing lease guidance. The Company is required to adopt this new guidance in the first quarter of fiscal 2020. The Company plans to implement ASU 2016-02 for all new leases.
We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our consolidated financial statements.
NOTE 3 - FIXED ASSETS
Fixed assets consisted of the following:
|
| January 31, |
| April 30, |
|
| 2018 |
| 2017 |
Vehicles |
| 15,376 |
| 15,376 |
Furniture and fixtures |
| 10,936 |
| 6,212 |
Computers and office equipment |
| 4,227 |
| 2,480 |
Leasehold improvements |
| 1,775 |
| - |
Total fixed assets |
| 32,314 |
| 24,068 |
Accumulated depreciation |
| (9,421) |
| (5,272) |
Total fixed assets |
| $ 22,893 |
| $ 18,796 |
During the three months ended January 31, 2018 and 2017, the Company recognized $1,432 and $1,286, respectively, in depreciation expense. During the nine months ended January 31, 2018 and 2017, the Company recognized $4,149 and $3,510, respectively, in depreciation expense. During the nine months ended January 31, 2018 and 2017, the Company purchased $8,246 and $16,480, respectively, of leasehold improvements and furniture and fixtures.
NOTE 4 – CONVERTIBLE PROMISSORY NOTES
Following is a summary of our outstanding convertible promissory notes as of January 31, 2018:
|
|
|
|
|
| Current Balances | ||||
Lender |
| Issue Date |
| Maturity |
| Principle |
| Interest |
| Total |
RDW Capital, LLC Note 3 |
| 3/10/2016 |
| 9/10/16 |
| $ 792 |
| $ - |
| $ 792 |
RDW Capital, LLC Note 4 |
| 5/13/2016 |
| 11/13/16 |
| - |
| 4,540 |
| 4,540 |
RDW Capital, LLC Note 5 |
| 5/20/2016 |
| 11/20/16 |
| - |
| 2,742 |
| 2,742 |
RDW Capital, LLC Note 6 |
| 8/22/2016 |
| 2/22/17 |
| - |
| 889 |
| 889 |
RDW Capital, LLC Note 7 |
| 9/1/2016 |
| 2/1/18 |
| 25,701 |
| 14,276 |
| 39,977 |
RDW Capital, LLC Note 8 |
| 2/6/2017 |
| 2/1/18 |
| 48,412 |
| 4,633 |
| 53,045 |
RDW Capital, LLC Note 9 |
| 3/30/2017 |
| 2/1/18 |
| 78,750 |
| 5,559 |
| 84,309 |
RDW Capital, LLC Note 10 |
| 4/26/2017 |
| 2/1/18 |
| 77,338 |
| 6,932 |
| 84,270 |
RDW Capital, LLC Note 11 |
| 5/30/2017 |
| 2/1/18 |
| 81,375 |
| 4,572 |
| 85,947 |
RDW Capital, LLC Note 12 |
| 8/7/2017 |
| 2/7/18 |
| 52,500 |
| 2,106 |
| 54,606 |
Power Up Lending Gp Note 1 |
| 10/20/2017 |
| 7/30/18 |
| 70,000 |
| 2,411 |
| 72,411 |
Power Up Lending Gp Note 2 |
| 11/16/2017 |
| 8/30/18 |
| 36,000 |
| 911 |
| 36,911 |
Power Up Lending Gp Note 3 |
| 1/5/2018 |
| 10/10/18 |
| 38,000 |
| 326 |
| 38,326 |
Totals |
|
|
|
|
| $ 508,868 |
| $ 49,897 |
| $ 558,765 |
Debt discount balance |
|
|
|
|
| (85,426) |
|
|
|
|
Balance sheet balances |
|
|
|
|
| $ 423,442 |
|
|
|
|
Following is a summary of our outstanding convertible promissory notes as of April 30, 2017:
|
|
|
|
|
| Current Balances | ||||
Lender |
| Issue Date |
| Maturity |
| Principle |
| Interest |
| Total |
RDW Capital, LLC Note 3 |
| 3/10/2016 |
| 9/10/16 |
| $ 792 |
| $ - |
| $ 792 |
RDW Capital, LLC Note 4 |
| 5/13/2016 |
| 11/13/16 |
| - |
| 4,540 |
| 4,540 |
RDW Capital, LLC Note 5 |
| 5/20/2016 |
| 11/20/16 |
| - |
| 2,742 |
| 2,742 |
RDW Capital, LLC Note 6 |
| 8/22/2016 |
| 2/22/17 |
| 31,674 |
| 8,291 |
| 39,965 |
RDW Capital, LLC Note 7 |
| 9/1/2016 |
| 3/1/17 |
| 157,500 |
| 8,664 |
| 166,164 |
RDW Capital, LLC Note 8 |
| 2/6/2017 |
| 8/5/17 |
| 48,412 |
| 1,477 |
| 49,889 |
RDW Capital, LLC Note 9 |
| 3/30/2017 |
| 9/29/17 |
| 78,750 |
| 544 |
| 79,294 |
RDW Capital, LLC Note 10 | 4/26/2017 |
| 10/26/17 |
| 110,000 |
| 98 |
| 110,098 | |
Totals |
|
|
|
|
| $ 427,128 |
| $ 26,356 |
| $ 453,484 |
Debt discount balance |
|
|
|
|
| (286,159) |
|
|
|
|
Balance sheet balances |
|
|
|
|
| $ 140,969 |
|
|
|
|
The companyhas determined that each convertible promissory notesnote conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under FASB Accounting Standards Codification ("ASC"(“ASC”) 815-40-15-7 and treatment under ASC 470-20 – Debt“Debt with Conversion and Other OptionsOptions” is appropriate.
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RDW Capital, LLC
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
On November 12, 2015,CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
The following represents a summary of the Company’s lenders, key terms of the debt and outstanding balances at July 31, 2020 and April 30, 2020, respectively.
Year Ended April 30, 2021
Effective August 1, 2020, the Company’s outstanding convertible notes payable (8%) and related accrued interest of approximately $662,000 were no longer in default as these debt instruments were extended to a maturity date of February 1, 2021.
Also, effective August 1, 2020, all principal and accrued interest outstanding under the convertible notes as of July 31, 2020 were consolidated into one single convertible note. Additional financings subsequent to July 31, 2020 retain the same terms as the original convertible notes payable.
Year Ended April 30, 2020
Effective May 1, 2019, the lender amended the conversion price for all outstanding notes to a fixed price of $0.0003. As a result of this amendment, the Company entered intodetermined that the present value of the cash flows of the outstanding debt were similar (less than 10%) to the present value of the cash flows of the new debt and therefore this amendment was accounted for as a Securities Purchase Agreement (“RDW SPA 1”) with debt modification, which had no effect for financial reporting purposes.
Additionally, on May 1, 2019, the lender amended all of their 8% convertible promissory notes previously outstanding as well as those issued after May 1, 2019 to suspend the default provision, which would allow for a default penalty of 150% on the outstanding principal and accrued interest at the time of default. The lender has provided for similar relief to its 5%, non-convertible note, issued on October 11, 2019 (See below). The lender has reserved the right to reinstate the default provision at their discretion.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Lenders
RDW Capital, LLC (“RDW”), a Florida limited liability company. On November 12, 2015, - Convertible Notes (6 Notes)
Term of Convertible Notes | Approximately 6 months | |
Maturity Dates | September 10, 2016 – October 31, 2018, then February 1, 2021 | |
Interest Rate | 8% | |
Default Interest Rate | 24% | |
Collateral | Unsecured | |
Conversion Discount | Fixed at $0.003 | |
Conversion Restriction | Ownership cannot exceed 4.99% | |
Prepayment Penalty (P&I) | 130% | |
Default Penalty (P&I) | 150% | |
Common Share Reserve | Three (3) times the possible shares needed upon conversion |
Red Diamond Partners, LLC (“Red”) – Convertible Notes (12 Notes)
Issuance Date of Convertible Notes | October 11, 2019 – July 23, 2020 | |
Term of Convertible Notes | Approximately 6 months | |
Maturity Dates | April 11, 2020 – January 23, 2021, then February 1, 2021 | |
Gross Proceeds | $211,806 | |
Interest Rate | 8% | |
Default Interest Rate | 24% | |
Collateral | Unsecured | |
Conversion Feature | Fixed at $0.0003 | |
Conversion Restriction | Ownership cannot exceed 4.99% | |
Prepayment Penalty (P&I) | 130% | |
Default Penalty (P&I) | 150% | |
Common Share Reserve | Three (3) times the possible shares needed upon conversion |
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Red Diamond Partners, LLC – Term Note (1 Note)
Issuance Date of Note | October 11, 2019 | |
Term of Note | Approximately 6 months | |
Maturity Date | April 11, 2020 | |
Gross Proceeds | $27,500 | |
Interest Rate | 5% | |
Default Interest Rate | None | |
Collateral | 5,000,000 shares, Series A, Redeemable Preferred Stock – all held by the Company’s CEO | |
Conversion Feature | None | |
Conversion Restriction | N/A | |
Prepayment Penalty (P&I) | 130% | |
Default Penalty (P&I) | N/A | |
Common Share Reserve | N/A |
As of July 31, 2020, the Company and RDW entered into the First Amended Securities Purchase Agreement. On November 12, 2015, the Company and RDW entered into the Second Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Third Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Fourth Amended Securities Purchase Agreement. On May 9, 2016, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 2”). On August 22, 2016, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 3”). On September 1, 2016, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 4”). On March 31, 2017, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 5”). On August 8, 2017, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 6”). RDW SPA 1, amendments thereto, RDW SPA 2, RDW SPA 3, RDW SPA 4, RDW SPA 5 and RDW SPA 6 may hereinafter be referred to collectively as, the “RDW SPAs”.note payable of $27,500 along with accrued interest of $1,108 was in default.
RDW Note 3 - In connection with RDW SPA 1the default, the lender has not called this debt and amendments thereto,is not seeking to foreclose on March 10, 2016, the Company issued to RDWcollateral and obtain the 5,000,000 shares of Series A, Redeemable, Preferred Stock. See Note 5.
The following is a summary of the Company’s convertible note (“RDW Note 3”) due on September 10, 2016 in the principal amountnotes and related accrued interest (included as a component of $210,000 of which the Company received proceeds of $180,000 after payment of a $10,000 OIDaccounts payable and due diligence fees totaling $20,000.accrued expenses) at July 31, 2020:
|
| Convertible Notes Payable |
| |||||
|
|
|
|
| ||||
|
| Amounts |
|
| In-Default |
| ||
Balance - April 30, 2019 |
| $ | 439,465 |
|
| $ | 439,465 |
|
Proceeds |
|
| 175,756 |
|
|
|
|
|
Repayments |
|
| (132,460 | ) |
|
|
|
|
Gain on Debt Settlements - Net |
|
| (19,200 | ) |
|
|
|
|
Balance - April 30, 2020 |
|
| 463,561 |
|
|
| 420,661 |
|
Proceeds |
|
| 36,050 |
|
|
|
|
|
Balance - July 31, 2020 |
| $ | 499,611 |
|
| $ | 463,561 |
|
As of April 30, 2016, RDW Note 3 was paid down to a principal balance of $792.
25 |
Table of Contents |
During the three and nine months ended January
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017, the Company recognized $0 and $151,793 of accretion related to the debt discount.2020
|
| Accrued Interest Payable |
| |||||
|
|
|
|
| ||||
|
| Amounts |
|
| In-Default |
| ||
Balance - April 30, 2019 |
|
| 149,636 |
|
|
| 149,636 |
|
Interest Expense - Net |
|
| 65,367 |
|
|
|
|
|
Repayments |
|
| (2,040 | ) |
|
|
|
|
Gain on Debt Settlements - Net |
|
| (41,857 | ) |
|
|
|
|
Balance - April 30, 2020 |
|
| 171,106 |
|
|
| 168,174 |
|
Interest Expense |
|
| 27,732 |
|
|
|
|
|
Balance - July 31, 2020 |
| $ | 198,838 |
|
| $ | - |
|
RDW Note 4 - In connection with RDW SPA 2, on May 13, 2016, the Company issued to RDW a convertible note (“RDW Note 4”) due on November 13, 2016 in the principal amount of $105,000 of which the Company received proceeds of $82,500 after payment of a $5,000 OID, $7,500 of legal fees and $10,000 of due diligence fees.
RDW Note 4 principle was discounted for the value of the OID, legal fees due diligence fees– Commitments and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $70,000. As this amount resulted in a total debt discount that was less than RDW Note 4 principal, the full $70,000 discount was recognized. The resulting $92,500 discount was accreted over the 6 month term of RDW Note 4 through November 13, 2016.Contingencies
During the three and nine months ended January 31, 2017, the Company recognized $750 and $4,540, respectively, of interest expense and $6,535 and $92,500, respectively, of accretion related to the debt discount.Product Warranties
RDW Note 5 - In connection with RDW SPA 2, on May 20, 2016, the Company issued to RDW a convertible note (“RDW Note 5”) due on November 20, 2016 in the principal amount of $52,500 of which the Company received proceeds of $45,000 after payment of a $2,500 OID and $5,000 of due diligence fees.
RDW Note 5 principle was discounted for the value of the OID, due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $35,000. As this amount resulted in a total debt discount that was less than RDW Note 5 principal, the full $35,000 discount was recognized. The resulting $42,500 discount was accreted over the 6 month term of RDW Note 5 through November 20, 2016.
During the three and nine months ended January 31, 2017, the Company recognized $775 and $2,742, respectively, of interest expense and $4,620 and $42,500, respectively, of accretion related to the debt discount.
RDW Note 6 - In connection with RDW SPA 3, on August 22, 2016, the Company issued to RDW a convertible note (“RDW Note 6”) due on February 22, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID and legal and due diligence fees totaling $20,000.
RDW Note 6 principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $105,000. As this amount resulted in a total debt discount that was less than RDW Note 6 principal, the full $105,000 discount was recognized. The resulting $132,500 discount was accreted over the 6 month term of RDW Note 6 through February 22, 2017.
During the three months ended January 31, 2018 and 2017, the Company recognized -$293 and $3,304, respectively, of interest expense. During the nine months ended January 31, 2018 and 2017, the Company recognized -$186 and $5,773, respectively, of interest expense. During the three months ended January 31, 2018 and 2017, the Company recognized $0 and $66,250, respectively, of accretion related to the debt discount. During the nine months ended January 31, 2018 and 2017, the Company recognized $0 and $132,500, respectively, of accretion related to the debt discount. RDW began converting the RDW Note 6 principal into shares of common stock beginning in March 2017. During the three months ended January 31, 2018, RDW converted $7,216 of unpaid interest into 4,340,000 shares. During the nine months ended January 31, 2018, RDW converted $39,183 into 4,919,733 shares.
RDW Note 7 – In connection with RDW SPA 4 under which RDW agreed to purchase an aggregate of up to $367,500 in principal amount of notes, on September 1, 2016, the Company issued to RDW a convertible note (“RDW Note 7”) due on March 1, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID and legal and due diligence fees totaling $20,000. The second tranche for $210,000 will occur on the date that is two trading days from the date a registration statement is declared effective by the SEC. On November 30, 2017, the Company and RDW agreed to amend RDW Note 7 to extend the Maturity Date to February 1, 2018.
RDW Note 7 principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $105,000. As this amount resulted in a total debt discount that was less than RDW Note 7 principal, the full $105,000 discount was recognized. The resulting $132,500 discount was accreted over the 6 month term of RDW Note 7 through March 1, 2017.
During the three months ended January 31, 2018 and 2017, the Company recognized $879 and $3,296, respectively, of interest expense. During the nine months ended January 31, 2018 and 2017, the Company recognized $5,612 and $8,664, respectively, of interest expense. During the three and nine months ended January 31, 2017, the Company recognized $67,348 and 111,271, respectively, of accretion related to the debt discount which was fully accreted as of April 30, 2017. RDW began converting the RDW Note 7 principal into shares of common stock beginning in May 2017. During the three and nine months ended January 31, 2018, RDW converted $16,652 into 7,832,000 shares and $131,800 into 24,585,900 shares, respectively.
RDW Note 8 – In connection with RDW SPA 4, on February 6, 2017, the Company issued to RDW a convertible note (“RDW Note 8”) due on August 5, 2017 in the principal amount of $210,000 of which the Company received proceeds of $180,000 after payment of a $10,000 OID and legal and due diligence fees totaling $20,000. On November 30, 2017, the Company and RDW agreed to amend RDW Note 8 to extend the Maturity Date to February 1, 2018.
RDW Note 8 principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $217,000. As this amount resulted in a total debt discount that exceeded RDW Note 8 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 8. The resulting $210,000 discount is being accreted over the 6 month term of RDW Note 8 through August 5, 2017.
During the three and nine months ended January 31, 2018, the Company recognized $1,073 and $3,155, respectively, of interest expense and $0 and $113,167, respectively, of accretion related to the debt discount. RDW began converting the RDW Note 8 principal into shares of common stock beginning in February 2017 through year end in April 2017. RDW has not converted any of RDW Note 8 during the nine months ended January 31, 2018.
RDW Note 9 – In connection with RDW SPA 5, on March 30, 2017, the Company issued to RDW a convertible note (“RDW Note 9”) due on September 29, 2017 in the principal amount of $78,750 of which the Company received proceeds of $62,500 after payment of a $3,750 OID and legal and due diligence fees totaling $12,500. On November 30, 2017, the Company and RDW agreed to amend RDW Note 9 to extend the Maturity Date to February 1, 2018.
RDW Note 9 principle was discounted for the value of the OID, fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $72,000. As this amount resulted in a total debt discount that exceeded RDW Note 9 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 9. The resulting $78,750 discount is being accreted over the 6 month term of RDW Note 9 through September 29, 2017.
During the three and nine months ended January 31, 2018, the Company recognized $1,706 and $5,015, respectively, of interest expense and $0 and $65,410, respectively, of accretion related to the debt discount.
RDW Note 10 – In connection with RDW SPA 5, on April 26, 2017, the Company issued to RDW a convertible note (“RDW Note 10”) due on October 26, 2017 in the principal amount of $110,000 of which the Company received proceeds of $90,000 after payment of a $10,000 OID and legal fees totaling $10,000. On November 30, 2017, the Company and RDW agreed to amend RDW Note 10 to extend the Maturity Date to February 1, 2018.
RDW Note 10 principle was discounted for the value of the OID, fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $134,000. As this amount resulted in a total debt discount that exceeded RDW Note 10 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 10. The resulting $110,000 discount is being accreted over the 6 month term of RDW Note 10 through October 26, 2017.
During the three and nine months ended January 31, 2018, the Company recognized $2,240 and $6,835, respectively, of interest expense and $0 and $107,582, respectively, of accretion related to the debt discount. RDW began converting the RDW Note 10 principal into shares of common stock beginning in December 2017. During the three and nine months ended January 31, 2018, RDW converted $32,662 into 22,630,500 shares.
RDW Note 11 – In connection with RDW SPA 5, on May 30, 2017, the Company issued to RDW a convertible note (“RDW Note 11”) due on November 30, 2017 in the principal amount of $81,375 of which the Company received proceeds of $65,000 after payment of a $3,875 OID and legal and due diligence fees totaling $12,500. On November 30, 2017, the Company and RDW agreed to amend RDW Note 11 to extend the Maturity Date to February 1, 2018.
RDW Note 11 principle was discounted for the value of the OID, fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $102,000. As this amount resulted in a total debt discount that exceeded RDW Note 11 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 11. The resulting $81,375 discount is being accreted over the 6 month term of RDW Note 11 through November 30, 2017.
During the three and nine months ended January 31, 2018, the Company recognized $1,739 and $4,572, respectively, of interest expense and $13,267 and $81,375, respectively, of accretion related to the debt discount.
RDW Note 12 – In connection with RDW SPA 6, on August 7, 2017, the Company issued to RDW a convertible note (“RDW Note 12”) due on February 7, 2018 in the principal amount of $52,500 of which the Company received proceeds of $46,000 after payment of a $2,500 OID and legal and due diligence fees totaling $4,000.
RDW Note 12 principle was discounted for the value of the OID, fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $107,283. As this amount resulted in a total debt discount that exceeded RDW Note 12 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 12. The resulting $52,500 discount is being accreted over the 6 month term of RDW Note 12 through February 7, 2018.
During the three and nine months ended January 31, 2018, the Company recognized $1,105 and $2,106, respectively, of interest expense and $26,250 and $50,503, respectively, of accretion related to the debt discount.
RDW Note 1 through RDW Note 12 may hereinafter be referred to collectively as, the “RDW Notes”.
15
The RDW Notes have the following terms and conditions:
·The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.
·Interest is due and payable on each conversion date and on the Maturity Date.
·At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the “Conversion Price”).
· TheRDW Notes are unsecured obligations.
·We may prepay the RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%). RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.
· Default interest of twenty-four percent (24%) per annum.
·Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.
·Upon an event of default, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration (“Acceleration”).
·Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages.
·In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.
·We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion.
·Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.
In total, during the three months ended January 31, 2018 and 2017, the Company recognized $8,449 and $7,175, respectively, of interest expense and $39,517 and $144,753, respectively, of accretion related to the debt discount of the RDW Notes. In total, during the nine months ended January 31, 2018 and 2017, the Company recognized $27,109 and $21,307, respectively, of interest expense and $418,037 and $549,914, respectively, of accretion related to the debt discount of the RDW Notes.
In total, during the three months ended January 31, 2018, RDW converted $56,529 of RDW Note principal and interest into 34,802,500 shares of common stock. In total, during the nine months ended January 31, 2018, RDW converted $203,350 of RDW Note principal and interest into 52,136,133 shares of common stock.
Power Up Lending Group Ltd.
Power Up Note 1 – On October 20, 2017 the Company sold and Power Up Lending Group, Ltd. (“Power Up”) purchased a 12% convertible note in the principal amount of $70,000 (the “Power Up Note 1”) of which the Company received $60,300 after payment of legal fees. The Power Up Note 1 matures on July 30, 2018.
The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Power Up Note 1 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $44,754. This Power Up Note 1 has been discounted by $44,754 which is being accreted over the 10 month term of the Power Up Note 1.
During the three and nine months ended January 31, 2018, the Company recognized interest expense of $2,157 and $2,411, respectively, and $17,702 and $19,819, respectively, of debt discount accretion.
Power Up Note 2 – On November 16, 2017 the Company sold and Power Up purchased a 12% convertible note in the principal amount of $36,000 (the “Power Up Note 2”) of which the Company received $30,000 after payment of legal fees. The Power Up Note 2 matures on August 30, 2018.
The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Power Up Note 2 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $23,016. This Power Up Note 2 has been discounted by $44,754 which is being accreted over the 10 month term of the Power Up Note.
During the three and nine months ended January 31, 2018, the Company recognized interest expense of $911 and $7,684 of debt discount accretion.
Power Up Note 3 – On January 5, 2018 the Company sold and Power Up Lending Group, Ltd. (“Power Up”) purchased a 12% convertible note in the principal amount of $38,000 (the “Power Up Note 3”) of which the Company received $32,000 after payment of legal fees. The Power Up Note 3 matures on October 10, 2018.
The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Power Up Note 3 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $24,295. This Power Up Note 3 has been discounted by $30,295 which is being accreted over the 10 month term of the Power Up Note.
During the three and nine months ended January 31, 2018, the Company recognized interest expense of $326 and $2,833 of debt discount accretion.
Power Up Note 1 through Power Up Note 3 may hereinafter be referred to collectively as, the “Power Up Notes”.
The Power Up Notes have identical terms and conditions, including convertibility into common stock, at Power Up’s option any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Power Up Note, at a price for each share of common stock equal to 61% of the average of the lowest two (2) trading prices during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall Power Up effect a conversion if such conversion results in Power Up beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Power Up Notes and accrued interest may be prepaid within the 180 day period following the issuance date at an amount equal to 115% - 140% of the outstanding principle and unpaid interest. After expiration of the 180 days, the Power Up Note may not be prepaid. Any principal and interest unpaid when due shall bear interest at 22%. Upon the occurrence of an event of default the balance of principle and interest shall become immediately due at the default amount which is equal to the sum of the unpaid principal and unpaid interest multiplied by 150%.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Product Warranties
OurCompany’s manufacturer(s) provide the Company with a 2 year2-year warranty. The Company products are sold with a 1 year1-year manufacturer’s warranty. The Company offers a 1 year1-year extended warranty for a fee. The extended warranty expires at the end of the second year from the date of purchase with warranty costs during the two yeartwo-year period being born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.
Operating LeasesNote 5 – Series A, Redeemable Preferred Stock – Related Party
On November 15, 2017,As of July 31, 2020, and April 30, 2020, respectively, there were 5,000,000 shares of $0.0001 par value, Series A, Redeemable Preferred Stock outstanding held by the Company’s Chief Executive Officer (“CEO”).
The Preferred Stock pays no dividends and has no conversion rights into common stock. Each share of Preferred Stock is entitled to 200 votes per share and is redeemable in whole, but not in part, at the option of the holder for $0.0001 per share. Due to the redemption feature being at the option of the holder, the Company entered into a lease of office space at 1600 Olive Chapel Road, Apex, North Carolina 27502. The lease expires on November 30, 2020 and includes an option to extendclassifies the lease an additional term or three years. Rent is $1,650 per month and is increased each anniversary by 3%. The Company paid a $1,650 security deposit. The Company has adopted ASC 2016-2; Leases (Topic 842). As a result, The Company is required to estimate and recordpurchase price in the right of use asset (“ROU Asset”) and lease liability on the face of The Company’s balance sheet. The Company determined the ROU Asset and lease liability to be $51,063 which compares to the total paymentstemporary equity section of the initial three year term of $61,200. The company determined that there was no discount rate implicit in the lease. Thus, the Company used its incremental borrowing rate of 12%balance sheet.
See Note 3 regarding these 5,000,000 shares serving as collateral for a debt issuance to discount the lease payments in the determinationRed Diamond Partners, LLC (“Red”) on October 11, 2019 for $27,500.
26 |
Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
NOTE 6 – REVENUES
All of the ROU assetCompany’s revenues are derived from business in North America. The following tables disaggregate our revenue by major product line, types of customers, and lease liability.
On March 21, 2015, the Company entered into a leasetiming of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. Duringrevenue recognition for the three months ended JanuaryJuly 31, 2018, the Company moved2020 and this lease was terminated with no further obligations2019, respectively:
|
| July 31, 2020 |
|
| July 31, 2019 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Major Product Lines |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cameras |
| $ | 3,644 |
|
|
| 79 | % |
| $ | 15,779 |
|
|
| 63 | % |
Accessories |
|
| 964 |
|
|
| 21 | % |
|
| 9,369 |
|
|
| 37 | % |
Total Net Revenue |
| $ | 4,608 |
|
|
| 100 | % |
| $ | 25,148 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Types of Customers |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | 138 |
|
|
| 3 | % |
| $ | 1,760 |
|
|
| 7 | % |
State and Local |
|
| 4,424 |
|
|
| 96 | % |
|
| 22,382 |
|
|
| 89 | % |
Non-government |
|
| 46 |
|
|
| 1 | % |
|
| 1,006 |
|
|
| 4 | % |
|
| $ | 4,608 |
|
|
| 100 | % |
| $ | 25,148 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transferred at a point in time |
| $ | 4,608 |
|
|
| 100 | % |
| $ | 25,148 |
|
|
| 100 | % |
|
| $ | 4,608 |
|
|
| 100 | % |
| $ | 25,148 |
|
|
| 100 | % |
The Company has no other noncancelable operating leases. Future minimum lease payments under this operating lease with an initial term in excess of one year as of January
Note 7 - Stockholder’s Deficit
July 31, 2018 are as follows:2020
Fiscal Year
2018
$4,950
2019
$20,048
2020
$20,649
2021
$12,253
Thereafter
$0
During the three months ended JanuaryJuly 31, 2018 and 2017, rent expense for office space totaled $4,192 and $3,658, respectively. During the nine months ended January 31, 2018 and 2017, rent expense for office space totaled $11,580 and $11,234, respectively.
NOTE 6 – STOCKHOLDER'S EQUITY
As of January 31, 2018 and April 30, 2017,2020, there were 54,035,496 and 1,698,494 shares of common stock outstanding, respectively. As of Januaryno equity transactions.
July 31, 2018 and April 30, 2017 there were 5,000,000 and 1,000,000 shares of Series A Preferred Stock outstanding, respectively.2019
On January 19, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorized the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200,000 (i.e., 200:1) votes per share and with no right of conversion into shares of common stock.
On September 8, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 250,000,000 shares to 750,000,000 shares and to increase our authorized Series A Preferred Stock from 1,000,000 shares to 5,000,000 shares.
On March 31, 2017, we amended our Articles of Incorporation to effect a 1:250 reverse stock split which became effective on April 24, 2017.
On December 8, 2017, we amended our Articles of Incorporation to increase our authorized common stock from 750,000,000 shares to 2,000,000,000 shares and to increase our authorized Series A Preferred Stock from 5,000,000 shares to 15,000,000 shares.
During the ninethree months endedJanuary July 31, 2018, we issued 1) 52,136,133 shares2019, the Company’s CEO forgave accrued payroll of common stock$18,523. Since the forgiveness occurred with a related party, accordingly there was no gain or loss, this resulted in exchangea contribution to equity.
27 |
Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
Note 8 – Related Party Transactions
Shareholder advances (repayments)
From time to time, the Company receives advances from and repays such advances to the Company’s CEO for convertible notes totaling $203,350; 2) 100,000 shares in exchange for $600; 3) 100,000 shares in exchange for services valued at $600;working capital purposes and 4) 4,000,000 shares of Series A Preferred Stock to Paul Feldman, CEO in exchange for $4,000. Each Series A preferred share is entitled to 200,000 (i.e., 200:1) votes per sharerepay indebtedness. The advances are non-interest bearing, unsecured and carries no right of conversion into shares of common stock.due on demand.
During the three months ended July 31, 2020, the Company repaid $800, resulting in an outstanding balance of $11,350.
During the three months ended July 31, 2019, the Company repaid $300, resulting in an outstanding balance of $14,350.
Note 9 - Subsequent Events
Debt Issuances
The following is a summary of the Company’s convertible notes payable and related accrued interest (included as a component of accounts payable and accrued expenses) for the fiscal year endedend April 30, 2017, we issued 1,527,931 shares of common stock in exchange for convertible notes totaling $755,401, and issued 8,423 shares of common stock valued at $20,000 as fees related to the issuance of certain RDW Notes.
NOTE 7 – SUBSEQUENT EVENTS
Management has reviewed material events subsequent of the quarterly period ended January2020, July 31, 2018 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
Subsequent toJanuary 31, 20182020 and through February 28, 2018, RDW converted $30,490 of convertible note principal into 26,622,700 shares of common stock.September 18, 2020:
|
| Convertible Notes Payable |
| |||||
|
|
|
|
| ||||
|
| Amounts |
|
| In-Default |
| ||
Balance - April 30, 2019 |
| $ | 439,465 |
|
| $ | 439,465 |
|
Proceeds |
|
| 175,756 |
|
|
|
|
|
Repayments |
|
| (132,460 | ) |
|
|
|
|
Gain on Debt Settlements - Net |
|
| (19,200 | ) |
|
|
|
|
Balance - April 30, 2020 |
|
| 463,561 |
|
|
| 420,661 |
|
Proceeds |
|
| 36,050 |
|
|
|
|
|
Balance - July 31, 2020 |
|
| 499,611 |
|
|
| 463,561 |
|
Proceeds |
|
| 66,859 |
|
|
|
|
|
Balance - September 18, 2020 |
| $ | 566,470 |
|
| $ | - |
|
28 |
Table of Contents |
19
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2020
|
| Accrued Interest Payable |
| |||||
|
|
|
|
| ||||
|
| Amounts |
|
| In-Default |
| ||
Balance - April 30, 2019 |
|
| 149,636 |
|
|
| 149,636 |
|
Interest Expense - Net |
|
| 65,367 |
|
|
|
|
|
Repayments |
|
| (2,040 | ) |
|
|
|
|
Gain on Debt Settlements - Net |
|
| (41,857 | ) |
|
|
|
|
Balance - April 30, 2020 |
|
| 171,106 |
|
|
| 168,174 |
|
Interest Expense |
|
| 27,732 |
|
|
|
|
|
Balance - July 31, 2020 |
|
| 198,838 |
|
|
| 198,701 |
|
Interest Expense |
|
| 6,207 |
|
|
|
|
|
Balance - September 18, 2020 |
| $ | 205,045 |
|
| $ | - |
|
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our April 30, 20172020 Annual Report on Form 10-K.
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our estimates of our financial results and our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number ofseveral risks, uncertainties, and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
As used herein, the “Company,” “our,” “we,” or “us” and similar terms refers to Enhance-Your-Reputation.com, Inc. unless the context indicates otherwise.
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Overview
ITEM 1: BUSINESS
Overview
The Company is in the business of selling video and audio capture devices initially targeted to law enforcement agencies. With over 30 years of marketing to law enforcement, the Company’s CEO, Paul Feldman is able to leverage his extensive knowledge and base of contacts to produce sales. The Company has established a web site at www.forceprovideo.com whereby customers can view the Company’s products and place orders. We believe that given recent current events between law enforcement agencies and the public, which has been widely reported by the media, there is a significant market opportunity for the Company’s products. In the first quarter of fiscal 2016, the Company received multiple orders for the LE10 camera System. The LE10 is a small bodied, high definition (HD) camera which is half the size and half the price of most law enforcement cameras currently available. The LE10 and more recent addition the LE50 are rich with features that make them ideal for on-demand video and audio capture. The LE10 and LE50 do not require special software or expensive storage contracts. The video files can quickly be downloaded into a standard law enforcement case file and the micro SD cards are sealed in the provided static evidence bags and then securely stored in the department’s evidence locker. The Company’s Video LE10 and LE50 cameras are a rugged design which incorporates Ambarella (NASDAQ “AMBA”) made chips that allow the cameras to record high definition video.
Product Development and Sales
20
Our on-body mini-camera was developed by Paul Feldman, our Chief Executive Officer, President and Director who has significant experience in the development and commercialization of security and surveillance related products. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc., a manufacturer of surveillance products and audio intelligent devices which were sold to the U.S. military and law enforcement. Patent technologies previously developed by Mr. Feldman include U.S. Patent Number 7,631,601 Surveillance Projectile and U.S. Patent Number 2006/0283,345 Surveillance Projectile.
Products
Our video and audio capture devices are compact, ergonomic, tamperproof and designed to capture HD video and/or audio on demand enabling our customers to capture content while engaged in a wide range of activity. We also sell accessories that enhance the functionality and versatility of our products, including mounts, such as the helmet, handlebar, roll bar and tripod mounts, as well as mounts that enable users to wear the camera on their bodies, such as the wrist housing, chest harness and head strap. Other accessories include spare batteries, charging accessories and memory drives. Our products are marketed primarily to law enforcement due to their unique need to capture important events in the course of their duties.
Our primary hardware products consist of the video and audio recording devices as follows:
LE10 Law Enforcement Video Recorder. Retail price: $195. The LE10 on-body camera is designed for use by law enforcement and can be mounted on helmets, tactical vest, and riot shields. The LE10 provides high quality video and a sensor that allows the device to shoot in full HD at 30 fps, and 8 MP photos with shutter speed of 8fps in burst mode. In photo mode, the user can take pictures with a delayed timer. The device has three (3) resolutions and slow-motion capability allowing its user to create highly quality video while engaged in a variety of physical activity. The LE10 has built-in Wi-Fi, providing connectivity with a smartphone or tablet to enable remote control and content viewing functionality. Video taken by the LE10 is stored on a micro HD SD card which can be transferred to a computer for use as evidence. Downloading the video into evidence requires no special software or expensive cloud storage contracts. The LE10 is equipped with a high definition microphone to capture and record audio. The LE10 can also be used only as a standalone audio recorder to record witness statements or conduct interviews.
LE50 HD Body Cam. Retail price: $495. The LE50 includes many of the LE10 features in an on-body camera designed for use by law enforcement which can be mounted on helmets, tactical vest, and riot shields. The LE50 provides up to 10 hours of high quality video with a built in audio announcement feature, 50 hours of standby time, sound and vibration operation indication, 2″ TFT-LCD High Resolution Color Display, 32 GB of internal tamper proof storage, supports up to 128GB of memory, 140 degree field of view, white led illumination, waterproof level of IP65, metal clip with 360 degrees rotation, one button tag of important file feature and GPS recording.
SC1 Sunglass Camera. Retail price: $199.95. The SC1 Sunglass Camera is made from TR90 high impact resistant and Citadel 3G Solar Security Cameraflexible material and features a 150° wide-angle full HD 1080p video camera, with one-hour record time, built between the eyes with the controls and battery built into the glasses’ ultra slim frame. A full range of polarized and clear lenses are available and easily interchangeable.
DistributionSurveillance Cameras. Retail price: $100-$1,800. The Surveillance cameras now offered are state of the art, disguised cameras sold exclusively to law enforcement. Due to the sensitive nature of these products no further information may be disclosed.
Our manufacturer provides a one (1) year warranty for our products, and customers can purchase another year.
Our customers include the federal government and more than twenty-five thousand (25,000) state and local law enforcement agencies.
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Distribution
Customers purchase products from our website, printed catalogs and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges.charges for orders less than $200.
MarketingManufacturing
We purchase our finished products on an as needed basis from several manufacturers in Shenzhen China, Taiwan, and the USA. Our manufacturers provide production, labeling and packaging of our finished product according to our specifications which is confirmed with each order placed. We are not subject to any supplier agreements which means we are not obligated to purchase a minimum amount of product or place orders in the future. We pay for all products we order at the time the order is placed. Upon placing an order, our manufacturer creates a purchase order reflecting: (i) the product ordered, (ii) price per item (iii) total cost for the order, (iv) total cost to ship product ordered from our manufacturer to our facility, (iv) that immediate payment in required at the time of the order, and (v) the delivery date and delivery address. All material used to manufacture our products is located, purchased and paid for by our manufacturers who invoices us only for our finished product. All products offered by Force Protection Video have a twelve (12) month warranty.
Marketing
Currently, our sales and marketing efforts include printprinted marketing brochures catalogs featuring our products which we distribute to state and local law enforcement agencies. We create and deliver brochures to state and local law enforcement, every four (4) weeks, using U.S. Mail. Our data base contains over 25,000 law enforcement agencies nationwide.
Cobraxtreme HD Corp.We believe that a marketing strategy focused on print marketing to law enforcement will provide our target customers with the opportunity to view our specific information about our products and their features, which is an optimal strategy to increase sales.
On September 19, 2017,Product Development
We expense all product development costs as incurred. Product development costs have been negligible for the past few years but are incurred as needed to support new product ideas and launches.
Product Warranty
We accept returns of products two (2) weeks after purchase. Additionally, our manufacturer provides a twelve (12) month warranty on all products manufactured and the Company causedoffers an extended warranty for year two. The occurrence of any material defects or product recalls could make us liable for damages and warranty claims. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor, and customer demand, and adversely affect our operating results and financial condition. Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.
Competition
The market for on-body cameras is highly competitive. Further, we expect competition to increase in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets. We compete against established, well-known camera manufacturers such as Axon- Taser, WatchGuard and Provision. Many of our current competitors have substantial market share, diversified product lines, well- established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.
In addition, many of our existing and potential competitors have substantial competitive advantages, such as:
· | longer operating histories; |
· | the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; |
· | broader distribution and established relationships with channel partners; |
· | access to larger established customer bases; |
· | greater financial resources; |
· | large intellectual property portfolios; and |
· | the ability to bundle competitive offerings with other products and services |
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Moreover, smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc. and Samsung, may design them for use in a range of conditions, including challenging physical environments, or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products. Further, we are aware that certain companies have developed cameras designed and labeled to appear similar to our products, which may confuse consumers or distract consumers from purchasing our products.
Increased competition may result in pricing pressures and reduced profit margins and may impede our ability to continue to increase the sales of our products or cause us to lose market share, any of which could substantially harm our business and results of operations
Seasonality
Our business, as well as the industry in which we operate, is not seasonal.
Intellectual Property
We currently have a patent pending on a new product
Other than the aforementioned pending patent, we have no registered or patented intellectual property. Trademarks and trade names distinguish the various companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be incorporated Cobraxtreme HD Corp., a North Carolina corporation as a wholly owned subsidiary. The purposefound in numerous variations of the subsidiary will be to sell HD video sports camerasname and accessories whichdescriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.
Employees
As of the date of this report, we have three full time employees including Paul Feldman who is our Director, Chief Executive Officer and Chief Financial Officer. Mr. Feldman spends approximately sixty (60) hours per week on our business. We have one full time employees who provide clerical and administrative services and one full time salesperson.
None of our employees are similar to those soldrepresented by GoPro. Cobraxtreme will also sell goggles and sunglass cameras.a collective bargaining agreement, nor have we experienced any work stoppages. We expect this subsidiary to be operational inmaintain good relationships with our third fiscal quarter. employees.
Results of Operations
As ofJanuary July 31, 2018,2020, we had total assets of $278,093$2,724 and total liabilities of $556,473.$791,251. Since our inception toJanuary July 31, 2018,2020, we have an accumulated a deficit of $3,815,263.$4,658,208. We anticipate that we will continue to incur losses for the foreseeable future. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long termlong-term operating requirements. We expect to raise additional capital through the sale of equity or debt securities.
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Three and nine months ended JanuaryMonths Ended July 31, 2018 compared with the three and nine months ended January 31, 2017
Revenue
Revenue is generated from the sale of our video and audio capture devices and related accessories. For the three months endedJanuary 31, 2018, the Company recognized $50,669 of revenue growing 13.9% year-over-year from $44,489 in the third quarter of fiscal 2017. For the nine months endedJanuary 31, 2018, the Company recognized $139,182 of revenue growing 79.2% year-over-year from $77,666 during the first nine months of fiscal 2017. In order to improve sales, earlier in fiscal 2017, the Company released a 30 page catalog that includes surveillance products not previously offered.
Gross profit
Gross profit was $21,159 and $14,684 during the three months ended January 31, 2018 and 2017, respectively. Gross profit was $78,805 and $24,084 during the nine months ended January 31, 2018 and 2017, respectively. Our Gross margin for the three months ended January 31, 2018 and 2017 was 41.8% and 33.0%, respectively. Our Gross margin for the nine months ended January 31, 2018 and 2017 was 56.6% and 31.0%, respectively. The year-over-year increase in gross margin was due to increased volumes of higher margin product. The Company anticipates fluctuations in the mix of product sales and cannot meaningfully determine at this early stage if our gross margin will increase or decrease with any degree of accuracy.
Operating Expenses
General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance and other office related costs. General and administrative costs decreased by $13,850 to $108,662 during the three months endedJanuary 31, 2018 compared to $122,512 during the three months endedJanuary 31, 2017. General and administrative costs decreased by $96,540 to $348,279 during the nine months endedJanuary 31, 2018 compared to $444,819 during the nine months endedJanuary 31, 2017. General and administrative costs decreased during the three and nine months ended January 31, 20182020, compared to the three and nineThree months endedJanuary July 31, 2017primarily due to decreased professional service fees, dues and insurance offset by slightly higher travel costs.2019
|
| For the Three Months Ended July 31, |
|
|
|
|
|
|
|
|
| |||||||||
|
| 2020 |
|
| 2019 |
|
| $ Change |
|
| % Change |
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
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|
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|
|
|
| |||||
Revenues |
| $ | 4,608 |
|
| $ | 25,148 |
|
| $ | (20,540 | ) |
|
| -82 | % |
|
| 1 |
|
Gross profit |
| $ | 1,882 |
|
| $ | 11,728 |
|
| $ | (9,846 | ) |
|
| -84 | % |
|
| 2 |
|
General and administrative expenses |
| $ | 25,489 |
|
| $ | 11,932 |
|
| $ | 13,557 |
|
|
| 114 | % |
|
| 3 |
|
Total other income (expense) - net |
| $ | (29,097 | ) |
| $ | (12,943 | ) |
| $ | (16,154 | ) |
|
| 125 | % |
|
| 4 |
|
Sales and marketing costs include costs to promote and sell our products. Sales and marketing costs decreased by $23,605 to $4,483 during the three months ended January 31, 2018 compared to $28,088 during the three months endedJanuary 31, 2017.Sales and marketing costs decreased by $42,877 to $74,417 during the nine months ended January 31, 2018 compared to $117,294 during the nine months endedJanuary 31, 2017.Sales and marketing costs decreased during the three and nine months ended January 31, 2018 compared to the three and nine months endedJanuary 31, 2017 due to more targeted marketing efforts.__________
1 | Revenues decreased due to lack of expected sales and a reduction in marketing and advertising. |
2 | The gross profit in 2020 and 2019 was related to cost of revenues in the ordinary course of business. Overall, however, in 2020, there was a decrease in the volume of higher margin products as compared to 2019. The Company does not have sufficient cash resources to keep inventory on hand, which prevents the Company from making potential sales. The Company anticipates fluctuations in the mix of its product sales and expects its gross margin to fluctuate due to changes in product mix. |
3 | General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance, and other office related costs. The decrease is primarily due to decreased professional, personnel, and travel costs as business has slumped. Additionally, sales and marketing costs include costs to promote and sell our products. Sales and marketing costs during the three months ended July 31, 2020 and 2019 were $749 and $2,972, respectively. The decrease of $2,223 coincides with the Company s lack of available cash resources to maintain sufficient spending in this area. |
4 | Other income and expense during 2020 consisted of interest expense on the Company's debt. Interest expense for 2020 and 2019 was $29,097 and $7,272, respectively. During the three months ended July 31, 2019, the Company recognized a gain on ROU lease liability termination of $603 and a related impairment charge of $6,274 for the property and equipment that was no longer being used for operations. |
Other (Expense)
All the elements of other income (expense) relate to our convertible promissory notes. During the three months ended January 31, 2018 and 2017, the Company incurred $11,843 and $7,175, respectively, of interest expense and $67,736 and $144,753, respectively, of debt discount accretion. During the nine months ended January 31, 2018 and 2017, the Company incurred $30,756 and $21,307, respectively, of interest expense and $448,373 and $567,647, respectively, of debt discount accretion.
Liquidity and Working Capital
Our principal source of liquidity is cash in the bank and salable inventory.bank. As of JanuaryJuly 31, 20182020, our current assets totaled $203,975 and were comprised primarily$2,724, of $56,675 inwhich $724 was cash $17,053 ofon hand. The Company also has accounts receivable and $121,450 of inventory.$2,000. These conditions raise doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will try to raise additional funds through private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
For the ninethree months ended JanuaryJuly 31, 2018,2020, net cash flows used in(used in) operating activities was $361,753,($37,031), compared to $573,360net cash provided by operating activities of $3,187 for the ninethree months ended JanuaryJuly 31, 2017.2019.
For the ninethree months ended JanuaryJuly 31, 2018,2020, net cash flows used in investing activities was $8,246,$0, compared to $16,480$0 for the ninethree months ended JanuaryJuly 31, 2017. The cash used in investing activities was for the purchase of fixed assets.2019.
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For the ninethree months ended JanuaryJuly 31, 2018, we generated2020, net cash flows fromprovided by financing activities of $237,900 primarily$35,250 related to proceeds from the issuance of five convertible promissory notes compared to $387,500 fromof $36,050 offset by the issuancerepayment of four convertible promissory notesrelated party advances of $800. Comparatively, for the ninethree months ended JanuaryJuly 31, 2017.2019, net cash flows used in financing activities were $(300) for the repayment of a shareholder advance. To date, we have financed our operations primarily through the issuance of debtconvertible notes and equity.term loans.
OffDuring the period May 1, 2020 through September 18, 2020, the Company raised additional proceeds of $66,859 of 8% convertible notes. The proceeds were used to for working capital.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
See Note 2 to our Condensed Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our condensed consolidated results of operations and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, which is the potential loss arising from adverse changes in market prices and rates. We have not entered, and do not intend to enter, into derivative financial instruments for hedging or speculative purposes.
ITEM 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of JanuaryJuly 31, 2018,2020, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended. Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’sSEC��s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s assessment of ineffectiveness is due to the following:
(1) Lack of segregation of duties. Management has found it necessary to limit the Company’s administrative staffing in order to conserve cash, until the Company’s level of business activity increases. As a result, there is limited segregation of duties amongst the employees, and the Company has identified this as a material weakness in the Company’s internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of employees and limited segregation of duties, management believes that the Company is capable of following its disclosure controls and procedures effectively.
(2) Lack of in-house US GAAP Expertise. Our current accounting personnel perform adequately in the basic accounting and recordkeeping function. However, our operations and business practices include complex technical accounting issues that are outside the routine basic functions. These technical accounting issues are complex and require significant expertise to ensure that the accounting and reporting are accurate and in accordance with generally accepted accounting principles.
(3) Lack of formal documentation. We maintain very informal controls over the billing and invoicing procedures. As a result, invoicing delays have occurred. This is a significant material weakness in the billing cycle because this will cause inaccuracies in the ultimate completion of the sale, which is the collection of cash. Also, sales cutoff complications could arise due to these delays in billing. Bills should be sent to customers as soon as possible to expedite payment and otherwise keep the accounting system current.
Changes in internal controls
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II -II- OTHER INFORMATION
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 the executive officers of our Company, threatened against or affecting our Company or our Common Stock, in which an adverse decision could have a material adverse effect.
Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1 of our Annual Report on Form 10-K for the year ended April 30, 2020. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.
There have been no material changes to the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended April 30, 2020 other than the following:
We face risks related to Novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations, sales, and financial results.
Our business could be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments could cause disruption to our operations and sales activities. Our third-party manufacturers, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions which could adversely affect our business, operations and customer relationships. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.
Publicly Reporting Company Considerations
We will face several material challenges of operating as a publicly reporting company and we expect to incur significant costs and expenses applicable to us as a public company. We anticipate that our ongoing costs and expenses of complying with our public reporting company obligations will be approximately $50,000 annually, which we expect to pay for out of proceeds from our financing efforts during the next twelve months from the date of this report. Subsequent to the next twelve-month reporting and compliance period, we expect to pay for our publicly reporting company compliance and reporting costs from our gross profits, although there is no assurance that sufficient revenues will be generated to cover said costs. We must structure, establish, maintain and operate our Company under corporate policies designed to ensure compliance with all required public company laws, rules and regulations, including, without limitation, the Securities Act of 1933, the Securities Act of 1934, the Sarbanes- Oxley Act of 2002, the Foreign Corrupt Practices Act and the respective rules and regulations promulgated thereunder. Some of our more significant challenges of being a publicly reporting company will include the following:
· | We will have to carefully prepare and file, in the format mandated by the SEC, all periodic filings as required by the Securities Exchange Act of 1934 (Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and interim reports of material significant events on Form 8-K), as well as insider reporting compliance for all officers and director under Section 16 of the Securities Exchange Act of 1934 on Forms 3, 4 and 5; |
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· | We will have to assure that our corporate governance principles and Board minutes are properly drafted and maintained; | |
· | We will have to carefully analyze and assess all disclosures in all forms of public communications, including periodic SEC filings, press releases, website postings, and investor conferences to assure legal compliance; | |
· | We will have assured corporate and SEC legal compliance with respect to proxy statements and information statements circulated for our annual shareholder meetings, shareholder solicitations and other shareholder information events; | |
· | We will have to assure securities law compliance for all equity-based employee benefit plans, including registration statements and prospectus distribution procedures; | |
· | We will have to continuously analyze the specific impact on our Company of all significant SEC initiatives, policies, proposals, and developments, as well as assess the rules of the Public Company Accounting Oversight Committee on governance procedures of the Company and our audit committee; | |
· | We will have to comply with the specific listing requirements of a stock exchange if we qualify and apply for such listing; | |
· | Being a public company increases our director and officer liability insurance costs; | |
· | We will have to interface with our Transfer Agent regarding issuance and trading of our common stock, which may include Rule 144 stock transfer compliance matters; and | |
· | We will incur additional costs for legal services as a function of our needs to seek guidance on securities law disclosure questions and evolving compliance standards. |
We have assigned a high priority to corporate compliance and our public company reporting obligations, however, there can be no assurance that we will have sufficient cash resources available to satisfy our public company reporting and compliance obligations. If we are unable to cover the cost of proper administration of our public company compliance and reporting obligations, we could become subject to sanctions, fines and penalties, our stock could be barred from trading in public capital markets and we may have to cease operations.
Our actual results may differ from our projections if there are material changes in any of the factors or assumptions upon which we have based our projections. Such factors and assumptions, include, without limitation, the development of our proprietary technology platform and our products, the timing of such development, market acceptance of our products, protection of our intellectual property, our success in implementing our strategic, operating and personnel initiatives and our ability to commercialize our products, any of which could impact sales, costs and expenses and/or planned strategies and timing. As a result, it is possible that we may require significantly more capital resources to meet our capital needs.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of the Company's equity securities during the quarter ended July 31, 2020 that were not previously reported in a Current Report on Form 8-K except as listed below. Except where noted, all of the securities discussed in this Part II, Item 2 were all issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
During the three months ended JanuaryJuly 31, 2018,2020, the Company issued 1) 34,802,500no shares of common stockstock.
During the three months ended July 31, 2020, the Company was able to RDW Capital, LLC uponraise $36,050 in 8%, convertible notes, under similar terms as its previous convertible note financings; and an additional $66,859 was raised during August and September 2020.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
At July 31, 2020, the conversionCompany was in default on certain convertible notes totaling $463,561 and related accrued interest of debt totaling $56,529; and 2) 100,000 shares in exchange for services valued at $600.
$198,701.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable
None.Effective August 1, 2020, the Company’s outstanding convertible notes payable (8%) and related accrued interest of approximately $662,000 were no longer in default as these debt instruments were extended to a maturity date of February 1, 2021.
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25
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are incorporated herein by reference, as follows:
Exhibit Index
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10.42* | ACH Total Receipts Agreement dated June 8, 2018 with Reliant Funding | |
10.43* | Loan Agreement dated September 25, 2018 with Strategic Funding Source, Inc. | |
10.44 | Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC | |
10.45 | Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC | |
10.46 | Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC | |
10.47 | Promissory Note dated October 24, 2019 with Red Diamond Partners, LLC | |
10.48 | Promissory Note dated November 19, 2019 with Red Diamond Partners, LLC | |
10.49 | Promissory Note dated November 26, 2019 with Red Diamond Partners, LLC | |
10.50 | Promissory Note dated December 24, 2019 with Red Diamond Partners, LLC | |
10.51 | Promissory Note dated January 14, 2020 with Red Diamond Partners, LLC | |
10.52 | Promissory Note dated June 18, 2020 with Red Diamond Partners, LLC | |
10.53 | Promissory Note dated July 13, 2020 with Red Diamond Partners, LLC | |
10.54 | Promissory Note dated July 16, 2020 with Red Diamond Partners, LLC | |
10.55 | Promissory Note dated July 23, 2020 with Red Diamond Partners, LLC | |
10.56 | Promissory Note dated August 21, 2020 with Red Diamond Partners, LLC |
10.57 | Promissory Note dated September 15, 2020 with Red Diamond Partners, LLC | |
32.1 * |
| |
101.INS |
| XBRL Instance Document** |
101.SCH |
| XBRL Taxonomy Extension - Schema Document** |
101.CAL |
| XBRL Taxonomy Extension - Calculation Linkbase Document** |
101.DEF |
| XBRL Taxonomy Extension - Definition Linkbase Document** |
101.LAB |
| XBRL Taxonomy Extension - Label Linkbase Document** |
101.PRE |
| XBRL Taxonomy Extension - Presentation Linkbase Document** |
__________
* Filed herewith
** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) | Incorporated by reference to Form S-1 filed on February 22, 2016. |
(2) | Incorporated by reference to Form 8-K filed on January 4, 2016. |
(3) | Incorporated by reference to Form S-1/A filed on March 7, 2016 |
(4) | Incorporated by reference to Form 8-K filed on May 18, 2016. |
(5) | Incorporated by reference to Form 10-K filed on June 27, 2016. |
(6) | Incorporated by reference to Form 8-K filed on August 24, 2016. |
(7) | Incorporated by reference to Form S-1 filed on October 11, 2016. |
(8) | Incorporated by reference to Form 8-K filed on March 31, 2017. |
(9) | Incorporated by reference to Form 10-K filed on July 27, 2017. |
(10) | Incorporated by reference to Form 8-K filed on August 10, 2017. |
(11) | Incorporated by reference to Form 8-K filed on October 25, 2017. |
(12) | Incorporated by reference to Form 10-Q filed on December 14, 2017. |
(13) | Incorporated by reference to Form 10-Q filed on February 28, 2018. |
(14) | Incorporated by reference to Form 8-K filed on March 5, 2018. |
(15) | Incorporated by reference to Form 8-K filed on March 8, 2018. |
(1) Incorporated by reference to Form S-1 filed on February 22, 2016.
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(2) Incorporated by reference to Form 8-K filed on January 4, 2016.
(3) Incorporated by reference to Form S-1/A filed on March 7, 2016.Signatures
(4) Incorporated by reference to Form 8-K filed on May 18, 2016.
(5) Incorporated by reference to Form 10-K filed on June 27, 2016.
(6) Incorporated by reference to Form 8-K filed on August 24, 2016.
(7) Incorporated by reference to Form S-1 filed on October 11, 2016.
(8) Incorporated by reference to Form 8-K filed on March 31, 2017.
(9) Incorporated by reference to Form 10-K filed on July 27, 2017.
(10) Incorporated by reference to Form 8-K filed on August 10, 2017.
(11) Incorporated by reference to Form 8-K filed on October 25, 2017.
(12) Incorporated by reference to Form 10-Q filed on December 14, 2017.
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Signatures
In accordance with Section 13 or 15(d) of the Securities Act of 1933, as amended, the Company caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| Force Protection Video Equipment Corp. | ||
| (Registrant) | ||
|
| ||
| By: | /s/ Paul Feldman | |
Paul Feldman | |||
|
| Chief Executive Officer, | |
Chief Financial Officer and Director |
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