UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended November 30, 2022August 31, 2023

 

OR

 

 TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File Number: 000-56351

 

Reviv3 Procare Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 47-4125218
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
   
901 Fremont Avenue, Unit 158 And Unit 168, Alhambra, CA 91803
(Address of Principal Executive Offices) (Zip Code)

(888) 638-8883

(Registrant’s Telephone Number, Including Area Code)

9480 Telstar Avenue, Suite 5, El Monte, California91731

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading symbol(s) Name of each exchange on which registered
None N/A N/A

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 ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

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
Non-accelerated filerSmaller reporting company 
Emerging growth company

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. ☐  

 

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

 

As of January 10,October 11, 2023, there were 116,858,340117,076,949 shares of the registrant’s common stock, $0.0001 par value, outstanding.

 

 

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

INDEX

  Page
Cautionary Note Regarding Forward Looking Statements ii 
PART I - FINANCIAL INFORMATION 
   
Item 1.Financial Statements (Unaudited)1
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk7
   
Item 4.Controls and Procedures7
   
PART II - OTHER INFORMATION 
   
Item 1.Legal Proceedings8
 
Item 1A.1.Legal ProceedingsRisk Factors8
   
Item 2.1A.Risk FactorsUnregistered Sales of Equity Securities and Use of Proceeds8
   
Item 3.2.Unregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior Securities8
   
Item 4.3.Defaults Upon Senior SecuritiesMine Safety Disclosures8
   
Item 5.4.Mine Safety DisclosuresOther Information8
   
Item 5.Other Information8
Item 6.ExhibitsExhibits9
   
SignaturesSignatures10

-i-

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Except for any historical information contained herein, the matters discussed in this quarterly reportThis Quarterly Report on Form 10-Q, containin particular Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains certain “forward-looking statements” within the meaning of Section 27A of the federal securities laws.Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our futureassumptions about financial position, economic performance, resultsperformance; the continuation of operations, business strategy, budgets, projected costs,historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs,needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans and objectives of management for future operations,operations; and the information referredeconomy in general or the future of the beauty and hair care industry and the hearing protection and ear bud business, all of which were subject to under “Management’s Discussionvarious risks and Analysis of Financial Condition and Results of Operations.”uncertainties.  

 

TheseThere are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements, generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “could,” “would,” “will likely result”, “project,” “continue” or similar terminology, although not all forward-looking statements contain these words, and any statements contained in this quarterly report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this Form 10-Q. These forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which by their nature, are inherently uncertain and beyondoutside of our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, actual results may differ materially depending on a variety of important factors including, among others: the duration of the COVID-19 pandemic and its effect on our business operations, financial results and financial position and on the industries in which we operate and the global economy generally, as well as the potential impact on our vendors in China;They include: the impact of unstable market and general economic conditions on our business, financial condition and stock price, including inflationary cost pressures, decreased discretionary consumer spending, supply chain disruptions and constraints, labor shortages, ongoing economic disruption, including the effects of the Ukraine-Russia conflict, and ongoing impact of COVID-19, and other downturns in the business cycle or the economy, such as potential recession;economy; our financial performance and liquidity, including our ability to successfully generate sufficient revenue to support our operations; our ability to raise additional funds or obtain other forms of financing on acceptable terms, or at all; our ability to repay our outstanding loans; our ability to successfully implement and achieve all anticipated benefits from our restructuring, simplification and modernization initiatives; risks related to our operations and international markets, such as fluctuations in currency exchange rates, different regulatory environments, trade barriers and sanctions, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations, including those related to climate change; our ability to protect and defend our intellectual property; continuity and security of information technology infrastructure and the potential impact of cybersecurity breaches or disruptions to our management information systems; competition; our ability to retain our management and employees and the potential impact of ongoing labor shortages; demands on management resources; availability and cost of the raw materials we use to manufacture our products, including the impacts of inflationary cost pressures and ongoing supply chain disruptions and constraints, which have been, and may continue to be, exacerbated by the Russia-Ukraine conflict and the COVID-19 pandemic;conflict; additional tax expenses or exposures; product liability claims; the potential outcome of any legal or regulatory proceedings; integrating acquisitions and achieving the expected savings and synergies, including our recent acquisition of hearing protection and ear bud businesses; global or regional catastrophic events, including the effects of natural disasters, which may be worsened by the impact of climate change; demand for and market acceptance of our products, as well as our ability to successfully anticipate consumer trends; business divestitures; labor relations; the potential impact of environmental, social and governance matters; and implementation of environmental remediation matters.

 

When used in this Quarterly Report on Form 10-Q and other reports, statements, and information we have filed with the Securities and Exchange Commission (the “SEC”), in our press releases, presentations to securities analysts or investors, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expect,” “should,” “could,” “would,” “continue,” “anticipate,” “intend,” “likely,” “estimate,” “project,” “plan,” “design,” “potential”, “focus” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict.

We do not assume the obligation to update any forward-looking statement, except as required by applicable law.

When considering these forward-looking statements, you You should keep in mind the cautionarycarefully evaluate such statements in light of factors described in this quarterly reportQuarterly Report. In this Quarterly Report on Form 10-Q, Reviv3 Procare Company (“Reviv3 Procare,” the “Company,” “we,” “us,” and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended May 31, 2022. We cannot assure you“our”) has identified material factors that the forward-looking statements in this quarterly report on Form 10-Q will provecould cause actual results to be accurate. Furthermore, if our forward-looking statements provediffer from expected or historic results. You should understand that it is not possible to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements,predict or identify all such factors. Consequently, you should not regard these statements asconsider any such list to be a representationcomplete list of all potential risks or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.uncertainties.

-ii-

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

REVIV3 PROCARE COMPANY AND SUBSIDIARY

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

CONTENTS

 

Financial Statements: 
  
Consolidated Balance Sheets - As of November 30, 2022 (Unaudited)August 31, 2023 and May 31, 20222023F-1
  
Consolidated Statements of Operations - For the three and six months ended November 30,August 31, 2023 and 2022 and 2021 (Unaudited)F-2
  
Consolidated Statements of Changes in Stockholders’ Equity - For the three and six months ended November 30,August 31, 2023 and 2022 and 2021 (Unaudited)F-3
  
Consolidated Statements of Cash Flows – For the sixthree months ended November 30,August 31, 2023 and 2022 and 2021 (Unaudited)F-4
  
Condensed Notes to Unaudited Consolidated Financial StatementsF-5

-1-

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

       
  August 31, 2023  May 31, 2023 
  (Unaudited)    
       
ASSETS      
CURRENT ASSETS:        
Cash $5,061,723  $4,832,682 
Accounts receivable, net  455,886   417,016 
Inventory, net  2,069,968   1,311,864 
Prepaid expenses and other current assets  485,609   801,360 
         
Total Current Assets  8,073,186   7,362,922 
         
OTHER ASSETS:        
Property and equipment, net  199,561   157,463 
Intangible assets, net  363,299   382,674 
Right of use asset  86,111   101,845 
Other assets  12,194   12,195 
Goodwill 2,152,215   2,152,215 
         
Total Other Assets  2,813,380   2,806,392 
         
TOTAL ASSETS $10,886,566  $10,169,314 
         
 LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
CURRENT LIABILITIES:        
Accounts payable $1,077,005  $908,606 
Customer deposits  92,817   183,688 
Equipment payable, current  1,375   2,200 
Contract liabilities, current  909,883   827,106 
Notes payable  155,334   172,588 
Due to related party  58,980   158,072 
Lease Liability, current  68,558   65,824 
Income Tax Liability  296,902   230,913 
Other current liabilities  768,185   305,664 
         
Total Current Liabilities  3,429,039   2,854,661 
         
LONG TERM LIABILITIES:        
Lease liability, long term  18,650   36,752 
Contract liabilities, long term  561,359   605,942 
         
Total Long Term Liabilities  580,009   642,694 
         
Total Liabilities  4,009,048   3,497,355 
         
Commitments and contingencies (see Note 11)  -   - 
         
STOCKHOLDERS’ EQUITY:        
Preferred stock, $0.0001 par value; 300,000,000 shares authorized; 250,000,000 shares issued and outstanding as of August 31, 2023 and May 31, 2023  25,000   25,000 
Common stock, $0.0001 par value: 450,000,000 shares authorized; 117,076,949 shares issued, and outstanding as of August 31, 2023 and May 31, 2023  11,708   11,708 
Additional paid-in capital  10,153,350   10,102,243 
Accumulated deficit  (3,312,540)  (3,466,992)
         
Total Stockholders’ Equity  6,877,518   6,671,959 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $10,886,566  $10,169,314 

         
  November 30,
2022
  May 31,
2022
 
  (Unaudited)    
       
ASSETS        
CURRENT ASSETS:        
Cash $4,018,170  $373,731 
Accounts receivable, net  791,325   105,921 
Inventory, net  2,113,678   323,388 
Prepaid expenses and other current assets  380,095   - 
         
Total Current Assets  7,303,268   803,040 
         
OTHER ASSETS:        
Property and equipment, net  159,627   29,145 
Intangible assets, net  421,423   - 
Right of use asset  -   45,453 
Other assets  20,087   16,277 
Goodwill  2,152,215   - 
         
Total Other Assets  2,753,352   90,875 
         
TOTAL ASSETS $10,056,620  $893,915 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
CURRENT LIABILITIES:        
Accounts payable $1,322,240  $435,713 
Contract liabilities- current  817,606   - 
Notes payable  208,688   156,300 
Due to related party  136,844   25,452 
Other current liabilities  1,450,495   89,538 
         
Total Current Liabilities  3,935,873   707,003 
         
LONG TERM LIABILITIES:        
Equipment payable  450   2,200 
Contract liabilities- long term  573,483   - 
         
Total Long Term Liabilities  573,933   2,200 
         
Total Liabilities  4,509,806   709,203 
         
Commitments and contingencies (see Note 10)  -   - 
         
STOCKHOLDERS’ EQUITY:        
Preferred stock, $0.0001 par value; 300,000,000 shares authorized; 250,000,000 and none shares issued and outstanding as of November 30 and May 31, 2022, respectively  25,000   - 
Common stock, $0.0001 par value: 450,000,000 shares authorized; 116,556,165 and 41,945,881 shares issued, issuable and outstanding as of November 30 and May 31, 2022, respectively  11,656   4,195 
Additional paid-in capital  9,899,298   5,472,084 
Accumulated deficit  (4,389,140)  (5,291,567)
         
Total Stockholders’ Equity  5,546,814   184,712 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $10,056,620  $893,915 

See accompanying condensed notes to these unaudited consolidated financial statements.

 

F-1

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2022 AND 2021

(UNAUDITED)

                        
 For the Three Months Ended For the Six Months Ended  For the Three Months Ended 
 November 30, November 30, November 30, November 30,  August 31, 
 2022 2021 2022 2021  2023 2022 
               
Sales $6,731,999  $493,816  $10,969,357  $1,333,088 
Sales, net $6,106,269  $4,237,358 
                        
Cost of sales  1,692,965   112,800   2,647,669   476,696   1,458,703   954,704 
          24%  23%
Gross profit  5,039,034   381,016   8,321,688   856,392   4,647,566   3,282,654 
          76%  77%
OPERATING EXPENSES:                        
Marketing and selling expenses  3,098,898   269,051   5,076,874   620,673   3,206,841   1,977,976 
Compensation and related taxes  509,339   777   790,027   11,608   279,989   280,688 
Professional and consulting expenses  213,205   55,686   679,655   119,554   426,775   466,450 
General and administrative  232,597   60,739   590,736   124,268   560,204   358,139 
                        
Total Operating Expenses  4,054,039   386,253   7,137,292   876,103   4,473,809   3,083,253 
          74%  73%
INCOME (LOSS) FROM OPERATIONS  984,995   (5,237)  1,184,396   (19,711)
INCOME FROM OPERATIONS  173,757   199,401 
                        
OTHER INCOME (EXPENSE):                        
Gain on debt settlement  -   35,000   50,500   35,000   -   50,500 
Other income  9,835   - 
Interest income  4,704   7   6,541   18   38,493   1,837 
Interest expense and other finance charges  (1,755)  (1,569)  (3,213)  (3,145)  (1,644)  (1,458)
                        
Other Income (Expense), Net  2,949   33,438   53,828   31,873   46,684   50,879 
                        
INCOME BEFORE PROVISION FOR INCOME TAXES  987,944   28,201   1,238,224   12,162   220,441   250,280 
                        
Provision for income taxes  261,044   -   335,797   -   65,989   74,753 
                        
NET INCOME $726,900  $28,201  $902,427  $12,162  $154,452  $175,527 
                        
NET INCOME PER COMMON SHARE:                        
Basic $0.01  $0.00  $0.01  $0.00  $0.00  $0.00 
Diluted $0.00  $0.00  $0.00  $0.00  $0.00  $0.00 
                        
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                        
Basic  115,226,893   41,945,881   108,779,476   41,945,881   117,076,949   102,402,140 
Diluted  368,933,486   41,945,881   341,429,203   41,945,881   372,451,949   314,223,880 

 

See accompanying condensed notes to these unaudited consolidated financial statements.

 

F-2

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30,AUGUST 31, 2023 AND 2022 AND 2021

(UNAUDITED)

For the six months ended November 30, 2022

                             
     Common Stock  Additional     Total 
  Preferred Stock  Issued And Issuable  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, May 31, 2022  -  $-   41,945,881  $4,195  $5,472,084  $(5,291,567) $184,712 
                             
Shares issued for acquisition of business  250,000,000   25,000   73,183,893   7,318   3,975,162   -   4,007,480 
                             
Stock options expense  -   -   -   -   124,145   -   124,145 
                             
Shares to be issued for cash  -   -   1,426,391   143   327,907   -   328,050 
                             
Net income for the six months ended November 30, 2022  -   -   -   -   -   902,427   902,427 
                             
Balance, November 30, 2022  250,000,000  $25,000   116,556,165  $11,656  $9,899,298  $(4,389,140) $5,546,814 

 

For the three months ended November 30, 2022August 31, 2023

 

     Common Stock  Additional     Total 
  Preferred Stock  Issued And Issuable  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, August 31, 2022  250,000,000  $25,000   115,129,774  $11,513  $9,544,529  $(5,116,040) $4,465,002 
                             
Stock options expense  -   -   -   -   26,862   -   26,862 
                             
Shares to be issued for cash  -   -   1,426,391   143   327,907   -   328,050 
                             
Net income for the three months ended November 30, 2022  -   -   -   -   -   726,900   726,900 
                             
Balance, November 30, 2022  250,000,000  $25,000   116,556,165  $11,656  $9,899,298  $(4,389,140) $5,546,814 

                             
     Common Stock        Total 
  Preferred Stock  Issued  Additional Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, May 31, 2023  250,000,000  $25,000   117,076,949  $11,708  $10,102,243  $(3,466,992) $6,671,959 
                             
Stock options expense  -   -   -   -   51,107   -   51,107 
                             
Net income for the three months ended August 31, 2023  -   -   -   -   -   154,452   154,452 
                             
Balance, August 31, 2023  250,000,000  $25,000   117,076,949  $11,708  $10,153,350  $(3,312,540) $6,877,518 

 

For the six months ended November 30, 2021

     Common Stock  Additional     Total 
  Preferred Stock  Issued And Issuable  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, May 31, 2021  -  $-   41,945,881  $4,195  $5,450,117  $(5,108,664) $345,648 
                             
Net income for the six months ended November 30, 2021  -   -   -   -   -   12,162   12,162 
                             
Balance, November 30, 2021  -  $-   41,945,881  $4,195  $5,450,117  $(5,096,502) $357,810 

For the three months ended November 30, 2021August 31, 2022                      

     Common Stock        Total 
  Preferred Stock  Issued  Additional Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, May 31, 2022  -  $-   41,945,881  $4,195  $5,472,084  $(5,291,567) $184,712 
                             
Shares issues for acquisition of business  250,000,000   25,000   73,183,893   7,318   3,975,162   -   4,007,480 
                             
Stock options expense  -   -   -   -   97,283   -   97,283 
                             
Net income for the three months ended August 31, 2022  -   -   -   -   -   175,527   175,527 
                             
Balance, August 31, 2022  250,000,000  $25,000   115,129,774  $11,513  $9,544,529  $(5,116,040) $4,465,002 

     Common Stock  Additional     Total 
  Preferred Stock  Issued And Issuable  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, August 31, 2021  -  $-   41,945,881  $4,195  $5,450,117  $(5,124,703) $329,609 
                             
Net income for the three months ended November 30, 2021  -   -   -   -   -   28,201   28,201 
                             
Balance, November 30, 2021  -  $-   41,945,881  $4,195  $5,450,117  $(5,096,502) $357,810 

See accompanying condensed notes to these unaudited consolidated financial statements.

 

F-3

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2022 AND 2021

(UNAUDITED)

         
  2022  2021 
       
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $902,427  $12,162 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization  43,015   4,475 
Bad debts  105,975   2,316 
Deposit used in rent  8,385   - 
Stock based compensation  124,145   - 
Gain on debt settlement  (50,500)  (35,000)
Amortization of prepaid expense  3,159   - 
Change in operating assets and liabilities:        
Accounts receivable  (563,594)  2,707 
Inventory  (447,830)  149,231 
Prepaid expenses and other current assets  (243,010)  (12,655)
Deposits  (12,195)  - 
Accounts payable  651,365   (60,745)
Other current liabilities  1,327,096   (90,551)
Contract liabilities  347,757   - 
         
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  2,196,195   (28,060)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Cash acquired on business acquisition  1,066,414   - 
Purchase of intangible assets  -    - 
Purchase of property and equipment  (54,400)  - 
         
NET CASH PROVIDED BY INVESTING ACTIVITIES  1,012,014   - 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Cash raised for common stock to be issued  328,050   - 
Proceeds from loan payable  -   35,000 
Repayment of equipment financing  (1,750)  (1,650)
Repayment of note payable  (1,462)  - 
Advances from (repayment to) related parties, net  111,392   (21,377)
         
NET CASH PROVIDED BY FINANCING ACTIVITIES  436,230   11,973 
         
NET INCREASE (DECREASE) IN CASH  3,644,439   (16,087)
         
CASH - Beginning of period  373,731   496,937 
         
CASH - End of period $4,018,170  $480,850 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest $250  $500 
Income taxes $-  $- 
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Stock issued for asset purchase agreement $4,007,480  $- 

 

         
  For the Three Months Ended August 31, 
  2023  2022 
       
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $154,452  $175,527 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  28,237   19,669 
Bad debts  52,866   - 
Stock based compensation  51,107   97,283 
Gain on debt forgiveness  -   (50,500)
Change in operating assets and liabilities:        
Accounts receivable  (91,736)  (93,901)
Inventory  (758,104)  432,998 
Prepaid expenses and other current assets  315,751   (204,130)
Accounts payable and accrued expenses  168,399   52,247 
Other current liabilities  438,006   296,106 
Contract liabilities  38,194   82,334 
         
NET CASH PROVIDED BY OPERATING ACTIVITIES  397,172   807,633 
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Cash acquired on business acquisition  -   1,066,414 
Purchase of property and equipment  (50,960)  (6,400)
         
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  (50,960)  1,060,014 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Repayment of equipment financing  (825)  (825)
Repayment of note payable  (17,254)  - 
Advances (payments) from a related party  (99,092)  2,732 
         
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  (117,171)  1,907 
         
NET INCREASE IN CASH  229,041   1,869,554 
         
CASH - Beginning of period  4,832,682   373,731 
         
CASH - End of period $5,061,723  $2,243,285 
   -     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest $1,644  $125 
Income taxes $-  $- 
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Stock issued for asset purchase agreement $-  $4,007,480 
Tangible assets (excluding cash) acquired in business combination $-  $1,740,729 
Intangible assets acquired in business combination $-  $456,945 
Goodwill acquired in business combination $-  $2,152,215 
Liabilities assumed in business combination $-  $1,408,823 

See accompanying condensed notes to these unaudited consolidated financial statements.

 

F-4

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

 

Note 1 – Organization

 

Reviv3 Procare Company (the “Company”) was incorporated in the State of Delaware on May 21, 2015, as a reorganization of Reviv3 Procare, LLC which was organized on July 31, 2013. The Company has moved its corporate headquarters to 901 Fremont Avenue, Unit 158, Alhambra, California 91803. Its phone number is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care products throughout the United States, Canada, Europe and Asia.(888) 638-8883. In March 2022, the Company incorporated a subsidiary “Reviv3 Acquisition Corporation.”

OnCorporation” and in June 16, 2022, the Company completed the asset acquisition of (i) the hearing protection business of Axil & Associated BrandsBrand Corp., a Delaware corporation business (“Axil”AXIL”), consisting of ear plugs and ear muffs, and (ii) Axil’s ear bud business, pursuant to the Asset Purchase Agreement dated May 1, 2022 and amended on June 15, 2022 and September 8, 2022, by and among the Company and its subsidiary Reviv3 Acquisition Corporation, Axil and certain stockholders of Axil. The acquired business constituted substantially all of the business operations of Axil but did not include Axil’s hearing aid line of business.

The Company is utilizingnow engaged in the Axil assets to expand intomanufacturing, marketing, sale and distribution of high-tech hearing and audio innovations that provide cutting edge solutions for consumers, with varied applications across many industries; as well as professional quality hair and skin care products. These products lines are both sold throughout the hearing enhancement business through its newly incorporated subsidiary.United States, Canada, Europe and Asia.

 

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

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited consolidated financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission.Commission (“SEC”). In the opinion of the management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of November 30,August 31, 2023, and 2022, and 2021, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2022.2023. The results of operations for the three and six months ended November 30, 2022August 31, 2023 are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

fiscal year ending 2024. The unaudited consolidated financial statements include Reviv3 Procarethe Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Risk and Uncertainty Concerning COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to impact the United States and the World. We continue to monitor the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. All of our Chinese vendor facilities were temporarily closed for a period of time. Most of these facilities have been reopened since July 2020, although some later shut down for periods of time due to COVID-19 restrictions. Depending on the progression of the outbreak, our ability to obtain necessary supplies and ship finished products to customers has been, and may continue to be, partly or completely disrupted globally. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress, it could have a material negative impact on our results of operations and cash flow, in addition to the impact on our employees. We have concluded that while it is reasonably possible that the virus could have a negative impact on the results of operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company obtained two loans under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and one loan under the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). See Note 7 – Notes Payable.

F-5

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

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

 

Liquidity and Capital Resources

 

We are an emerging growth company and currently engaged in our product sales and development. WeAlthough we earned net income and have cash provided by operations for the three months ended August 31, 2023, we had an accumulated deficit of $3,312,540 as of August 31, 2023 and have incurred operating losses and cash used in operations in the past. We currently expect to earn net income and positive cash flows from operations during the current fiscal year 2023.ending May 31, 2024. We believe our current cash balances, coupled with anticipated cash flow from operating activities, will be sufficient to meet our working capital requirements.requirements for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. We intend to continue to control our cash expenses as a percentage of expected revenue on an annual basis and thus may use our cash balances in the short-term to invest in revenue growth. As a result of the acquisition of Axil’s assets,AXIL’s business, we have generated and expect we will continue to generate sufficient cash for our operational needs, including any required debt payments, for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. Management is focused on growing the Company’s existing products, offering,introducing new products, as well as expanding its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus, maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands, including those resulting from the purchase of Axil’sAXIL’s assets in June 2022, will likelymay lead to cash utilization at levels greater than recently experienced. We have recently raised capital through the sale of common stock and may need or choose to raise additional capital in the future. However, theThe Company cannot provide any assurance that it will be able to raise additional capital or obtain necessary financing on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements.

F-5

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

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

 

Use of estimates

 

The preparation of the unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations and classifications, the useful life of property and equipment, the valuation of deferred tax assets, the value of stock-based compensation, contract liability, allowance on sales returns, valuation of lease liabilities and related right of use assets, fair value of securities issued for business combinations, fair value of assets acquired and liabilities assumed in business combinations and the fair value of non-cash common stockCommon Stock issuances. 

 

Cash and cash equivalents

 

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. (See Note 13)14)

Accounts receivable and allowance for doubtful accounts

 

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

Prepaid expenses and other current assets

 

Prepaid expenses and other current assets consist primarily of cash prepayments to vendors for inventory and prepayments for trade shows and marketing events which will be utilized within a year, prepayments on credit cards and the right to recover assets (for the cost of goods sold) associated with the right of returns for products sold.

F-6

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

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

Inventory

 

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

F-6

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

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

 

Property and Equipment

 

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

Product warranty

The Company provides a one-year, two-year or three-year limited warranty on its hearing enhancement and hearing protection products. The Company records the costs of repairs and replacements, as they are incurred, to the cost of sales. 

Revenue recognition and Contract Liabilities

 

The Company follows Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers. This revenue recognition standard (new guidance) has a five stepsstep process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied.

 

The Company sells a variety of electronic hearing and enhancement products and hair and skin care products. The Company recognizes revenue for the agreed upon sales price when a purchase order is received from the customer and subsequently the product is shipped to the customer, which satisfies the performance obligation. Consideration paid to the customer to promote and sell the Company’s products is typically recorded as a reduction in revenues.

 

The Company also sells hearing protection and hearing enhancement devices and the followingfive steps are followed for the revenue recognition:recognition are as follows:

 

Identify the contract with a customer. The Company generally considers completion of a sales order (which requires customer acceptance of the Company’s click-through terms and conditions for website sales and authorization of payment through credit card or another form of payment for sales made over the phone) or purchase orders from non-consumer customers as a customer contract provided that collection is considered probable. For payments that are not made upfront by credit card, the Company assesses customer creditworthiness based on credit checks, payment history, and/or other circumstances. For payments involving third party financier payors, the Company validates customer eligibility and reimbursement amounts prior to shipping the product.

 

Identify the performance obligations in the contract. Product performance obligations include shipment of hearing enhancement and hearing protection systemsproducts and related accessories, and service performance obligations include extended warranty coverage.

However, as the historical redemption rate under theour warranty policy has been low, the option is not accounted for as a separate performance obligation. The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.

F-7

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

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

Determine the transaction price and allocation to performance obligations. The transaction price in the Company’s customer contracts consists of both fixed and variable consideration. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes the 30-days and 60-days right of return that applies to all products.AXIL and Reviv3 products, respectively. To estimate product returns, the Company analyzes historical return levels, current economic trends, and changes in customer demand. Based on this information, the Company reserves a percentage of product sale revenue and accounts for the estimated impact as a reduction in the transaction price.

Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis.

Recognize revenue when or as the Company satisfies a performance obligation. Revenue for products (hearing enhancement and hearing protection systems with relatedaccessories) is recognized at a point in time, which is generally upon shipment. Revenue for services (extended warranty) is recognized over time on a ratable basis over the warranty period.

 

As of November 30, 2022August 31, 2023, and May 31, 2022,2023, contract liabilities amounted to $1,391,0891,471,242 and $01,433,048, respectively. Contract liabilities associated with product invoiced but not received by customers at the balance sheet date was $0 and $0, respectively; contract liabilities associated with unfulfilled performance obligations for warranty services offered for a period of one, totwo and three years was $1,135,809$1,350,680 and $0,$1,320,401, respectively, and contract liabilities associated with unfulfilled performance obligations for customers’ right of return was $255,280$120,562 and $0,$112,647, respectively. Our contract liabilities amounts are expected to be recognized over a period of between one year to three years. Approximately $817,606$854,943 will be recognized in year 1, $401,613$458,614 will be recognized in year 2, and $171,870$157,685 will be recognized in year 3.

 

Revenue recognized, during the three months ended November 30, 2022,August 31, 2023, that was included in the contract liability balance atupon the beginningacquisition of period (acquisition of Axil)AXIL was $125,993. Revenue recognized, during the six months ended November 30, 2022, that was included in the contract liability balance at the beginning of period (acquisition of Axil) was $221,401.$97,439

See Note 13 for revenue disaggregation disclosures..

 

Cost of Sales

 

The primary components of cost of sales include the cost of the product and shipping fees paid to vendors for inventory purchase.fees.

 

Shipping and Handling Costs

 

The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in marketing and selling expense were $222,193253,452 and $50,895285,329 for the three months ended November 30,August 31, 2023 and 2022, and 2021, respectively. Shipping costs included in marketing and selling expense were $507,522 and $122,572 for the six months ended November 30, 2022 and 2021, respectively.

Marketing, selling and advertising

 

Marketing, selling and advertising costs are expensed as incurred.

 

Customer Deposits

 

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

 

F-8

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

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

Fair value measurements and fair value of financial instruments

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

 

F-8

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

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

Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: 

Level 1:  Observable inputs such as quoted market prices in active markets for identical assets or liabilitiesliabilities.
  
Level 2:  Observable market-based inputs or unobservable inputs that are corroborated by market datadata.
  
Level 3:  Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

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

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

Business Combinations

 

For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets acquired and liabilities assumed of the acquired business, including goodwill, generally at their fair values.

 

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value and accretion costs are recognized in earnings. The increases or decreases in the fair value of contingent consideration can result from changes in anticipated revenue levels and changes in assumed discount periods and rates.

 

Goodwill

 

Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value.

 

The Company performs its annual goodwill impairment assessment on May 31st of each year or as impairment indicators dictate.

F-9

 

 REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

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

The Company performs its annual goodwill impairment assessment on May 31st of each year or as impairment indicators dictate.

When evaluating the potential impairment of goodwill, management first assesses a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the quantitative impairment testing methodology primarily using the income approach (discounted cash flow method).

 

Under the quantitative method we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is recognized as the amount by which the carrying amount exceeds the fair value.

 

When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results. 

Income Taxes

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

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

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

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

F-10

 REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

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

Impairment of long-lived assets  

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did notnot record any impairment loss during the sixthree months ended November 30, 2022August 31, 2023 and 2021.2022.

 

Stock-based compensation

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

 

For non-employee stock option based awards, the Company follows ASU 2018-7, which substantially aligns share based compensation for employees and non-employees.

Net income (loss) per share of common stockCommon Stock

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares during the period. Diluted net income (loss) per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. At November 30, 2022,August 31, 2023, the Company had 5,600,0005,375,000 options and 250,000,000 shares of preferred stock outstanding, all of which were potentially dilutive securities. At November 30, 2021,August 31, 2022, the Company had no5,300,000 options and 250,000,000 shares of preferred stock outstanding, all of which were potentially dilutive securities outstanding related to common stock.securities. 

 

The following table sets forth the computations of basic and diluted lossnet income per common share:

 

Schedule of Basic and Diluted Loss Per Share                
Schedule of net loss per share        
 For the Three Months Ended For the Six Months Ended  For the Three Months Ended 
 November 30, November 30, November 30, November 30,  August 31, 
 2022 2021 2022 2021  2023  2022 
              
Net income $726,900  $28,201  $902,427  $12,162  $154,452  $175,527 
                        
Weighted average basic shares  115,226,893   41,945,881   108,779,476   41,945,881   117,076,949   102,402,140 
Dilutive securities:                        
Convertible preferred stock  250,000,000   -   228,142,077   -   250,000,000   206,521,739 
Stock options  3,706,593   -   4,507,650   -   5,375,000   5,300,000 
Weighted average dilutive shares  368,933,486   41,945,881   341,429,203   41,945,881   255,375,000   211,821,739 
                        
Earnings per share:                        
Basic $0.01  $0.00  $0.01  $0.00  $0.00  $0.00 
Diluted $0.00  $0.00  $0.00  $0.00  $0.00  $0.00 

F-10F-11

 

 REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

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

 

Lease Accounting

In February 2016, the FASB issued ASU No. 2016-02, Leases(“ASU 2016-02”), which requires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance (ASC Topic 840). Under the new guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense is generally is flat (straight-line) throughout the life of the lease. For finance leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2019. The adoption of ASC Topic 842 did not have a material impact on the Company’s consolidated financial statements.

 

The Company’s renewed lease for its corporate headquarters has beencommencing December 1, 2022, under lease agreements classified as an operating lease. Please see Note 1011“Commitments‘Commitments and Contingencies” –Contingencies’ under “Leases” below for more information about the Company’s leases.

 

Segment Reporting

The Company follows ASC Topic 280, Segment Reporting. The Company’s management reviews the Company’s consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and has determined that the Company’s reportable segments are: (a) the sale of hearing protection and hearing enhancement products, and (b) the sale of hair care and skin care products. See Note 1415 – “BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION” for more information about the Company’s reportable segments.

Reclassifications

Certain reclassifications have been made to the prior year data to conform with the current period’s presentation specifically, the accounts payable have been separated from the accrued expenses, to conform with the current period’s presentation.

F-11

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

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

 

Recently Issued Accounting Pronouncements

 

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer must be separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal year beginning on June 1, 2024. Early adoption is permitted, subject to certain limitations. The Company is evaluating the potential impact of adoption on its consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in purchase accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company opted to adopt this ASU as of June 1, 2022. The adoption of the guidance did not have a material impact on the accompanying consolidated financial statements.

 

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

F-12

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

 

Note 3 – Accounts Receivable, net

 

Accounts receivable, consisted of the following:

Schedule of accounts receivable      
  August 31,
2023
  May 31,
2023
 
Customers Receivable $529,656  $345,264 
Merchant Processor Receivable  76,477   167,232 
Less: Allowance for Doubtful Debts  (150,247)  (95,480)
 Accounts receivable, net $455,886  $417,016 

Schedule of accounts receivable        
  November 30,
2022
  May 31,
2022
 
Customers Receivable $496,571  $115,741 
Merchant processor receivable  410,549   - 
Less: Allowance for doubtful debts  (115,795)  (9,820)
  $791,325  $105,921 

The Company recorded bad debt expense of $105,97552,866 and $0 during the three months ended November 30,August 31, 2023 and 2022, and 2021, respectively. The Company recorded bad debt expense of $105,975 and $2,316 during the six months ended November 30, 2022 and 2021, respectively.

 

Note 4 – Inventory, net

 

Inventory consisted of the following:

Schedule of Inventory      
  August 31,
2023
  May 31,
2023
 
Finished Goods $1,878,669  $1,198,218 
Raw Materials  191,299   113,646 
 Inventory, net $2,069,968  $1,311,864 

Schedule of Inventory        
  November 30,
2022
  May 31, 2022 
Finished Goods $1,804,534  $29,249 
Raw Materials $309,144  $294,139 
 Inventory, net $2,113,678  $323,388 

At November 30, 2022August 31, 2023 and May 31, 2022,2023, inventory held at third party locations amounted to $10,406114,630 and $16,9400, respectively. At November 30, 2022August 31, 2023 and May 31, 2022,2023, inventory in-transit amounted to $256,510345,628 and $0135,482, respectively.

F-12

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSDuring the three months ended August 31, 2023, the Company did not record any allowance on slow moving inventory that would be included in cost of sales. As of August 31, 2023, there was noslow moving inventory.

NOVEMBER 30, 2022

 

Note 5 – Property and Equipment

 

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

 

Schedule of Property and Equipment                 
 Estimated Life November 30,
2022
 May 31,
2022
  Estimated Life August 31,
2023
 May 31,
2023
 
Furniture and Fixtures 5 years $5,759  $5,759  5 years $5,759  $14,598 
Computer Equipment 3 years  22,130   17,392  3 years  30,968   33,146 
Office equipment 5-10 years  8,838   - 
Plant Equipment 5-10 years  154,527   45,128  5-10 years  216,738   165,778 
Automobile 5 years  15,000   -  5 years  15,000   15,000 
Less: Accumulated Depreciation    (46,627)  (39,134)  (68,904)  (71,059)
   $159,627  $29,145 
Total Property and Equipment, net $199,561  $157,463 

Depreciation expense amounted to $3,9708,862 and $2,1283,523 for the three months ended November 30,August 31, 2023 and 2022, and 2021, respectively. Depreciation expense amounted to $7,493 and $4,475 for the six months ended November 30, 2022 and 2021, respectively.

F-13

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 6 – Intangible Assets

The Company acquired intangible assets through the asset purchase agreement.Business Combination. (See Note 12)13). These intangible assets consisted of the following:

Schedule of intangible assets        
  Estimated Life August 31,
2023
  May 31,
2023
 
Licensing rights 3 years $11,945  $11,945 
Customer Relationships 3 years  70,000   70,000 
Trade Names 10 years  275,000   275,000 
Website 5 years  100,000   100,000 
Less: Accumulated Amortization    (93,646)  (74,271)
Total Intangible Assets, net   $363,299  $382,674 

Goodwill arising through the business combination was $2,152,215 at August 31, 2023 (see Note 13).

 

Schedule of intangible assets          
  Estimated Life November 30,
2022
  May 31,
2022
 
Licensing rights 3 years $11,945  $       - 
Customer Relationships 3 years  70,000   - 
Trade Names 10 years  275,000   - 
Website 5 years  100,000   - 
Less: Accumulated Amortization    (35,522)  - 
    $421,423  $- 

Amortization expense amounted to $19,37619,375 and $016,146 for the three months ended November 30,August 31, 2023 and 2022, and 2021, respectively. Amortization expense amounted to $35,522 and $0 for the six months ended November 30, 2022 and 2021, respectively.   

F-13

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

Note 7 – Notes Payable

During the year ended May 31, 2020, a commercial bank granted to the Company a loan in the amount of $150,000, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The EIDL loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is payable in installments of $731 per month, beginning May 18, 2021 until May 13, 2050. The Company has to maintain a hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company used the loan proceeds for qualifying expenses. The Company received a loan forgiveness for $10,000 during the year ended May 31, 2022. During the year ended May 31, 2022, the Company received additional $10,000 of borrowings under the program. The Company recorded accrued interest of $14,206 and $11,684, as of November 30, 2022 and May 31, 2022, respectively. The Company has not paid two installments of the loan as of November 30, 2022 and the loan is currently in default.

On February 7, 2021, a commercial bank granted to the Company a loan in the amount of $6,300, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Second Draw Paycheck Protection Program (the “PPP”) of the CARES Act. The PPP loan, which is evidenced by a note dated February 7, 2021, bears interest at an annual rate of 1.0% and matures on February 6, 2026. The Note may be prepaid without penalty, at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company used the loan proceeds for qualifying expenses. The Company’s borrowings under the loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,” as defined in the CARES Act. The Company’s indebtedness, after any such loan forgiveness, is payable in 54 equal monthly installments commencing on September 7, 2021, with all amounts due and payable by the maturity. The Company recorded accrued interest of $111 and $75, as of November 30, 2022 and May 31, 2022, respectively. The Company has not paid any installment of the loan as of November 30, 2022 and the loan is currently in default.

During the six months ended November 30, 2022 the Company obtained insurance financing of $53,337 on the general liability and excess liability insurance policies. The loan has a finance charge of $3,164 and is payable in 10 monthly installments of $5,650 each beginning November 1, 2022. As of November 30, 2022, no installment has been paid and the loan is currently in default. As of November 30, 2022 outstanding balance of the loan amounted to $53,337.

Schedule of notes payable        
  November 30,
2022
  May 31,
2022
 
Insurance Financing $53,337  $- 
Second Draw Paycheck Protection Program (PPP- 2)  6,300   6,300 
Economic Injury Disaster Loan Program (EIDL)  149,051   150,000 
Total  208,688   156,300 
Less: Current portion  (208,688)  (156,300)
Non-current portion $-  $- 

F-14

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

Note 87Other Current Liabilities

Other current liabilities comprised of the following:

Schedule of other current liabilities      
  August 31,
2023
  May 31,
2023
 
Credit Cards $12,308  $833 
Accrued Interest  10,904   10,343 
Royalty Payment Accrual  34,062   8,792 
Sales Tax Payable  227,894   240,559 
Other Accrued Expenses  456,097   17,464 
Affiliate Accrual  26,920   27,673 
Total Other Current Liabilities $768,185  $305,664 

 

Schedule of other current liabilities        
  November 30,
2022
  May 31,
2022
 
Credit Cards $21,768   2,966 
Equipment Payable, current  3,300   3,300 
Lease Liability  -   47,166 
Customer Deposits  360,046   16,523 
Royalty Payment Accrual  33,809   - 
Affiliate Accrual  154,704   - 
Income Tax Accrual  335,797   - 
Accrued Payroll  100,401   - 
Sales Tax Payable  305,585   - 
Accrued Expenses  120,774   - 
Accrued Interest and Other  14,311   19,583 
Other current liabilities $1,450,495  $89,538 

F-14

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 8 – Equipment Payable

During the fiscal year ended May 31, 2019, the Company purchased a forklift under an installment purchase plan. The loan amount is $16,500 payable in 60 monthly installment payments of $317 comprising of principal payment of $275 and interest payment of $42. At August 31, 2023 and May 31, 2023, the balance outstanding on the loan was $1,375 and $2,200, respectively, of which the $1,375 balance is payable within the next year. The Company recorded an interest expense of $125 and $125, associated with the equipment financing during the three months ended August 31, 2023 and 2022, on the loan in the accompanying unaudited consolidated financial statements.

The amounts of loan payments due within the next fiscal year ending May 31, are as follows:

Schedule of loan payment due   
  Total 
2024 $1,375 
Equipment Payable, Net $1,375 

Note 9 – Notes Payable

During the year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $150,000, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is payable in installments of $731 per month, beginning May 18, 2021 until May 13, 2050. The Company has to maintain a hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company used the loan proceeds for qualifying expenses. During the year ended May 31, 2022, the Company received additional $10,000 of borrowings under the program. The Company received a loan forgiveness for $10,000 during the year ended May 31, 2022. The Company recorded accrued interest of $10,904 and $10,343, as of August 31, 2023 and May 31, 2023, respectively.

During the three months ended August 31, 2023 the Company continued to pay its insurance financing loan, which had a total principal of $53,337 for the general and excess liability insurance policies. The loan has a finance charge of $3,164 and is payable in 10 monthly installments of $5,650 each beginning November 1, 2022. Through the three months ended August 31, 2023, nine installments have been paid and the outstanding balance of the loan amounted to $5,334.

Schedule of notes payable      

Notes Payable as of

 August 31,
2023
  May 31,
2023
 
Insurance Financing $5,334  $21,335 
Financing Charges  -   1,253 
Economic Injury Disaster Loan Program (EIDL)  150,000   150,000 
Total  155,334   172,588 
Less: Current portion  (155,334)  (172,588)
Non-current portion $-  $- 

F-15

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023


Note 910Stockholders’ Equity

Shares Authorized

On June 13, 2022,As of August 31, 2023, the Company amended its amended and restated certificate of incorporation to increase the number of authorized common stock, par value $0.0001 common stock per share, from 100,000,000 to 450,000,000 and to increase the number of authorized preferred stock, par value $0.0001 per share, from 20,000,000 to 300,000,000. On November 30, 2022, the authorized capital of the Company consistedconsists of 450,000,000 shares of common stock, par value $0.0001 per share and 300,000,000 shares of preferred stock, par value $0.0001 per share.

 

Preferred Stock

 

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

 

During the six monthsfiscal year ended November 30, 2022,May 31, 2023, the Company issued 250,000,000 shares of non-voting Series A Preferred Stock, which are convertible into shares of Company common stockCommon Stock on a one-to-one ratio, pursuant to the Asset Purchase Agreement (See Note 12)13 and Common Stock section below). These 250,000,000 shares of non-voting Series A Preferred Stock were valued at the fair market value of $3,100,000. at issuance.

The holders of shares of Series A Preferred Stock shall have no rights to dividends with respect to such shares. No dividends or other distributions shall be declared or paid on the Common Stock unless and until dividends at the same rate shall have been paid or declared and set apart upon the Series A Preferred Stock, based upon the number of shares of Common Stock into which the Series A Preferred Stock may then be converted. Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive out of the assets of the Company the sum of $0.0001 per share before any payment or distribution shall be made on our shares of Common Stock. The Series A Preferred Stock shall not be subject to redemption at the option, election or request of the CorporationCompany or any holder or holders of the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible at the option of the holder thereof, at any time after the second anniversary of the date of the first issuance of the shares of Series A Preferred Stock into one fully paid and nonassessable share of Common Stock provided, however, that the holder may not convert that number of shares of Series A Preferred Stock which would cause the holder to become the beneficial owner of more than 5% of the Corporation’sCompany’s Common Stock as determined in accordance with Sections 13(d) and (g) of the Securities and Exchange Act of 1934 and the applicable rules and regulations thereunder.

 

As of November 30, 2022,August 31, 2023 and May 31, 2023, 250,000,000 shares of preferred stockPreferred Stock were issued and outstanding.

 

No shares of preferred stock were issued and outstanding as of May 31, 2022.

F-15F-16

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

Note 10 – Stockholders’ Equity (continued)

Common Stock

 

As of November 30, 2022,August 31, 2023, 116,556,165117,076,949 shares of common stock were issued and outstanding. 

 

During the six months ended November 30, 2022, the Company issued 73,183,893 shares of common stock, valued at $907,480, as consideration pursuant to the Asset Purchase agreement (See Note 12).

During the six months ended November 30, 2022, the Company sold 1,426,391 shares of common stock at $0.23 per share for a total of $328,050, under several private placement agreements.

No shares of common stockCommon Stock were issued during the six monthsthree month period ended November 30, 2021.August 31, 2023.

 

Stock Options

 

The Board of Directors approved the Company’s 2022 Equity Incentive Plan (the “Plan”) on March 21, 2022. Under the Plan, equity-based awards may be made to employees, officers, directors, non-employee directors and consultants of the Company and its Affiliates (as defined in the Plan) in the form of (i) Incentive Stock Options (to eligible employees only); (ii) Nonqualified Stock Options; (iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any combination of the foregoing. The Plan will terminate upon the close of business on the day next preceding March 21, 2032, unless terminated earlier in accordance with the terms of the Plan. The Board serves as the Plan administrator and may amend or terminate the Plan without stockholder approval, subject to certain exceptions.

 

The total number of shares initially authorized for issuance under the Plan was 10.0 million shares. The Plan provides for an annual increase on April 1 of each calendar year, beginning in 2022 and ending in 2031, subject to Board approval prior to such date. Such increase may be equal to the lesser of (i) 4% of the total number of shares of the Company’s common stock outstanding on May 31 of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Board. The number of shares authorized for issuance under the Plan will not change unless the Board affirmatively approves an increase in the number of shares authorized for issuance prior to April 1 of the applicable year. Shares surrendered or withheld to pay the exercise price of a stock option or to satisfy tax withholding requirements will not be added back to the number of shares available under the Plan. To the extent that any shares of common stock awarded or subject to issuance or purchase pursuant to awards under the Plan are not delivered or purchased, or are reacquired by the Company, for any reason, including a forfeiture of restricted stock or failure to earn performance shares, or the termination, expiration or cancellation of a stock option, or any other termination of an award without payment being made in the form of shares of common stock will be added to the number of shares available for awards under the Plan. The number of shares available for issuance under the Plan will be adjusted for any increase or decrease in the number of outstanding shares of common stock resulting from payment of a stock dividend on common stock, a stock split or subdivision or combination of shares of common stock, or a reorganization or reclassification of common stock, or any other change in the structure of shares of common stock, as determined by the Board. Shares available for awards under the Plan will consist of authorized and unissued shares.

Two types of options may be granted under the Plan: (1) Incentive Stock Options, which may only be issued to eligible employees of the Company and are required to have exercise price of the option not less than the fair market value of the common stock on the grant date, or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110% of the fair market value of the common stock on the grant date; and (2) Non-qualified Stock Options, which may be issued to participants under the Plan and which may have an exercise price less than the fair market value of the common stock on the grant date, but not less than par value of the stock.

The Board may grant or sell restricted stock to participants (i.e., shares that are subject to a subject to restrictions or limitations as to the participant’s ability to sell, transfer, pledge or assign such shares) under the Plan. Except for these restrictions and any others imposed by the Board, upon the grant of restricted stock, the recipient generally will have rights of a stockholder with respect to the restricted stock. During the applicable restriction period, the recipient may not sell, exchange, transfer, pledge or otherwise dispose of the restricted stock. The Board may also grant awards of common stock to participants under the Plan, as well as awards of performance shares, which are awards for which the payout is subject to achievement of such performance objectives established by the Board. Performance shares may be settled in cash.

F-17

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 10 – Stockholders’ Equity (continued)

Each equity-based award granted under the Plan will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the Board may determine, consistent with the provisions of the Plan.

Upon the occurrence of a change in control, unless otherwise provided in an award agreement: (i) all outstanding stock options will become immediately exercisable in full; (ii) all outstanding performance shares will vest in full as if the applicable performance conditions were achieved in full, subject to certain adjustments, and will be paid out as soon as practicable; and (iii) all restricted stock will immediately vest in full. The Plan defines a change in control as (i) the adoption of a plan of merger or consolidation of the Company with any other corporation or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the approval by the Board of an agreement providing for the sale or transfer (other than as security for obligations of the Company) of substantially all the assets of the Company; or (iii) in the absence of prior Board approval, the acquisition of more than 20% of the Company’s voting capital stock by any person within the meaning of Rule 13d-3 under the Exchange Act (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company).

Subject to the Plan’s terms, the Board has full power and authority to determine whether, to what extent and under what circumstances any outstanding award will be terminated, canceled, forfeited or suspended. Awards to that are subject to any restriction or have not been earned or exercised in full by the recipient will be terminated and canceled if such recipient is terminated for cause, as determined by the Board in its sole discretion.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.

The Company utilizes the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

Pursuant to the Plan, on May 10, 2022, the Company issued to two Company officers non-statutory stock options to purchase, in the aggregate, up to 5,300,000 shares of its Common Stock, at an exercise price of $0.09 per share valued at $477,000 and expiring on April 20, 2032. The options vest over time with 25% of the options vesting on September 1, 2022 and thereafter vesting 1/24th on the 1st of every month. 1,656,2502,890,625 of the options were vested as of November 30, 2022. August 31, 2023.

The Company computed the aggregate grant date fair value of $477,000using the black-scholesBlack-Scholes option pricing model, which is being recorded as stock-based compensation expense over the vesting period. During the three months ended August 31, 2023 and 2022, the Company recorded stock-based compensation expense of $51,107 and $97,283, respectively, for these options, in the accompanying unaudited consolidated financial statements.

F-18

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 10 – Stockholders’ Equity (continued)

 

Pursuant to the Plan, on November 1, 2022, the Company issued non-statutory stock options, to ana former executive officer of the Company, to purchase, in the aggregate, up to 300,000 shares of its Common Stock, at an exercise price of $0.20 per share valued at approximately $60,000 and expiring on October 31, 2032. The options vest over time with 25% of the options vesting on January 30, 2023 and thereafter vesting 1/33rd on the 1st of every month. None of these options were75,000 shares vested as of November 30, 2022.January 29, 2023, and the remaining 225,000 were forfeited in April 2023 when the executive officer left the Company. The Company computed the aggregate grant date fair value of $60,090the 75,000 vested options using the black-scholesBlack-Scholes option pricing model which is being recorded as stock-based compensation expense over the vesting period.

During the three months ended November 30, 2022 and 2021, the Company recorded a stock-based compensation expense of $26,862 and $0, respectively, for these options, in the accompanying consolidated financial statements. During the six months ended November 30, 2022 and 2021, the Company recorded a stock-based compensation expense of $124,145 and $0, respectively, for these options, in the accompanying consolidated financial statements.$15,000.

 

The following table summarizes the activity relating to the Company’s stock options held by Officers:executive officers: 

Schedule of stock option activity            
  Number of Options  Weighted Average Exercise Price  Weighted Average Remaining Term 
          
Outstanding at June 1, 2022  5,300,000  $0.09   9.42 
Granted  300,000   0.20   9.93 
Exercised  -   -   - 
Outstanding at November 30, 2022  5,600,000  $0.10   9.45 
Less: Unvested at November 30, 2022  (3,943,750)  0.10   9.46 
Vested at November 30, 2022  1,656,250  $0.09   9.42 

F-16

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

Schedule of summarizes relating to the company’s stock         
  Number of Options  Weighted Average Exercise Price  Weighted Average Remaining Term 
          
Outstanding as May 31, 2022  5,300,000  $0.09   10.0 
Granted  300,000  $0.20   9.68 
Less: Forfeited  (225,000) $0.20   9.68 
Outstanding as May 31, 2023  (5,375,000) $0.09   8.92 
Granted  -   -   - 
Less: Forfeited  -   -   - 
Less: Unvested at August 31, 2023  (2,484,375) $0.09   8.67 
Vested at August 31, 2023  2,890,625  $0.09   8.67 

Note 1011Commitments and contingenciesContingencies

 

Leases

 

As discussed in Note 2 above, the Company adopted ASU No. 2016-02, Leases on June 1, 2019, which require lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. The Company entered into a lease agreement in connection with its office and warehouse facility in California under an operating lease on December 1, 2019 for 3 years. The lease expired onleases. In November 30, 2022. On November 9, 2022, the Company entered into an extension of its lease for a new lease agreement for two years, commencing onyear term beginning December 1, 2022 and expiring on November 30, 2024.2022. The Company has to pay a monthly base rent of $6,098is $6,098 per month for the first twelve monthsyear and $6,342 forwill increase by a certain amount the next twelve months, under the lease agreement.following year.

 

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

 

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

 

F-19

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 11 – Commitments and Contingencies (continued)

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

 

Pursuant to the standard, theThe Company computed an initial lease liability of $131,970 for the new lease agreement and an initial ROU asset in the same amount which will bewas recorded on the books at the commencement of the lease on December 1, 2022. A lease term of two years and a discount rate of 12% was used. During the three months ended November 30,August 31, 2023 and 2022, and 2021, the Company recorded a lease expense in the amount of $23,55918,659 and $23,559, respectively, for the old lease which expired on November 30, 2022. During the six months ended November 30, 2022 and 2021, the Company recorded a lease expense in the amount of $47,117 and $47,117, respectively, for the old lease which expired on November 30, 2022.respectively. As of November 30, 2022,August 31, 2023, the lease liability balance was $087,208 and the right of use asset balance was $086,111. A lease term of three years and a discount rate of 12% was used.

 

Supplemental balance sheet information related to leases was as follows:

Schedule of supplemental balance sheet information      
  August 31,
2023
  May 31,
2023
 
Assets        
Right of use assets $131,970  $131,970 
Accumulated reduction  (45,859)  (30,125)
Operating lease assets, net $86,111  $101,845 
         
Liabilities        
Lease liability $131,970  $131,970 
Accumulated reduction  (44,762)  (29,394)
Total lease liability, net  87,208   102,576 
Current portion  (68,558)  (65,824)
Non-current portion $18,650  $36,752 

Maturities of operating lease liabilities were as follows as of August 31, 2023:

Schedule of maturities of operating lease liabilities   
Operating Lease   
2024 $50,456 
2025  36,752 
Total $87,208 
Less: Imputed interest $- 
Present value of lease liabilities $87,208 

  

Schedule of Supplemental balance sheet information        
  November 30,
2022
  May 31, 2022 
Assets      
Right of use assets $     -  $235,748 
Accumulated reduction  -   (190,295)
Operating lease assets, net $-  $45,453 
         
Liabilities        
Lease liability $-  $235,748 
Accumulated reduction  -   (188,582)
Total lease liability, net  -   47,166 
Current portion  -   (47,166)
Non-current portion $-  $- 

F-17

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

Contingencies

 

On November 23, 2020, the Company was served a copy of a complaint filed by Jacksonfill, LLC in the Fourth Circuit Court for Duval County, Florida. The complaint allegesalleged breach of Agreement for non-payments for certain products against the Company. The allegations arise from alleged discrepancies discoveredOn September 2, 2023, Jacksonfill, LLC and the Company settled the dispute in the Circuit Court of the Fourth Judicial Circuit in Duval County, Florida per a binding settlement agreement. There is no admission of liability by the Company and the Company has agreed to pay Jacksonfill, LLC $125,000 in connection with the settlement. Currently, the Company has recorded a liability of $204,182 to provide for the reserve of the amount in question, which is in excess of what the settlement agreement provides. The adjustment will be made in the manufacturing of certain product. The Company has retained counsel and intends to vigorously defend the allegations. The product was delivered to the Company. However, the Company believes that the product was defective. The amount of the claim of $204,182 has been recorded as accounts payable, in the accompanying financial statements as of November 30, 2022.subsequent reporting period.

F-20

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

 

Note 1112Related Party Transactions

 

The Company’s Chief Executive Officer, Jeff Toghraie, is the managing director of Intrepid Global Advisors (“Intrepid”). Intrepid has, from time to time, provided advances to the Company for working capital purposes. At November 30, 2022August 31, 2023 and May 31, 2022,2023, the Company had aamounts payable to the officerIntrepid of $136,84458,980 and $25,452124,378, respectively. These advances are due on demandwere short-term in nature and non-interest bearing. Additionally, pursuant to a voting agreement, effective June 16, 2022 as amended effective November 7, 2022, with AXIL and Intrepid Global Advisors, we are subject to certain limitations on our ability to sell our capital stock until June 2024. 

 

During the sixthree months period ended November 30, 2022,August 31, 2023, the Company made purchasespaid $58,000 as consulting fee for product development to Weston T. Harris, a major stockholder of $20,737 from certain related parties. During the three months period ended November 30, 2022,AXIL, and the Company made purchases ofalso paid $12,43435,805 from certain related parties.to his sons as compensation for services relating to packaging design and affiliate marketing during the same period. 

 

During the six months period ended November 30,On June 16, 2022, the Company paid $118,114and its wholly owned subsidiary Reviv3 Acquisition Corporation completed the acquisition of both (i) the hearing protection business of AXIL, consisting of ear plugs and ear muffs, and (ii) AXIL’s ear bud business pursuant to the Asset Purchase Agreement, dated May 1, 2022, as consulting fee to a major shareholderamended on June 15, 2022, by and among the Company, Reviv3 Acquisition Corporation, AXIL and certain stockholders of Axil, which is the largest shareholderAXIL. One of the Company . The Company also paid $42,630 to the sonsstockholders of AXIL is Intrepid Global Advisors, Inc. As of August 31, 2023, Intrepid Global Advisors, Inc. held no outstanding common stock of AXIL and 19.50% of the major shareholder as compensation for services, during the six months period ended November 30, 2022. During the three months period ended November 30, 2022, the Company paid $80,779 as consulting fee to a major shareholder of Axil. The Company also paid $36,389 to the sonsoutstanding common stock of the major shareholder as compensation for services, during the three months period ended November 30, 2022.

During the six months period ended November 30, 2022, the Company paid $72,484 as consulting fee to the son-in-law of a major shareholder of Axil. The Company paid $55,181 to the son of the major shareholder in commissions and contractor fee, during the six months period ended November 30, 2022. The Company also paid $8,428 to the daughter of the major shareholder as compensation for services, during the six months period ended November 30, 2022. During the three months period ended November 30, 2022, the Company paid $39,150 as consulting fee to the son-in-law of a major shareholder of Axil. The Company paid $32,221 to the son of the major shareholder in commissions and contractor fee, during the three months period ended November 30, 2022. The Company also paid $4,500 to the daughter of the major shareholder as compensation for services, during the three months period ended November 30, 2022. Company.

 

Note 1213Asset Purchase AgreementBusiness Combination

On June 16, 2022, the Company completed the acquisition of certain assets of Axil & Associated Brands Corp. (“Axil”),AXIL, a Delaware corporation, pursuant to the Asset Purchase Agreement dated May 1, 2022 and amended on June 15, 2022 and September 8, 2022. by and among the Company, its subsidiary, AxilAXIL, and certain of Axil’sAXIL’s stockholders, providing for the acquisition of Axil’sAXIL’s hearing protection business and ear bud business. The business constituted substantially all of the business operations of AxilAXIL but did not include Axil’sAXIL’s hearing aid line of business.

 

One of the stockholders of AxilAXIL is Intrepid Global Advisors.Intrepid. As of June 16, 2022, Intrepid held 4.684.68%% of the outstanding common stock of AxilAXIL and 22.3322.33%% of the outstanding common stockCommon Stock of the Company. As of August 31, 2023, Intrepid held no outstanding common shares of AXIL, as they were distributed with the Asset Purchase Agreement. Jeff Toghraie, Chairman and Chief Executive Officer of the Company, is a managing director of Intrepid.

 

As consideration for the Asset Purchase, AxilAXIL received a total of 323,183,893 323,183,893shares comprised of (a) 73,183,893shares of the Company’s common stockCommon Stock and (b) 250,000,000shares of non-voting Series A Preferred Stock, which are convertible into shares of Company common stockCommon Stock on a one-to-one ratio. The Preferred Shares may not be converted or transferred for a period of two years following the closing of the acquisition. Thereafter, no holder of Preferred Shares may convert such shares into a number of shares of Company common stockCommon Stock that would cause the holder to beneficially own more than 5% of the Company’s common stock,Common Stock, as determined in accordance with Sections 13(d) and (g) of the Securities Exchange Act of 1934 (the “Exchange Act”).Act. The purchase price was computed to be $4,007,480based on a fair value of $0.0124per share on the date of acquisition.

 

F-18

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022

The Company is utilizing the AxilAXIL assets to expand into the hearing enhancement business through its newly incorporated subsidiary.

 

The acquisition is accounted for by the Company in accordance with the acquisition method of accounting pursuant to ASC 805 “Business Combinations” and pushdown accounting is applied to record the fair value of the assets acquired by the Company. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired will bewas allocated to goodwill.

 

F-21

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 13 – Business Combination (continued)

The following is a summary of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

Schedule of estimated fair value of the assets acquired   
Cash $1,066,414 
Accounts receivable  227,786 
Inventory  1,342,461 
Prepaid expenses  62,452 
Other assets  108,030 
Accounts payable  (285,665)
Contract liabilities  (1,043,332)
Other current liabilities  (79,826)
Net tangible assets acquired $1,398,320 
     
Identifiable intangible assets    
Licensing rights $11,945 
Customer relationships  70,000 
Tradenames  275,000 
Website  100,000 
Total Identifiable intangible assets $456,945 
     
Consideration paid $4,007,480 
Total net assets acquired  1,855,265 
Goodwill purchased $2,152,215 

Schedule of estimated fair value of the assets acquired    
Cash $1,066,414 
Accounts receivables  227,786 
Inventory  1,342,461 
Prepaid expenses  62,452 
Other assets  108,030 
Accounts payables  (285,665)
Deferred revenues  (1,043,332)
Other liabilities  (79,826)
Net tangible assets acquired $1,398,320 
     
Identifiable intangible assets    
Licensing rights $11,945 
Customer relationships  70,000 
Tradenames  275,000 
Website  100,000 
     
Total Identifiable intangible assets $456,945 
     
Consideration paid $4,007,480 
Total net assets acquired  1,855,265 
Preliminary goodwill purchased $2,152,215 

We completed the accounting and preliminary valuations of the assets acquired and liabilities assumed and, accordingly, the estimated fair values are provisional pending the final valuations which will not exceed one year in accordance with ASC 805.

Pro Forma Information (Unaudited)

The unaudited pro forma condensed combined financial statements are based on Reviv3 Procare Company and Axil & Associated Brands Corp.’s unaudited historical consolidated financial statements as adjusted to give effect to the Asset Purchase Agreement. The unaudited pro forma combined statements of operations for the three months and six months ended November 30, 2022 and 2021, for Reviv3 Procare Company and Axil & Associated Brands Corp., give effect to the Asset Purchase Agreement as if it had occurred on June 1, 2022 and 2021, respectively.

 Schedule of proforma information            
  For the Three Months Ended  For the Six Months Ended 
  November 30,  November 30,  November 30,  November 30, 
  2022  2021  2022  2021 
             
Revenue $6,731,999  $5,085,369  $11,650,248  $7,997,583 
Net income (loss) $726,900  $101,945  $863,912  $(118,533)
Earnings (loss) per common share                
Basic $0.01  $0.00  $0.01  $(0.00)
Diluted $0.00  $0.00  $0.00  $(0.00)

The pro forma financial information is not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that result in the future.

Note 1314Concentrations

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable and cash deposits, investments and cash equivalents instruments. The Company maintains its cash in bank deposits accounts. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At November 30, 2022August 31, 2023 and May 31, 2022,2023, the Company held cash of approximately $3,416,8374,309,828 and $123,8714,582,682, respectively, in excess of federally insured limits. The Company has not experienced any losses in such accounts through November 30, 2022.August 31, 2023.

Concentration of Revenue, Accounts Receivable, Product Line, and Supplier – Hair and Skin Care Products

During the three months ended August 31, 2023 hair and skin care product sales to three customers, which each represented over 10% of our total sales, aggregated to approximately 40% of the Company’s net sales at 13%, 12% and 15%. During the three months ended August 31, 2022, there were no sales to any customer, which represented over 10% of our total sales.

During the three months ended August 31, 2023 hair and skin care product sales to customers outside the United States represented approximately 31% to Canada. During the three months ended August 31, 2022, sales to customers outside the United States represented approximately 7% which consisted of 5% from Canada and the balance from several other countries.

F-19F-22

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

 

Concentration of Revenue, Product Line, and Supplier

Note 14 – Concentrations (continued)

During the three months ended November 30, 2022 there were no sales to any customer, which represented over 10% of our total sales. During the three months ended November 30, 2021 sales to one customer, aggregated to approximately 12% of the Company’s net sales. During the six months ended November 30, 2022 there were no sales to any customer, which represented over 10% of our total sales. During the six months ended November 30, 2021 sales to two customers, which each represented over 10% of our total sales, aggregated to approximately 34% of the Company’s net sales at 13%August 31, 2023, hair and 21%.

During the three months ended November 30, 2022, sales to customers outside the United States represented approximately 5% which consisted of 4% sales from Canada and balance 1% from several other countries. During the three months ended November 30, 2021, sales to customers outside the United States represented approximately 27% which consisted of sales of 20% from Canada and 7% from Italy. During the six months ended November 30, 2022, sales to customers outside the United States represented approximately 6% which consisted of 4% sales from Canada and balance 2% from several other countries. During the six months ended November 30, 2021, sales to customers outside the United States represented approximately 16% which consisted of 13% from Canada and 3% from EU.

During the three months ended November 30, 2022,skin care product sales by product line which each represented over 10% of sales consisted of approximately 8617%% from salesales of our ear buds for PSAP (personal sound amplification product)hair shampoo, and hearing protection.28% from sales of hair conditioner, 7% from shampoo and conditioner bundles, 30% from bundle kits and 18% from hair treatment product. During the three months ended November 30, 2021,August 31, 2022, hair and skin care product sales by product line which each represented over 10% of sales consisted of approximately 1411%% from sales of hair shampoo, 34% from sales of hair shampoo and conditioner, and 35% from sale of shampoo, 11% from sale of moisturizer and conditioner, 39% from sales of bundled packages and 18% from sale of introductory kitbundle kits (shampoo, conditioner and treatment spray).During the six months ended November 30, 2022, , sales by product line which each represented over 10% of sales consisted of approximately 85% from sale of our ear buds for PSAP (personal sound amplification product) and hearing protection. During the six months ended November 30, 2021, sales by product line which each represented over 10% of sales consisted of approximately 21% from sale of fragrance shampoo and conditioner, 22% from sales of bundled packages and 29% from sale of introductory kit (shampoo, conditioner and treatment spray).

 

During the sixthree months ended November 30,August 31, sales by product line comprised of the following:

 

Schedule of sales by product line        
  For the Six Months ended November 30, 
  2022  2021 
Ear buds (PSAP)  85%  - 
Other hearing enhancement products  10%  - 
Hair care and skin care products  5%  100%
Total  100%  100%
Schedule of sales by product line        
  For the Three Months ended 
Hair Care Products August 31, 2023  August 31, 2022 
Shampoos and Conditioners  52%  45%

Bundle Kits

  30%  35%
Ancillary Products  18%  20%
Total  100%  100%

At November 30, 2022,August 31, 2023, hair and skin care product’s only accounts receivables from customers that accounted for more than 10% of sales transactions were from three separate customers at 36%, 26%, and 23%. At May 31, 2023, hair and skin care product’s only accounts receivable from threeone customer accounted for more than 310% customers represented approximately 71% at 48%, 13% and 10%. At May 31, 2022, accounts receivable from four 4 customers represented approximately 74% at 11%, 12%, 14% and 37%.of sales transactions.

 

The Company purchased inventories and products from one 1 vendor totaling approximately $2.2 million (80% of the purchases) and three 3two vendors totaling approximately $71,24084,000 for the three months ended August 31, 2023. Hair and skin care inventory product purchased from three vendors totaling approximately $297,833, (10095%% of the purchases at 4061%%, 4212%% and 1822%%) during the fiscal year ended May 31, 2023.

Concentration of Revenue, Accounts Receivable, Product Line, and Supplier – Ear Protection and Enhancement Products

AXIL is sold direct-to-consumer, therefore, during the three months ended November 30, 2022 and 2021, respectively.August 31, 2023, 8496.3%% and 0% of our purchases were from international vendors, duringsales was direct to customers. There was no single customer that accounted for greater than 10% of total sales. During the three months ended November 30,August 31, 2022, and 2021, respectively.96.4% of sales was direct to customers, with no single customer that accounted for greater than 10% of total sales in that period.

 

The Company purchased inventories and products from one 1 vendor totaling approximately $2.6 million (73% of purchases) and three 3 vendors totaling approximately $121,859 (96% of the purchases at 27%, 48% and 21%) during the six months ended November 30, 2022 and 2021, respectively. 79% and 0% of our purchases were from international vendors, duringDuring the three months ended November 30,August 31, 2023 AXIL sales to customers outside the United States represented approximately 4.9% which consisted of 4.2% from Canada and the remaining from various countries. During the three months ended August 31, 2022 sales of AXIL product to customers outside the United States represented 4.4% which consisted of 3.9% from Canada and 2021, respectively.the remaining from various countries.

Manufacturing is outsourced primarily overseas via a number of third-party vendors, the largest vendor accounted for 94.6% of all purchases for the three months ended August 31, 2023. For the fiscal year ended May 31, 2023, the two largest vendors accounted for 82% and 10% of all purchases.

F-20F-23

 

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2022AUGUST 31, 2023

Note 14 – Concentrations (continued)

During the three months ended August 31, 2023, AXIL sale of ear buds for PSAP (personal sound amplification product) and hearing protection by product line which each represented over 10% of sales consisted approximately 55.9% ($5.1M) from Ghost Stryke, 11.2% ($11.2M) from Trackr earmuffs and 32.8% ($3.0M) of sales of other Bluetooth and ear buds. During the three months ended August 31, 2022, AXIL sale of ear buds and hearing protection by product line which represented over 10% of sales was 90.7% from Ghost Stryke model GS-X ($5.5M).

During the three months ended August 31, 2023 sales by hearing enhancement and protection products comprised of the following:  

Schedule of sales by product comprised      
  For the three months ended 
  August 31,  August 31, 
Ear Protection & Enhancement Products 2023  2022 
Ghost Stryke  55.9%  90.7%
Trackr Earmuffs  11.2%  8.2%
Other Bluetooth and ear buds  32.8%  1.0%
Accessories, other  0.1%  0.1%
Total  100.0%  100.0%

Note 1415Business Segment and Geographic Area Information

Business Segments

The Company, directly or through its subsidiaries, markets and sells its products and services directly to consumers and through its dealers. In June 2022, the Company acquired a hearing enhancement and hearing protection business. The Company’s determination of its reportable segments is based on how its chief operating decision makers manage the business.

 

F-24

REVIV3 PROCARE COMPANY AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2023

Note 15 – Business Segment and Geographic Area Information (continued)

The Company’s segment information is as follows:

Schedule of segment information        
  Three months ended 
Net Sales August 31, 2023  August 31, 2022 
Hair care and skin care $314,853  $485,236 
Hearing enhancement and protection  5,791,416   3,752,122 
Total net sales $6,106,269  $4,237,358 
         
Operating earnings        
Segment gross profit:        
Hair care and skin care $221,524  $324,105 
Hearing enhancement and protection  4,426,042   2,958,549 
Total segment gross profit $4,647,566  $3,282,654 
Selling and Marketing  3,206,841   1,977,976 
General and Administrative  1,266,968   1,105,277 
Consolidated operating income $173,757  $199,401 
         
Total Assets:        
Hair care and skin care $4,259,041  $781,328 
Hearing enhancement and protection  6,627,525   6,185,244 
Consolidated total assets $10,886,566  $6,966,572 
         
Payments for property and equipment        
Hair care and skin care $-  $- 
Hearing enhancement and protection  50,960   6,400 
Consolidated total payments for property and equipment $50,960  $6,400 
         
Depreciation and amortization        
Hair care and skin care $1,418  $1,423 
Hearing enhancement and protection  26,819   18,246 
Consolidated total depreciation and amortization $28,237  $19,669 

 Schedule of segment information                
  Three months ended November 30,  Six months ended November 30, 
  2022  2021  2022  2021 
Net Sales                
Hair care and skin care $418,734  $493,816  $903,970  $1,333,088 
Hearing enhancement and protection  6,313,265   -   10,065,387   - 
Total net sales $6,731,999  $493,816  $10,969,357  $1,333,088 
                 
Operating earnings (loss)                
Segment gross profit:                
Hair care and skin care $316,326  $381,016  $640,431  $856,392 
Hearing enhancement and protection  4,722,709   -   7,681,257   - 
Total segment gross profit  5,039,034   381,016   8,321,688   856,392 
Selling and Marketing  3,098,898   269,051   5,076,874   620,673 
General and Administrative  955,141   117,202   2,060,418   255,430 
Consolidated operating income (loss) $984,995  $(5,237) $1,184,396  $(19,711)
                 
Total Assets:                
Hair care and skin care $1,018,083  $1,060,400  $1,018,083  $1,060,400 
Hearing enhancement and protection  9,038,537   -   9,038,537   - 
Consolidated total assets $10,056,620  $1,060,400  $10,056,620  $1,060,400 
                 
Payments for property and equipment                
Hair care and skin care $-  $-  $-  $- 
Hearing enhancement and protection  54,400   -   54,400   - 
Consolidated total payments for property and equipment $54,400  $-  $54,400  $- 
                 
Depreciation and amortization                
Hair care and skin care $1,418  $2,128  $2,841  $4,475 
Hearing enhancement and protection  21,928   -   40,174   - 
Consolidated total depreciation and amortization $23,346  $2,128  $43,015  $4,475 

Geographic Area Information

During the three months ended November 30, 2022,August 31, 2023, approximately 9596%% of our consolidated net sales and, during the three months ended November 30, 2021, approximately 73% of our consolidated net sales were to customers located in the U.S. (based on the customer’s shipping address). During the six months ended November 30, 2022, approximately 94% of our consolidated net sales and, during the six months ended November 30, 2021, approximately 84% of our consolidated net sales were to customers located in the U.S. (based on the customer’s shipping address). All Company assets are located in the U.S.

 

Note 1516Subsequent EventsIncome Taxes

We calculated our interim tax provision in accordance with ASC Topic 270, “Interim Reporting,” and ASC Topic 740, “Accounting for Income Taxes.” As the end of each interim quarterly period, we estimate our annual effective tax rate and apply that rate to our ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects of other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.

We recorded an income tax expense of $65,989 and $74,753 for the three months ended August 31, 2023 and 2022, respectively.

The Company solddoes 302,175no shares of common stock for $94,500t have any uncertain tax positions or events leading to be issued at $0.23 per share, under several private placement agreements.uncertainty in a tax position. The Company’s 2020, 2021 and 2022 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 

The following discussionManagement’s Discussion and Analysis of our financial conditionFinancial Condition and resultsResults of operationsOperations should be read in conjunction with, and is qualified in its entirety by, the unaudited consolidated financial statements and related notes thereto included in Item 1 in this Quarterly Report on Form 10-Q.

10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended May 31, 2023 filed with the SEC on August 21, 2023. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky.  Forward-looking statements are often identified by words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions, or words that, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q. See “Forward-Looking Statements” in this Form 10-Q for additional information.

 

Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in herein and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Please see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional information.

 

Overview

 

Reviv3 ProcareThe Company is engaged in the manufacturing, marketing, sale and distribution of high-tech, innovative hearing and audio enhancement and protection products that provide cutting-edge solutions for people with varied applications across many industries and professional quality hair and skin care products under various trademarks and brands. We have adopted and used the trademarks of our products for distribution throughout the United States, Canada, Europe, and Asia pursuant to the terms of twelve exclusive distribution agreements with various parties throughout our targeted market. Our manufacturing operations are outsourced and fulfilled by our co-packers and manufacturing partners. Currently, we produce fifty-one products with eighty separate stock-keeping units (“SKUs”), including hearing protection and ear bud products as a result of our asset acquisition in June 2022, described below, and look to expand our product lines over the next twelve months.

 

On May 1, 2022, Reviv3 Procare Companywe entered into an Asset Purchase Agreement dated May 1, 2022 and amended on June 15, 2022 and September 8, 2022 with Axil & Associated Brands Corp. (“Axil”),AXIL, a Delaware corporation, and a leader in hearing protection and enhancement products, for the acquisition of both the hearing protection business of AxilAXIL consisting of ear plugs and ear muffs, and Axil’sAXIL’s ear bud business. These businesses constituted substantially all of the business operations of Axil. The acquisition did not include Axil’s hearing aid line of business, which Axil will continue to operate following the completion of the acquisition.AXIL. The acquisition was completed subsequently on June 16, 2022. On September 8, 2022, the Company and AxilAXIL entered into an amendment to the asset purchase agreement inAsset Purchase Agreement which eliminated the provision in the Asset Purchase Agreement requiring the Company to effectuate a reverse stock split of its common stockour Common Stock and preferred stock pursuant to the asset purchase agreementAsset Purchase Agreement within a certain period of time.

AXIL creates high-tech hearing and audio innovations to provide cutting-edge solutions for people with varied applications across many industries. AXIL designs, innovates, engineers, manufactures, markets and services specialized systems in hearing enhancement, hearing protection, wireless audio, and communication. AXIL distributes its products through direct-to-consumer eCommerce channels and local, regional, and national retail chains. AXIL serves the sporting goods market, law enforcement, tactical, fitness, outdoor, industrial, sporting, and stadium events. AXIL focuses primarily on US markets, followed by Canada, Europe, Australia, New Zealand, and Africa.

 

As a result of the acquisition of Axil’sAXIL’s assets, the Company has two reportable segments: hair care and skin care, and hearing enhancement and protection.

 

Reviv3 Procare Company was incorporatedThrough our hearing enhancement and protection segment, we design, innovate, engineer, manufacture, market and service specialized systems in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC, which was organized on July 31, 2013. The Company is not,hearing enhancement, hearing protection, wireless audio, and has not been at any time, a shell company. The Company has moved its corporate headquarters to 901 Fremont Avenue, Units 158communication. Through our hair care and 168, Alhambra, California 91803. Its phone number remains the same.skin care segment, we manufacture, market, sell, and distribute professional quality hair and skin care products. 

 

Emerging GrowthThe Company’s overall business strategy is to establish market awareness of our products through our direct-to-consumer campaigns. We believe the increase in awareness will allow the Company to increase distribution and gain customers through our distribution partners’ retail establishments, with the goal of helping us achieve growth in market share and diversify our sales channels.

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

disclose certain executive compensation related items such as comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Results of Operations

For the SixThree months Ended November 30, 2022August 31, 2023 Compared to the SixThree months Ended November 30, 2021August 31, 2022

 

SalesOur results of operations are summarized below .

  Three months ended 
  August 31, 
  2023  2022 
       
 Net Sales $6,106,269  $4,237,358 
 Cost of sales  1,458,703   954,704 
 Gross profit  4,647,566   3,282,654 
 Total operating expenses  4,473,809   3,083,253 
 Income from operations  173,757   199,401 
 Net income after tax $154,452  $175,527 

Net sales for the sixthree months ended November 30,August 31, 2023 and 2022 were $6,106,269 and 2021 were $10,969,357 and $1,333,088,$4,237,358, respectively. SalesNet sales increased by $1,868,911 or 44.1% for the sixthree months ended November 30,August 31, 2023, as compared to the three months ended August 31, 2022, increased by $9,636,269 or 723% over the same comparable period in 2021, primarily due to the acquisitiona combination of the hearing protectionincreased market awareness and hearing enhancement business, pursuanthigher demand of AXIL products attributed to the asset purchase agreement.an increase in online and non-digital marketing campaigns and brand advertising.

 

Cost of sales consistedincludes primarily ofthe cost of product,products and freight-in costs, distribution and merchant fees. Costcosts. For the three months ended May 31, 2023, the overall cost of sales forincreased by $503,999 or 52.8%, as compared to the six months ended November 30,comparable period in 2022, and 2021which was $2,647,669 and $476,696, respectively.primarily due to the relative increase in sales of AXIL products. Cost of sales as a percentage of salesnet revenues for the sixthree months ended November 30, 2022 and 2021August 31, 2023 was 24% and 36%, respectively. Cost23.9% as compared to 22.5% for the comparable period in 2022. The small overall increase in cost of sales, as a percentage of sales, decreasedis primarily attributable to an increase in 2022 for the respective periodshipping costs. The Company will continue to work to increase efficiencies in procurement and logistics, as compared to the same comparable period in 2021, which was primarily due to the acquisition of the new business with higher profit margins.well as focus on enhanced production capabilities.

 

Gross profit for the sixthree months ended November 30,August 31, 2023 and 2022 was $4,647,566 and 2021 was $8,321,688 and $856,392,$3,282,654, respectively. Gross profit as a percentage of sales for the sixthree months ended November 30, 2022,August 31, 2023, was 76%76.1% as compared to 64%77.5% for the same comparable period in 2021.2022. The increasedecrease in gross profit for the sixthree months ended November 30, 2022August 31, 2023 was primarily attributable to the acquisitionexpansion of thecurrent marketing campaigns, costs attributed to new business with higher profit margins.product awareness, and advertising and related promotional activities of AXIL products.

 

Operating expenses consisted of marketing and selling expenses, compensation and related taxes, professional and consulting fees, compensation to employees and other general and administrative expenses.costs. Operating expenses for the sixthree months ended November 30,August 31, 2023 and 2022 were $4,473,809 and 2021 were $7,137,292 and $876,103,$3,083,253, respectively. Operating expenses for the six months ended November 30, 2022, increased in amount by $6,261,189 or 715% over the comparable period in 2021. This increase was primarily due to the costs related to the new business which was acquired during the six months ended November 30, 2022. Operating expenses as a percentage of salesnet revenues for the sixthree months ended November 30, 2022August 31, 2023, were 73.3% compared to 72.8% for the comparable period in 2022. Operating expenses increased by $1,390,556 or 45.1% year-over-year due to an increase in advertising and 2021marketing expenses by $1,170,172 in the AXIL spend for displaying our products through various advertising platforms, and the remaining $220,384 primarily attributable to increases in headcount in the Company’s sales and marketing department related to its AXIL business and other business operating expenses. The increase in marketing and advertising costs, which were 65% and 66%, respectively.aimed at increasing our AXIL customer base was partially offset by a decrease in operating expenses for the Reviv3 products for the three months ended August 31, 2023 as compared to the comparable period in 2022.

 

Other income (expense) consisted of gain on debt forgiveness, interest income, interest expense and other finance charges. Interest incomeIncome from operations for the sixthree months ended November 30,August 31, 2023 and 2022 was $173,757 and 2021$199,401, respectively. The year-over-year decrease in income from operations of $25,644 was $6,541primarily driven from the increase in marketing costs and $18, respectively. Interest expensegeneral and finance changes foradministrative expenses in the six months ended November 30, 2022 and 2021 were $3,213 and $3,145, respectively, primarily due to interest expense related to business credit card financing charges. The Company recognized $50,500 and $35,000 as gain on debt forgiveness during the six months ended November 30, 2022 and 2021, respectively.AXIL business.

 

Provision for income taxes amounted to $335,797$65,989 and $0$74,753 for the sixthree months ended November 30,August 31, 2023 and 2022, and 2021, respectively. The Company recorded a provision during the current period for the net income earned. The Company had net loss in the comparable period in the previous year, hence no provision for taxes was recorded.

 

As a result of the above, we reported a net income of $902,427$154,452 and $12,162$175,527, for the sixthree months ended November 30,August 31, 2023 and 2022, and 2021, respectively.respectively, a decrease of $21,075.

 

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For the Three months Ended November 30, 2022 Compared to the Three months Ended November 30, 2021

Sales for the three months ended November 30, 2022 and 2021 were $6,731,999 and $493,816, respectively. Sales for the three months ended November 30, 2022 increased by $6,238,183 or 1,264% over the same comparable period in 2021, primarily due to the acquisition of the hearing protection and hearing enhancement business, pursuant to the asset purchase agreement.

Cost of sales consisted primarily of cost of product, freight-in costs, distribution and merchant fees. Cost of sales for the three months ended November 30, 2022 and 2021 was $1,692,965 and $112,800, respectively. Cost of sales as a percentage of sales for the three months ended November 30, 2022 and 2021 was 25% and 23%, respectively. Cost of sales as a percentage of sales, for the three months ended November 30, 2022 was comparable to the same period in 2021.

Gross profit for the three months ended November 30, 2022 and 2021 was $5,039,034 and $381,016, respectively. Gross profit as a percentage of sales for the three months ended November 30, 2022, was 75% as compared to 77% for the same comparable period in 2021. Gross profit as a percentage of sales for the three months ended November 30, 2022 was comparable to the same period in 2021.

Operating expenses consisted of marketing and selling expenses, professional and consulting fees, compensation to employees and other general and administrative expenses. Operating expenses for the three months ended November 30, 2022 and 2021 were $4,054,039 and $386,253, respectively. Operating expenses for the three months ended November 30, 2022, increased in amount by $3,667,786 or 950% over the comparable period in 2021. This increase was primarily due to the costs related to the new business which was acquired during the six months ended November 30, 2022. Operating expenses as a percentage of sales for the three months ended November 30, 2022 and 2021 were 60% and 78%, respectively. The decrease in operating expenses as a percentage of sales for the three months ended November 30, 2022, was primarily due to better cost controls.

Other income (expense) consisted of gain on debt forgiveness, interest income, interest expense and other finance charges. Interest income for the three months ended November 30, 2022 and 2021 was $4,704 and $7, respectively. Interest expense and finance changes for the three months ended November 30, 2022 and 2021 were $1,755 and $1,569, respectively, primarily due to interest expense related to business credit card financing charges. The Company recognized $35,000 gain on debt forgiveness during the three months ended November 30, 2021. There was no such gain recognized for the same comparable period in the current year.

Provision for income taxes amounted to $261,044 and $0 for the three months ended November 30, 2022 and 2021, respectively. The Company recorded a provision during the current period for the net income earned. The Company had net loss in the comparable period in the previous year, hence no provision for taxes was recorded.

As a result of the above, we reported a net income of $726,900 and $28,201 for the three months ended November 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

 

We are an emerging growth company and currently engaged in our product sales and development. We have an accumulated deficit andAlthough we earned a net income in the three months ended August 31, 2023, we have incurred operating losses in the past. We currently expect to earn net income during the current fiscal year 2023.ending May 31, 2024. We believe our current cash balances, coupled with anticipated cash flow from operating activities, will be sufficient to meet our working capital requirements.requirements for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. We intend to continue to control our cash expenses as a percentage of expected revenue on an annual basis and thus may use our cash balances in the short-term to invest in revenue growth. As a result of the acquisition of Axil’sAXIL ’s assets, we have generated and expect we will continue to generate sufficient cash for our operational needs, including any required debt payments, for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. Management is focused on growing the Company’s existing product lines, introducing new products, offering, as well as expanding its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands, including those resulting from the purchase of Axil’sAXIL’s assets in June 2022, will likelymay lead to cash utilization at levels greater than recently experienced. We have recently raised capital through the sale of our common stock and may need or choose to raise additional capital in the future. However, theThe Company cannot provide any assurance that it will be able to raise additional capital or obtain necessary financing on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements.

 

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Cash Flows

 

Operating Activities

Net cash provided by operating activities for the three months ended August 31, 2023 was $397,172, attributable to a net income of $154,452, items of adjustments to depreciation and amortization, bad debts, other income and stock based compensation that total $132,210. There were favorable changes in accounts payable and accrued expenses of $168,399, contract and current liabilities of $476,200, and decrease in prepaid expense and other current assets of $315,751. The net decrease in cash was increased by a net decrease in operating assets and liabilities of $849,840 primarily due to increase in accounts receivable and inventory.

 

Net cash flows provided by operating activities for the sixthree months ended November 30,August 31, 2022 was $2,196,195,$807,633, attributable to a net income of $902,427,$175,527, depreciation and amortization of $43,015, provision for bad debts of $105,975,$19,669, stock based compensation expense of $124,145,$97,283, gain on settlement of debt of $50,500, utilization of security deposit to pay rent of $8,385, amortization of prepaid expenses of $3,159 and net change in operating assets and liabilities of $1,059,589$565,654 primarily due to an increasea decrease in inventory increase in prepaid expenses, increase in security deposit and increase in accounts receivablepayable, contract liabilities and other current liabilities, partially offset by an increase in accounts payable, increase in other current liabilities and increase in contract liabilities. Net cash flows used in operating activities for the six months ended November 30, 2021 was $28,060, attributable to a net income of $12,162, depreciation of $4,475, bad debt expense of $2,316, gain on debt forgiveness of $35,000 and net change in operating assets and liabilities of $12,013 primarily due to decrease in accounts receivable and inventory, offset by a decrease in accounts payable and accrued expenses, customer deposits and an increase in prepaid expenses.prepayments.

 

Investing Activities

 

Net cash flows provided byused in investing activities for the sixthree months ended November 30,August 31, 2023 was $50,960 due to the purchase of property and equipment for the AXIL business. For the three months ended August 31, 2022, and 2021 was $1,012,014 and $0 respectively,net cash flows provided were $1,060,014, attributable to the cash received from acquisition of business during the six-month period ended November 30, 2022, partially offset by the purchase of property and equipment during the same period.AXIL business.

 

Financing Activities

 

Net cash flows used in financing activities for the three months ended August 31, 2023 was $117,171, and were for repayment of equipment financing and note payable, and a decrease in the amount due from a related party. Net cash flows provided by financing activities for the sixthree months ended November 30,August 31, 2022, and 2021, amounted to $436,230 and $11,973, respectively. For the six months ended November 30, 2022, we raised capital of $328,050 pursuant to a private placement of shares of common stock, we received $111,392$1,907 as there was an increase in related party loans, we repaid $1,462 towards the EIDL loan and we repaid $1,750 towards equipment financing. For the six months ended November 30, 2021, we received $35,000 in COVID-19 related grants, we repaid advancesamount due from a related party of $21,377 and repaid $1,650 towardsrepayment of equipment financing.

 

As a result ofDuring the activities described above, we recorded a net increase in cash of $3,644,439 for the sixthree months ended November 30,August 31, 2023, the Company has various financed items and has debt outstanding in order to run the business operations. In 2019, the Company purchased a forklift under an installment purchase plan. The loan amount is $16,500 payable in 60 monthly installment payments of $322 comprising of principal payment of $275 and interest payment of $42. At August 31, 2023 and 2022, the balance outstanding on the loan was $1,375 and a decrease in cash$5,500, respectively, of $16,087 forwhich the six months ended November 30, 2021.$1,375 balance is payable within the next year.

 

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As of November 30, 2022,August 31, 2023, we had the followinga secured loansEconomic Injury Disaster Loan outstanding, both of which were administered pursuant to the CARES Act: an Economic Injury Disaster Loan (“EIDL”)Act in the principal amount of $150,000, with a maturity date of which $149,051 remains outstanding and a loan received pursuant to the PPP in the amount of $6,300.May 18, 2050. The Company has paid two installmentscontinues to pay interest on the EIDL loan, but no installmentloan. As of August 31, 2023 the PPP loan has been paid,Company held insurance financing with an outstanding balance of $5,334 on the general liability and as of November 30, 2022 and currently, both loans are in default.excess liability insurance policies.

 

We are dependent on our product sales to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock or of debt securities or entering into credit agreements or other borrowing arrangements with institutions or private individuals, to maintain operations, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. In addition, pursuant to a voting agreement, effective June 16, 2022, as amended effective November 7, 2022, with AxilAXIL and Intrepid Global Advisors, we are subject to certain limitations on our ability to sell our capital stock until June 2024. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. ThereWe do not have any plans to seek additional financing at this time and anticipate that our existing cash equivalents and cash provided by operations will be sufficient to meet our working capital requirements. However, if the need arises for additional cash, there can be no assurance that we will be able to raise the capital we need for our operations on favorable terms, or at all. We have not located any sources for additional funds and may not be able to do so in the future. We expect that we will seek additional financing in the future but may not be able to obtain additional capital when needed or at all, particularly if certain unfavorable economic and market conditions, such as inflation and the impacts of COVID-19 pandemic and supply chain disruptions, persist or worsen and intensify risks of a potential recession or other economic downturn.generate sufficient revenues to fund our operations. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. If we are unsuccessful at generatingraising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations and mayoperations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

 

Off-Balance Sheet Arrangements

 

WeAs of August 31, 2023, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

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Critical Accounting Policies

 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require the most difficult, subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These critical accounting policies relate to revenue recognition, impairment of intangible assets and long-lived assets, inventory, stock compensation, and evaluation of contingencies. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial condition or results of operations.

 

Significant Accounting Policies

See the footnotes to our unaudited consolidated financial statements for the sixthree months ended November 30,August 31, 2023 and 2022, and 2021, included with this quarterly report.Quarterly Report on Form 10-Q for additional discussion of our critical accounting policies and use of estimates.

 

Impact of COVID-19

For over two years, the effects of a new coronavirus (“COVID-19”) and related actions to attempt to control its spread have impacted our business. The impact of COVID-19 on our operating results for the six months ended November 30, 2022 was limited, in all material respects, on our sales in Europe and in China where the Chinese government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Governments around the world have mandated, and in some areas continue to introduce, orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

To the extent that COVID-19 continues or worsens, including challenges arising from the emergence of new variants of COVID-19, governments may extend ongoing restrictions, reimplement previous restrictions or impose additional restrictions. The result of COVID-19 and those restrictions have resulted, and could continue to result, in a number of adverse impacts to our business, including but not limited to additional disruption to the economy and consumers’ willingness and ability to spend, temporary or permanent closures by businesses that consume our products, such as salons and spas, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be challenging to obtain and process raw materials and for supply chains to support our business needs, and individuals could become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations. Further, if our customers’ businesses or incomes are similarly affected, they might delay or reduce purchases from us. The potential effects of COVID-19 also could impact us in a number of other ways including, but not limited to, reductions to our profitability, laws and regulations affecting our business, the availability of future borrowings, the cost of borrowings, and credit risks of our customers and counterparties.

Given the evolving health, economic, social, and governmental environments, the potential impact that COVID-19 could have on our business remains uncertain and could be significant.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required forAs a smaller reporting companies.company, we are not required to provide the information required by this Item 3.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as thatsuch term is defined in RuleRules 13a-15(e), promulgated by and 15d-15(e) under the SEC pursuant to the Securities Exchange Act, of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and proceduresthat are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms, and that such information is accumulated and communicated to our management, including the principal executive officerour Chief Executive Officer (“CEO”) and principal financial officer,Principal Executive Officer, and Chief Financial Officer (“CFO”) and Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management,We conducted an evaluation, under the supervision and with the participation of our CEO and CFO, of the principal executive officereffectiveness of the design and principal financial officer, evaluatedoperation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. August 31, 2023. Based on this evaluation of disclosure controls and procedures as of August 31, 2023, our assessment, our principal executive officerCEO and principal financial officerCFO concluded that as of November 30, 2022, our disclosure controls and procedures were not effective.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and the Board regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of August 31, 2023 using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission Internal Control-Integrated Framework issued in 2013. Based on the assessment, our management has concluded that as of August 31, 2023, our internal control over financial reporting was not effective based on those criteriacriteria.  .

Remediation

The Company plans to initiate measures to improve the effectiveness of the internal controls over financial reporting and disclosure controls and procedures. We are currently working with a third-party to enhance the reporting in our accounting systems, as well as increase the level of review when any non-routine accounting entry is proposed. The Company hired additional accounting personnel to oversee the financial close and reporting process. The Company plans to hire additional staff to aid in segregation of duties to continue to improve our internal controls in the coming fiscal year. We have also started to develop an internal control structure and identify key procedures for financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002 and we are currently in the process of documenting our internal control policies and procedures. We have adopted written policies and procedures that are being distributed to employees for review and approval by the Board, and should be fully implemented during the fiscal year ending May 31, 2024. In addition, the company has adopted controls related to corporate governance, including a Code of Business Conduct and Ethics that applies to all of our employees, including our CEO, CFO, and Board.  

 

Changes in internal control over financial reporting

 

There werehas been no changeschange in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act that occurred during the fiscal quarter ended November 30, 2022August 31, 2023 that havehas materially affected or areis reasonably likely to materially affect our internal control over financial reporting.Our management is currently taking corrective action to remedy the internal control weaknesses. See section entitled “Remediation” above.

  

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, weWe are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record an accrual, consistent with applicable accounting guidance. In the opinion of management, while the outcome of such claims and disputes cannot be predicted with certainty, our ultimate liability in connection with these matters is not expected to have a material adverse effect on our results of operations, financial position or cash flows, and the amounts accrued for any individual matter are not material. However, legal proceedings are inherently uncertain. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

 

On November 23, 2020, the Company was served a copy of a complaint filed by Jacksonfill, LLC in the Fourth Circuit Court for Duval County, Florida. The complaint allegesalleged breach of Agreement for non-payments for certain products against the Company. The allegations arise from alleged discrepancies discoveredOn September 2, 2023, Jacksonfill, LLC and the Company settled the dispute in the Circuit Court of the Fourth Judicial Circuit in Duval County, Florida per a binding settlement agreement. There is no admission of liability by the Company and the Company has agreed to pay Jacksonfill, LLC $125,000 in connection with the settlement. Currently, the Company has recorded a liability of $204,182 to provide for the reserve of the amount in question, which is in excess of what the settlement agreement provides. The adjustment will be made in the manufacturing of certain product. The Company has retained counselsubsequent reporting period. Please see Note 11—Commitments and intendsContingencies to vigorously defend the allegations. The product was delivered to the Company. However, the Company believes that the product was defective. The amount of the claim of $204,182 has been recorded as accounts payable, in the accompanying unauditedour financial statements as of November 30, 2022.included herein for additional information about this matter.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide risk factors.the information required by this Item 1A.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the three months ended November 30, 2022, the Company granted to an officer a stock option to purchase up to 300,000 shares of Company’s common stock, at an exercise price of $0.20 per share, pursuant to the Company’s 2022 Equity Incentive Plan. In addition, we sold 1,426,391 shares of common stock, under a private placement, to accredited investors, at a purchase price of $0.23 per share, for net proceeds of $328,050.None.

In December 2022, the Company sold additional 302,175 shares of common stock, under the private placement agreement, to accredited investors, at a purchase price of $0.23 per share, for net proceeds of $94,500.

The sale or issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, including Regulation D and Rule 506 promulgated thereunder, as transactions of a Company not involving a public offering. No advertising or general solicitation was employed in offering the securities. Each purchaser is an accredited investor (as defined in Rule 501 of Regulation D), and each received adequate information about the Company or had access to such information, through employment or other relationships, to such information. All the common stock issued or issuable upon exercise or conversion of the foregoing securities are deemed restricted securities for the purposes of the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

(a) Not applicable.

 

(b) During the six months ended November 30, 2022, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.None.

(c) Not applicable.

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ITEM 6. EXHIBITS

 

Exhibit   Filed Furnished
Number Exhibit Description herewith
3.1Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1 (File No. 333-220846) filed with the SEC on October 6, 2017). herewith
3.2Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K filed with the SEC on August 25, 2022).
3.3Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-220846) filed with the SEC on October 6, 2017).
10.1Amendment to Asset Purchase Agreement, dated September 8, 2022, between Reviv3 Procare Company, Reviv3 Acquisition Corporation, and Axil & Associated Brands Corp. and Certain Stockholders of Axil & Associated Brands Corp. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 12, 2022).
10.2*Executive Employment Agreement, dated November 1, 2022, by and between Reviv3 Procare Company and Meenu Jain (incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 2, 2022).
10.3Amendment Number 1 to Voting Agreement, dated November 7, 2022, by and among Reviv3 Procare Company, Intrepid Global Advisors, Inc., and Axil & Associated Brands Corp. (incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 9, 2022).
10.4+Standard Industrial/Commercial Muti-Tenant Lease, dated November 9, 2022, between Vicky Lien and Reviv3 Procare Company.X
10.5Form of Securities Purchase Agreement.X
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X
32.1 
32.1Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

X

(furnished herewith)

32.2 X
32.2Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

X

(furnished herewith)

101 The following unaudited condensed consolidated financial statements from the Quarterly Report on Form 10-Q for the quarter ended November 30, 2022August 31, 2023 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Changes in Stockholders’ Equity, (iv) Statements of Cash Flows, and (v) the Notes to Financial Statements. X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). X

*        Management compensatory plan or arrangement.

 

+ The schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K and the Company agrees to furnish supplementally to the SEC a copy of any omitted schedules or exhibits upon request.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 REVIV3 PROCARE COMPANY
   
Date: January 10,October 12, 2023  
   
 By: /s/ Jeff Toghraie              
  Jeff Toghraie
  Chief Executive Officer
  (Principal Executive Officer)
   
 By:/s/ Meenu JainMonica Diaz Brickell
  Meenu JainMonica Diaz Brickell
  Chief Financial Officer
  (Principal Financial Officer and Principal Accounting Officer)

 

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