United States

Securities and Exchange Commission

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended: January 31, 2019

 

Commission file no.: 000-55519

 

Force Protection Video Equipment Corp.

(Name of Small Business Issuer in its Charter)

  

Florida

 

45-1443512

(State or other jurisdiction of

 

(I.R.S.Employer

incorporation or organization)

 

Identification No.)

 

1600 Olive Chapel Road, Suite 248

Apex, NC

 

27502

(Address of principal executive offices)

 

(Zip Code)

 

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

 

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

 

Title of each class

 

Name of each exchange on which registered

None

 

None

 

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

 

Common Stock, $0.0001 par value per share 

(Title of class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x 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 x 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 filer

Smaller reporting company

(Do not check if a smaller reporting company)

Emerging growth company

x

  

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: 841,184,289 shares of common stock, par value $0.0001, were outstanding on April 23, 2020.

 

 
 

 

 

 

FORCE PROTECTION VIDEO EQUIPMENT CORP

FORM 10-Q

TABLE OF CONTENTS

   

 

 

PAGE

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

3

   

Consolidated Balance Sheets as of January 31, 2019 (Unaudited) and April 30, 2018

 

                   3

   

Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2019 and 2018 (Unaudited)

4

   

Statements of Stockholders’ Deficit for the Three and Nine Months Ended January 31, 2019 and 2018 (Unaudited)

5

   

Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2019 and 2018 (Unaudited)

7

   

Notes to Consolidated Financial Statements

8

   

Item 2.

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

26

   

Item 4.

Controls and Procedures

29

   

PART II - OTHER INFORMATION

   

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

30

   

Item 5.

Other Information

30

   

Item 6.

Exhibits

31

   

Signatures

33

 

 
2

 

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

  

Force Protection Video Equipment Corp

 

 

 

 

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

January 31,

 

 

April 30,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ -

 

 

$ 6,320

 

Accounts receivable

 

 

7,153

 

 

 

9,235

 

Inventory, net

 

 

-

 

 

 

117,889

 

Prepaid inventory

 

 

-

 

 

 

8,798

 

Total current assets

 

 

7,153

 

 

 

142,242

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $11,265 and $7,922, respectively

 

 

12,045

 

 

 

16,669

 

Operating lease right of use asset

 

 

33,332

 

 

 

45,001

 

Deposits

 

 

1,650

 

 

 

1,650

 

Total assets

 

$ 54,180

 

 

$ 205,562

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 219,564

 

 

$ 99,702

 

Shareholder advance

 

 

14,500

 

 

 

7,500

 

Operating lease liability

 

 

17,353

 

 

 

15,440

 

Loans, net of discount of $13,797 and $0, respectively

 

 

19,551

 

 

 

-

 

Convertible promissory notes, net of discount of $0 and $21,225, respectively

 

 

375,677

 

 

 

459,398

 

Total current liabilities

 

 

646,645

 

 

 

582,040

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Warranty

 

 

362

 

 

 

143

 

Operating lease liability

 

 

16,580

 

 

 

29,811

 

Total liabilities

 

 

663,587

 

 

 

611,994

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 4)

 

 

 

 

 

 

 

 

Redeemable Preferred Stock

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 20,000,000 authorized; 5,000,000 and 5,000,000 issued and outstanding, respectively

 

 

5,000

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value 20,000,000,000 shares authorized; issued and outstanding 841,184,289 and 194,415,754 at January 31, 2019 and April 30, 2018, respectively.

 

 

84,119

 

 

 

19,441

 

Additional paid-in capital

 

 

3,757,467

 

 

 

3,598,589

 

Accumulated deficit

 

 

(4,455,993 )

 

 

(4,029,462 )

Total stockholders' equity (deficit)

 

 

(614,407 )

 

 

(411,432 )

Total liabilities and stockholders' equity (deficit)

 

$ 54,180

 

 

$ 205,562

 

 

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

 

 
3

 

Table of Contents

 

Force Protection Video Equipment Corp

Consolidated Statements of Operations

For the Three and Nine Months Ended January 31, 2019 and 2018

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 31,

 

 

January 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$ 38,179

 

 

$ 50,669

 

 

$ 153,530

 

 

$ 139,182

 

Cost of goods sold

 

 

13,426

 

 

 

29,510

 

 

 

178,411

 

 

 

60,377

 

Gross profit

 

 

24,753

 

 

 

21,159

 

 

 

(24,881 )

 

 

78,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

41,019

 

 

 

108,662

 

 

 

197,247

 

 

 

348,279

 

Sales and marketing

 

 

1,305

 

 

 

4,483

 

 

 

8,489

 

 

 

74,417

 

Total operating expenses

 

 

42,323

 

 

 

113,145

 

 

 

205,737

 

 

 

422,696

 

Loss from operations

 

$ (17,570 )

 

$ (91,986 )

 

$ (230,617 )

 

$ (343,891 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(30,271 )

 

 

(11,843 )

 

 

(67,011 )

 

 

(30,756 )

Accretion of debt discount

 

 

(16,069 )

 

 

(67,736 )

 

 

(129,491 )

 

 

(448,373 )

Gain on sale of asset

 

 

588

 

 

 

-

 

 

 

588

 

 

 

-

 

    Total other (expense)

 

 

(45,752 )

 

 

(79,579 )

 

 

(195,914 )

 

 

(479,129 )

Loss before taxes

 

 

(63,322 )

 

 

(171,565 )

 

 

(426,531 )

 

 

(823,020 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$ (63,322 )

 

$ (171,565 )

 

$ (426,531 )

 

$ (823,020 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) per common share basic and diluted

 

$ (0.00 )

 

$ (0.01 )

 

$ (0.00 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding basic and diluted

 

 

832,839,249

 

 

 

32,194,936

 

 

 

637,177,485

 

 

 

16,007,454

 

 

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

 

 
4

 

Table of Contents

 

Force Protection Video Corp 

Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended 

January 31, 2019 (Unaudited)

 

 

 

Common

Shares

 

 

Par

Value

 

 

Additional

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Total

Deficit

 

Balance as of April 30, 2018

 

 

194,415,754

 

 

$ 19,441

 

 

$ 3,598,589

 

 

$ (4,029,462 )

 

$ (411,432 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

412,001,868

 

 

 

41,201

 

 

 

58,380

 

 

 

-

 

 

 

99,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

48,729

 

 

 

-

 

 

 

48,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(120,798 )

 

 

(120,798 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 31, 2018

 

 

606,417,622

 

 

$ 60,642

 

 

$ 3,705,698

 

 

$ (4,150,260 )

 

$ (383,920 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

158,450,000

 

 

 

15,845

 

 

 

(4,715 )

 

 

-

 

 

 

11,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

43,469

 

 

 

-

 

 

 

43,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(242,411 )

 

 

(242,411 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of October 31, 2018

 

 

764,867,622

 

 

$ 76,487

 

 

$ 3,744,452

 

 

$ (4,392,671 )

 

$ (571,732 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

76,316,667

 

 

 

7,632

 

 

 

(3,053 )

 

 

-

 

 

 

4,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

16,068

 

 

 

-

 

 

 

16,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(63,322 )

 

 

(63,322 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 31, 2019

 

 

841,184,289

 

 

$ 84,119

 

 

$ 3,757,467

 

 

$ (4,455,995 )

 

$ (614,407 )

    

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

 

 
5

 

Table of Contents

 

Force Protection Video Corp

Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended

January 31,2018

 

 

 

Common

Shares

 

 

Par

Value

 

 

Additional

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Total

Deficit

 

Balance as of April 30, 2017

 

 

1,698,494

 

 

$ 170

 

 

$ 3,124,998

 

 

$ (2,992,396 )

 

$ (132,872 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

4,058,933

 

 

 

406

 

 

 

82,291

 

 

 

-

 

 

 

82,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

65,000

 

 

 

-

 

 

 

65,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fractional shares issued in stock split

 

 

869

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(355,641 )

 

 

(355,641 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 31, 2017

 

 

5,758,296

 

 

$ 576

 

 

$ 3,272,289

 

 

$ (3,348,037 )

 

$ (75,072 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

13,274,700

 

 

 

1,327

 

 

 

63,991

 

 

 

-

 

 

 

64,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued for cash

 

 

100,000

 

 

 

10

 

 

 

590

 

 

 

-

 

 

 

600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

90,754

 

 

 

-

 

 

 

90,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(295,814 )

 

 

(295,814 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of October 31, 2017

 

 

19,132,996

 

 

$ 1,913

 

 

$ 3,426,430

 

 

$ (3,643,851 )

 

$ (215,408 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in satisfaction of loan debt and interest

 

 

34,802,500

 

 

 

3,480

 

 

 

53,049

 

 

 

-

 

 

 

56,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued as compensation for services

 

 

100,000

 

 

 

10

 

 

 

590

 

 

 

-

 

 

 

600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to beneficial conversion feature

 

 

-

 

 

 

-

 

 

 

50,911

 

 

 

-

 

 

 

50,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(171,565 )

 

 

(171,565 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 31, 2018

 

 

54,035,496

 

 

 

5,403

 

 

 

3,530,980

 

 

 

(3,815,416 )

 

 

(278,533 )

 

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

 

 
6

 

Table of Contents

 

Force Protection Video Corp

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

Nine Months Ended January 31,

 

Cash flows from operating activities:

 

2019

 

 

2018

 

Net (Loss)

 

$ (426,531 )

 

$ (823,020 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

4,111

 

 

 

4,149

 

Accretion of debt discount

 

 

120,434

 

 

 

448,373

 

Impairment of inventory

 

 

113,184

 

 

 

-

 

Gain on sale of asset

 

 

588

 

 

 

-

 

Stock based compensation

 

 

-

 

 

 

600

 

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease/(Increase) in accounts receivable

 

 

2,082

 

 

 

(15,315 )

Decrease/(Increase) in inventory

 

 

13,426

 

 

 

(17,322 )

Decrease/(Increase) in other assets

 

 

11,669

 

 

 

(29,772 )

Increase in accounts payable and accrued expenses

 

 

122,792

 

 

 

22,183

 

Increase in other liabilities

 

 

3,183

 

 

 

48,371

 

Net cash used in operating activities

 

 

(35,062 )

 

 

(361,753 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

-

 

 

 

(8,246 )

Net cash used in investing activities

 

 

-

 

 

 

(8,246 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from shareholder advance

 

 

7,000

 

 

 

-

 

Proceeds from short term loans

 

 

39,574

 

 

 

-

 

Repayments of short term loans

 

 

(23,332 )

 

 

-

 

Proceeds from convertible promissory notes

 

 

5,500

 

 

 

233,300

 

Proceeds from the sale of redeemable preferred stock

 

 

-

 

 

 

4,000

 

Proceeds from the issuance of common stock

 

 

-

 

 

 

600

 

Net cash provided by financing activities

 

 

28,742

 

 

 

237,900

 

Decrease in cash

 

 

(6,320 )

 

 

(132,099 )

Cash and cash equivalents at beginning of period

 

 

6,320

 

 

 

188,773

 

Cash and cash equivalents at end of period

 

$ -

 

 

$ 56,674

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ 1,060

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

Non-cash operating activities:

 

 

 

 

 

 

 

 

Common stock issued for principal and interest on conversion notes

 

$ 115,289

 

 

$ 203,350

 

Common shares issued as compensation

 

$ -

 

 

$ 600

 

 

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

 

 
7

 

Table of Contents

 

FORCE PROTECTION VIDEO EQUIPMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE NINE MONTHS ENDED JANUARY 31, 2019 AND 2018

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

Force Protection Video Equipment Corp., together with its wholly owned subsidiary, Cobraxtreme HD Corp. (collectively, the Company), is in the business of selling video and audio capture devices and accessories to consumers and law enforcement. Force Protection Video Equipment Corp. was incorporated on March 11, 2011, under the laws of the State of Florida. On February 2, 2015 the Company changed its name to Force Protection Video Equipment Corp.

 

Going Concern

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

During the nine months ended January 31, 2019, the Company recognized revenue of $153,530 and $139,182, respectively, and a net operating loss of $426,531 and $823,020, respectively. As of January 31, 2019, the Company had negative working capital of $639,492 and an accumulated deficit of $4,455,993.

 

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

 

Basis of Presentation

The unaudited financial statements of Force Protection Video Equipment Corp. (the “Company”) as of January 31, 2019, and for the three and nine months ended January 31, 2019and 2018, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. The balance sheet at January 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended April 30, 2018, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending April 30, 2019. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

 
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Earnings Per Share

Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share.

 

The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).

 

Following is the computation of basic and diluted net loss per share for the nine months ended January 31, 2019 and 2018:

 

 

 

For the Nine Months Ended

 

 

 

January 31,

 

 

January 31,

 

 

 

2019

 

 

2018

 

Basic and Diluted EPS Computation

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Loss available to common stockholders'

 

$ (426,531 )

 

$ (823,020 )

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

637,177,485

 

 

 

16,007,454

 

 

 

 

 

 

 

 

 

 

Basic and diluted EPS

 

$ (0.00 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

Potentially dilutive securities are not included in the calculation of diluted net loss per share attributable to common stockholders, because to do so would be anti-dilutive.  Common stock equivalents pertaining to the Company’s Convertible Notes  are as follows:

 

 

 

 

 

 

 

 

 

Convertible notes, principal and accrued interest

 

 

7,931,942,735

 

 

 

297,910,788

 

Convertible notes, penalties potentially settled in common stock

 

 

-

 

 

 

-

 

     Total convertible note common stock equivalents

 

 

7,931,942,735

 

 

 

297,910,788

 

 

Concentrations of risk

 

During the nine months ended January 31, 2019, three customers accounted for 15.8% (4.4%, 5.0%, and 6.4%) of sales. During the nine months ended January 31, 2018, one customer accounted for 51.5% of sales.

 

The Company relies on third parties for the supply and manufacture of its capture devices, some of which are sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. During the nine months ended January 31, 2019, two suppliers accounted for 46.1% (31.4% and 14.7%) of our inventory purchases.  During the nine months ended January 31, 2018, three suppliers accounted for 51.6% (19.0%, 17.1%and 15.5%) of our inventory.

 

 
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Summary of Significant Accounting Policies

 

Principles of Consolidation

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

 

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Our most significant estimates are for stock based compensation; assumptions used in calculating derivative liabilities, and deferred tax valuation allowances. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

 

Cash and Cash Equivalents

Cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at either January 31, 2019 or 2018.

 

Cash Flow Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.

 

Inventory

The Company’s inventory is comprised of finished goods and primarily includes cameras and recording equipment. The Company’s inventory is stated at the lower of cost or market and expensed to cost of goods sold upon sale using the average-cost method. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. During the nine months ended January 31, 2019, the Company wrote off $113,184 of obsolete inventory. The Company plans to become a drop ship third-party seller that will reduce the need to carry inventory.

 

Accounts Receivable

Accounts receivable are reported at the customers' outstanding balances. The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve with none this period.

 

Leases

The Company recognizes lease assets and liabilities with terms in excess of twelve months on its balance sheet. The Company capitalizes operating lease obligations as a right-of-use asset with a corresponding liability based on the present value of future operating leases.

 

 
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Property and Equipment

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

 

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

 

 

Estimated

 

Useful Lives

 Vehicles

 

5 years

Office Equipment

 

3 - 5 years

Furniture & equipment

 

5 - 7 years

 

Long-Lived Assets

In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.

 

Income Taxes

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.

 

Revenue Recognition

Our revenue is generated from the sale of products consisting primarily of video and audio capture devices and accessories. We recognize revenue when control of our products is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. We consider a performance obligation satisfied once we have transferred control of a product to the customer, meaning the customer has the ability to use and obtain the benefit of the product. We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Revenue from product sales is generally recognized upon shipment to the end customer, which is when control of the product is deemed to be transferred. Payment or invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue is recorded net of discounts and promotions.

 

 
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Marketing and Advertising Costs

Marketing and advertising costs are expensed as incurred. The Company recognized $1,305 and $4,483 in marketing and advertising costs during the three months ended January 31, 2019 and 2018, respectively, and $8,489 and $74,417 during the nine months ended January 31, 2019 and 2018, respectively.

 

Stock Based Compensation

Under ASC 718, Compensation – Stock Compensation, companies are required to measure the compensation costs of employee and non-employee share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock issued for services, stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

In July 2019, the FASB released Accounting Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09 that affect a wide variety of Topics in the FASB Accounting Standards Codification including the guidance in paragraph 718-740-35-2, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in this update clarifies that an entity should recognize excess tax benefits (that is, the difference in tax benefits between the deduction for tax purposes and the compensation cost recognized for financial statement reporting) in the period in which the amount of the deduction is determined. This includes deductions that are taken on the entity’s return in a different period from when the event that gives rise to the tax deduction occurs and the uncertainty about whether (1) the entity will receive a tax deduction and (2) the amount of the tax deduction is resolved.

 

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Certain of these significant accounting policies require us to make critical accounting estimates, as defined below.

 

A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:

 

 

·

we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and

 

 

 

 

·

different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

  

Many of our financial instruments are issued in conjunction with the issuance of debt. At the time of issuance we allocate the proceeds received to the various financial instruments and this involves the determination of fair value. From time to time, the fair value of these financial instruments exceeds the proceeds received. When this occurs, we critically evaluate the validity of the fair value computation.

 

Financial Instruments

The Company’s balance sheets include the following financial instruments: cash, accrued expenses, notes payable and payables to a stockholder. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. The carrying values of the notes payable and amounts due to stockholder approximates fair value based on borrowing rates currently available to the Company for instruments with similar terms and remaining maturities.

 

 
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FASB Accounting Standards Codification (ASC) topic, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

 

·

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

 

 

 

 

·

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

 

 

 

·

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

  

Beneficial Conversion Features

ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.

 

Recent Accounting Pronouncements

We have reviewed all FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

 
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In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company does not expect adoption of ASU 2017-11 to have a material impact on its consolidated financial statements.

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment awards require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company implemented ASU 2017-09 for the interim and annual reporting periods of 2019, which resulted in no impact on its consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and Accounting Standards Codification ("ASC") Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers ("ASC 340-40"), (collectively, “Topic 606”). On May 1, 2018, the Company adopted Topic 606 by applying the modified retrospective method of adoption for all contracts that were not substantially completed as of the adoption date. ASU 2014-09 requires entities to recognize revenue through the application of a five-step model, which includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations. The Company implemented ASU 2014-09 for the interim and annual reporting periods of 2019, which resulted in no changes to how we recognize revenue.

 

The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company believes that none of the new standards will have a significant impact on its consolidated financial statements.

 

NOTE 2 - FIXED ASSETS

 

Fixed assets consisted of the following:

 

 

 

January 31,

 

 

April 30,

 

 

 

2019

 

 

2018

 

Vehicles

 

 

7,654

 

 

 

7,654

 

Furniture and fixtures

 

 

9,656

 

 

 

10,936

 

Computers and office equipment

 

 

4,226

 

 

 

4,226

 

Leasehold improvements

 

 

1,774

 

 

 

1,775

 

Total fixed assets

 

 

23,310

 

 

 

24,591

 

Accumulated depreciation

 

 

(11,265 )

 

 

(7,922 )

Total fixed assets

 

$ 12,045

 

 

$ 16,669

 

 

During the nine months ended January 31, 2019 and 2018, the company recognized $4,111 and $4,149, respectively in depreciation expense.

 

 
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NOTE 3 – DEBT

 

Short-Term Loans

On June 8, 2018, the Company borrowed $26,163 from Reliant Funding under the ACH Total Receipts Purchase Agreement. Pursuant to the terms of the ACH Loan, the Company received $16,605 of proceeds after deductions for a $395 origination fee and $9,163 related to interest. Repayment is achieved through 147 daily bank account withdrawals of $178. The ACH Loan is secured by all current and future assets of the Company. On September 25, 2018, the Company repaid the then outstanding balance of the ACH Loan totaling $13,372 with funds received from  Strategic Funding Source, Inc.

 

On September 25, 2018, the Company borrowed $38,340 from Strategic Funding Source, Inc. under the Loan Agreement. Pursuant to the terms of the Loan Agreement, the Company received $13,233 of proceeds after deductions for $395 of service fees and $11,340 related to interest. Repayment is achieved through 246 daily bank account withdrawals of $156. The Loan Agreement is secured by all current and future assets of the Company.  As of January 31, 2019, the Company owed $19,551 after a debt discount of $13,797.

 

Convertible Promissory Notes

During the nine months ended January 31, 2019 and 2018, respectively, the Company had convertible notes payable outstanding. The company determined that each convertible promissory note conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under FASB Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20  Debt with Conversion and Other Options is appropriate.

 

As of January 31, 2019, seven of the Company’s convertible promissory notes remain outstanding beyond their respective maturity dates; triggering an event of technical default under the respective agreements. Consequently, the Company is accruing interest on these notes at their respective default rates. As a result of being in default on these notes, the Holders could, at their sole discretion, call these Notes in their entirety, including all associated penalties provided for under the respective agreements. In this event, the Company may not have sufficient authorized shares to absolve itself of the defaulted Notes through the issuance of common shares of the Company. The Company is working with the current noteholders in order that it may resolve these outstanding issues as soon as practicable.

 

As of January 31, 2019, the Company owed $375,677 in principal and $110,552 in accrued interest on its remaining outstanding convertible promissory notes.  As of April 30, 2018, the Company owed $480,623 in principal (before a debt discount of $21,225) and $62,282 in accrued interest on its remaining outstanding convertible promissory notes.

 

 

 

January 31,

2019

 

 

April 30,

2018

 

Convertible promissory notes, various lending institutions, maturing at variable dates ranging from 180 days to one year from origination date, 8-12% interest and default interest of 12-24%, convertible at discount to trading price (60-61%) based on various measurements of prior trading, at face value of remaining original note principal balance, net of unamortized debt discounts and attributable deferred financing costs in the amount of $0 and $21,225, respectively.

 

 

 

 

 

 

Principal

 

$ 375,677

 

 

$ 480,623

 

Debt discount

 

 

-

 

 

 

(21,225 )

Total Principal

 

$ 375,677

 

 

$ 459,398

 

 

 
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Summary of Convertible Note Transactions:

 

January 31,

2019

 

 

April 30,

2018

 

 

 

 

 

 

 

 

Convertible notes, May  1

 

$ 459,398

 

 

$ 427,128

 

Additional notes, face value

 

 

5,789

 

 

 

363,375

 

Default Penalties

 

 

 

 

 

 

-

 

Payments and adjustments

 

 

21,580

 

 

 

-

 

Settlement of debt

 

 

-

 

 

 

-

 

Conversions of debt

 

 

(111,090 )

 

 

(309,880 )

Unamortized debt discounts

 

 

-

 

 

 

(21,225 )

Convertible notes, balance

 

$

 375,677

 

 

$ 

 459,398

 

 

RDW Capital, LLC

The RDW Notes have identical terms and conditions including convertibility into common stock at the holder’s option, at a price for each share of common stock equal to 60% of the lowest traded price during the twenty (20) trading days immediately preceding the applicable conversion, and subject to anti-dilution and market adjustments set forth in the Agreement. The Notes mature in six months and bear an interest rate of 8%.  In no event shall RDW effect a conversion if such conversion results in RDW beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Notes and accrued interest may be prepaid in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%). Any principal and interest unpaid when due shall bear interest at 24% and RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration and the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest.  In the event the Company defaults on the accelerated balance, and at the request of the Holder, the Company must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest. The Company is required to reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion.

 

Note 3 - On March 10, 2016, the Company entered into a Securities Purchase Agreement and amendments thereto, with RDW Capital, LLC, pursuant to which the Company received $210,000 in financing through the execution of a Convertible Promissory Note.  The Company received proceeds of $180,000 after payment of $30,000 in legal fees.

 

The principal was discounted for the OID, due diligence fees, stock issued to an advisor in connection with the note totaling $18,000, and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $227,391. As this amount resulted in a total debt discount that exceeded the note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the note.

 

The note became due and payable on September 10, 2016 and the Company is in default of its obligations under the note and the default interest rate of 24% per annum is being accrued beginning on September 11, 2016.

 

During the nine months ended January 31, 2019 and 2018, respectively, the Company issued no common shares for payment on the note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $792 and $792 in principle and $0 and $0 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 13,196,334.  The number of common shares the Company is required to have in reserve on the note is 39,589,002.

 

Note 4 - On May 13, 2016, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC pursuant to which the Company received $105,000 in financing through the execution of a Convertible Promissory Note (RDW Note 4). The Company received proceeds of $82,500 after payment of a $5,000 OID and $17,500 of legal and due diligence fees.

 

The principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the BCF. The calculated intrinsic value was $70,000. As this amount resulted in a total BCF debt discount that was less than note principal, the full $70,000 discount was recognized and accreted over the 6 month term of the Note.

 

 
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The Note became due and payable on November 13, 2016 and the Company is in default of its obligations under the Note. The default interest rate of 24% per annum is being accrued beginning on November 14, 2016.

 

During the nine months ended January 31, 2019, the Company issued no common shares for payment on the Note. During the nine months ended January 31, 2018, the Company issued 71,341,227 common shares for a value of $105,000, satisfying the note principal, and leaving a balance due of $4,540 in accrued interest.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $0 and $0 in principle and $4,540 and $4,540 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 75,664,694.The number of common shares the Company is required to have in reserve on the note is 226,994,082.

 

Note 5 - On May 20, 2016, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC pursuant to which the Company received $52,500 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $45,000 after payment of a $2,500 OID and $5,000 of due diligence fees.

 

The principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the BCF. The calculated intrinsic value was $35,000. As this amount resulted in a total BCF debt discount that was less than note principal, the full $35,000 discount was recognized. The resulting $42,500 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on November 20, 2016 and the Company is in default of its obligations under the Note. The default interest rate of 24% per annum is being accrued beginning on November 21, 2018.

 

During the nine months ended January 31, 2019, the Company issued no common shares for payment on the Note. During the nine months ended January 31, 2018, the Company issued 80,769 common shares for a value of $52,500, satisfying the note principal, and leaving a balance due of $2,742 in accrued interest.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $0 and $0 in principle and $2,742 and $2,742 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 45,706,301.The number of common shares the Company is required to have in reserve on the note is 137,118,903.

 

Note 6 - On August 22, 2016, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC pursuant to which the Company received $157,500 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $130,000 after payment of a $7,500 OID and $20,000 of legal and due diligence fees.

 

The principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the BCF. The calculated intrinsic value was $105,000. As this amount resulted in a total BCF debt discount that was less than note principal, the full $105,000 discount was recognized. The resulting $132,500 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on February 22, 2017 and the Company is in default of its obligations under the Note. The default interest rate of 24% per annum is being accrued beginning on February 23, 2017.

 

During the nine months ended January 31, 2019, the Company issued no common shares for payment on the Note. During the nine months ended January 31, 2018, the Company issued 579,733 common shares for a value of $31,674, satisfying the note principal, and leaving a balance due of $8,398 in accrued interest.

 

 
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As of January 31, 2019 and April 30, 2018, respectively, the Company owed $0 and $0 in principle and $889 and $889 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 14,817,664.The number of common shares the Company is required to have in reserve on the note is 44,452,992.

 

Note 7 – In connection with RDW SPA 4 under which RDW agreed to purchase an aggregate of up to $367,500 in principal amount of notes, on September 1, 2016, the Company issued to RDW a convertible note due on March 1, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID and legal and due diligence fees totaling $20,000. The second tranche for $210,000 will occur on the date that is two trading days from the date a registration statement is declared effective by the SEC. On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

The principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the BCF. The calculated intrinsic value was $105,000. As this amount resulted in a total BCF debt discount that was less than note principal, the full $105,000 discount was recognized. The resulting $132,500 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company will be in default of its obligations under the Note. The default interest rate of 24% per annum will be accrued beginning on November 1, 2018.

 

During the nine months ended January 31, 2019, the Company issued no common shares for payment on the Note. During the nine months ended January 31,2018, the Company issued 16,753,900 common shares for a value of $115,148, and was applied to the Note principal.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $25,700 and $25,700 in principle and $19,462 and $13,397 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 752,701,277.The number of common shares the Company is required to have in reserve on the note is 2,258,103,831.

 

Note 8 – On February 6, 2017, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC, pursuant to which the Company received $210,000 in financing through the execution of a Convertible Promissory Note.  The Company received proceeds of $180,000 after payment of $10,000 OID and legal and due diligence fees totaling $20,000.On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

The principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the BCF. The calculated intrinsic value was $217,000. As this amount resulted in a total debt discount that exceeded the principal, the discount recorded for the BCF was limited to the principal amount of the Note. The resulting $210,000 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company will be in default of its obligations under the Note. The default interest rate of 24% per annum will begin accruing on November 1, 2018.

 

During the nine months ended January 31, 2019, the Company issued 57,100,000 common shares for a value of $14,754, and was applied to the Note principal. During the nine months ended January 31, 2018, the Company issued no common shares for payment on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $1,221 and $15,975 in principle and $6,418 and $5,512 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 127,328,408.The number of common shares the Company is required to have in reserve on the note is 381,985,224.

 

 
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Note 9 – On March 30, 2017, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC, pursuant to which the Company received $78,750 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $62,500 after payment of $3,750 OID and legal and due diligence fees totaling $12,500.On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

The principle was discounted for the value of the OID, fees and intrinsic value of the BCF. The calculated intrinsic value was $72,000. As this amount resulted in a total debt discount that exceeded the principal, the discount recorded for the BCF was limited to the principal amount of the Note. The resulting $78,750 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company is in default of its obligations under the Note. The default interest rate of 24% per annum will be accrued beginning on November 1, 2018.

 

During the nine months ended January 31, 2019, the Company issued 130,800,000 common shares for a value of $16,322, and was applied to the principal on the Note. During the nine months ended January 31, 2018, the Company issued no common shares for payment on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $62,428 and $78,750 in principle and $15,068 and $7,243 in interest, respectively.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 1,291,603,643.The number of common shares the Company is required to have in reserve on the note is 3,874,810,929.

 

Note 10 – On April 26, 2017, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC, pursuant to which the Company received $110,000 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $90,000 after payment of $10,000 OID and legal fees totaling $10,000.On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

The principle was discounted for the value of the OID, fees and intrinsic value of the BCF. The calculated intrinsic value was $134,000. As this amount resulted in a total debt discount that exceeded the principal, the discount recorded for the BCF was limited to the principal amount of the Note. The resulting $110,000 discount was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company will be in default of its obligations under the Note. The default interest rate of 24% per annum will be accrued beginning on November 1, 2018.

 

During the nine months ended January 31, 2019 and 2018, the Company issued no shares on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $7,510 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 125,169,335.The number of common shares the Company is required to have in reserve on the note is 375,508,005.

 

Note 11 – On May 30, 2017, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC, pursuant to which the Company received $78,750 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $65,000 after payment of $3,875 OID and legal and due diligence fees totaling $9,875.On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

 
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The principle was discounted for the value of the OID and issuance fees. The BCF intrinsic value was $102,000. As this amount resulted in a BCF that exceeded the Note proceeds, accretion of the BCF was limited to $65,000 which was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company will be in default of its obligations under the Note. The default interest rate of 24% per annum is being accrued beginning on November 1, 2018.

 

During the nine months ended January 31, 2019, the Company issued 138,791,667 common shares for a value of $9,050 and was applied against the principal on the Note. During the nine months ended January 31, 2018, the Company issued no shares on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $81,375 and $81,375 in principal and $15,721 and $6,288 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 1,618,268,834.The number of common shares the Company is required to have in reserve on the note is 4,854,806,502.

 

Note 12 – On August 7, 2017, the Company entered into a Securities Purchase Agreement with RDW Capital, LLC, pursuant to which the Company received $52.500 in financing through the execution of a Convertible Promissory Note. The Company received proceeds of $46,000 after payment of $2.500 OID and legal and due diligence fees totaling $4.000.On March 16, 2018, the Company and RDW agreed to amend the Note to extend the Maturity Date to October 31, 2018.

 

The principle was discounted for the value of the OID and issuance fees. The BCF intrinsic value was $107,283. As this amount resulted in a BCF that exceeded the Note proceeds, accretion of the BCF was limited to 46,000 which was accreted over the 6 month term of the Note.

 

The Note became due and payable on October 31, 2018 and the Company will be in default of its obligations under the Note. The default interest rate of 24% per annum is being accrued beginning on November 1, 2018.

 

During the six months ended October 31 2018 and 2017, respectively, the Company issued no shares against the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $52,500 and $52,500 in principal and $9,190 and $3,197 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 1,028,159,588.The number of common shares the Company is required to have in reserve on the note is 3,084,478,764.

 

Power Up Lending Group Ltd.

The Power Up Notes have identical terms and conditions, including convertibility into common stock, at the holder’s option any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Note, at a price for each share of common stock equal to 61% of the average of the lowest two (2) trading prices during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall Power Up effect a conversion if such conversion results in Power Up beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Notes and accrued interest may be prepaid within the 180 day period following the issuance date at an amount equal to 115% - 140% of the outstanding principle and unpaid interest. After expiration of the 180 days, the Note may not be prepaid. Any principal and interest unpaid when due shall bear interest at 22%. Upon the occurrence of an event of default the balance of principle and interest shall become immediately due at the default amount which is equal to the sum of the unpaid principal and unpaid interest multiplied by 150%.

 

 
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Power Up Note 1 – On October 20, 2017 the Company sold a 12% convertible note in the principal amount of $70,000 of which the Company received $60,300 after payment of legal fees of $9,700. The Note matured on July 30, 2018 and bears a default interest rate of 22% as of July 31, 2018.

 

The intrinsic value of the BCF was computed as the difference between the fair value of the common stock issuable upon conversion of the Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $44,754 and is being accreted over the 10 month term of the Note.

 

During the nine months ended October 31 2018, the Company issued 243,760,201 common shares for a value of $70,230; whereby $66,030 was applied against the principal and $4,200 was applied against the accrued interest. 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $0 and $66,030 in principal and $0 and $4,554 in accrued interest.

 

Power Up Note 2 – On November 16, 2017 the Company sold a 12% convertible note in the principal amount of $36,000 of which the Company received $30,000 after payment of legal fees of $6,000.

 

The intrinsic value of the BCF was computed as the difference between the fair value of the common stock issuable upon conversion of the Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $23,016 and is being accreted over the 9.5 month term of the Note.

 

The Note became due and payable on August 30, 2018 and the Company is in default of its obligations under the Note. The default interest rate of 22% per annum is being accrued beginning on August 31, 2018.

 

During the nine months ended January 31, 2019, the Company issued 138,791,667 common shares for a value of $9,050, which was applied against the principal on the Note. During the nine months ended January 31, 2018, the Company issued no shares against the balance on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $26,950 and $36,000 in principal and $7,456 and $2,006 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to hold in its reserves is equal to the amount required to satisfy the Note, which is 564,032,786.

 

Power Up Note 3 – On January 5, 2018 the Company sold a 12% convertible note in the principal amount of $38,000 of which the Company received $32,000 after payment of legal fees.

 

The intrinsic value of the BCF was computed as the difference between the fair value of the common stock issuable upon conversion of the Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $24,295 and is being accreted over the 10 month term of the Note.

 

The Note became due and payable on October 10, 2018 and the Company is in default of its obligations under the Note. The default interest rate of 22% per annum is being accrued beginning on October 11, 2018.

 

During the nine months ended January 31, 2019 and 2018, the Company issued no shares against the balance on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $38,000 and $38,000 in principal and $6,509 and $1,464 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to hold in its reserves is equal to the amount required to satisfy the Note, which is 729,653,424.

 

 
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Power Up Note 4 – On January 5, 2018 the Company sold a 12% convertible note in the principal amount of $33,000 of which the Company received $27,500 after payment of legal fees. The Note matures on December 15, 2018 and bears interest at 12%.

 

The intrinsic value of the BCF was computed as the difference between the fair value of the common stock issuable upon conversion of the Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $21,098 and is being accreted over the 9 month term of the Note.

 

During the nine months ended January 31, 2019 and 2018, the Company issued no shares against the balance on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $33,000 and $33,000 in principal and $4,302 and $613 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to hold in its reserves is equal to the amount required to satisfy the Note, which is 611,515,395.

 

Power Up Settlement

On October 8, 2018, the Company and the assignee of Power Up, “Recovery”, agreed to settle the amount of all outstanding Notes, in final settlement of all related claims for the aggregate sum of $146,925.  At closing, the Company was obligated to pay the first installment of $30,000; the second installment of $15,000 due on October 22, 2019, and the third and final amount of $15,000 by November 5, 2019.  Should the Company fail to pay the settlement amount by the deadline, Recovery shall have all rights under the Notes and SPA’s to convert the debt amount into common stock of the Company pursuant to the terms and provisions of the Notes.  Recovery, in addition, is entitled to obtain an affirmative injunction from the Court which injunction shall remain in full force and effect until Recovery has converted the debt obligation.  Recovery will also have the right to enter a money judgement and have immediate execution thereon for the default amount together with accrued and unpaid interest and full default interest against the Company, giving the Company credit for all sums received by Recovery prior to enforcement.  The Company subsequently met all the terms of the final settlement.

 

Adar Bays, LLC

The Adar Notes bear interest at the rate of 8% per annum. All interest and principal must be repaid on or before March 5, 2019. After six months, the Adar Notes are convertible into common stock, at Adar's option, at a conversion price equal to 60% of the lowest trading price of our common stock during the 20 prior trading days prior to conversion. The Company is required to reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion. The two Adar Collateralized Notes may only be converted by Adar in the event they are paid in full. In addition, the Note contains pre-payment penalties. The Company is only required to make payments on the Back End Notes if Adar funds the Collateralized Notes.

 

Adar has agreed to restrict its ability to convert the Adar Notes and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Adar Notes are a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The Adar Notes also provides for penalties and rescission rights if the Company does not deliver shares of its common stock upon conversion within the required timeframes. In the event of default, the note interest rate increases to 24%.

 

Adar Note 1 - On March 5, 2018 the Company entered into a Securities Purchase Agreement with Adar Bays, LLC providing for the purchase of a Convertible Promissory Note in the principal amount of $52,500; and two Collateralized Secured Promissory Notes also in the amount of $52,500 each (the “Adar Collateralized Notes”) and the delivery by the Company of two Back End Notes payable to Adar each in the principal amount of $52,500. The first $52,500 financing closed on March 5, 2018 with the Company receiving net proceeds of $43,500 after payment of legal fees of $6,500 and a 5%, or $2,500 original issue discount. On May 24, 2018 Adar funded $5,789 under one of the Adar Collateralized Notes with the Company receiving net proceeds of $5,500 after payment of a 5% original issue discount.

 

 
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The intrinsic value of the Adar Notes beneficial conversion feature exceeded their proceeds thereby limiting the accretion of the BCF to $43,500 and $5,500 for Adar Note 1 and the Adar Collateralized Note, respectively. Accretion is over the 12 month term of the Adar Notes.

 

During the nine months ended January 31, 2019, the Company issued 76,316,667 shares against the balance on the Note.

 

As of January 31, 2019 and April 30, 2018, respectively, the Company owed $53,710 and $52,500 in principal and $10,745 and $648 in accrued interest.

 

As of January 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 934,125,052. The number of common shares the Company is required to have in reserve is 2,802,375,156, which is equal to three times the amount sufficient to satisfy the note at each measurement date.

 

Adar Settlement

On March 15, 2019 the Company received a Notice of Default from 111 Recovery Corp, as Assignee from Power Up Lending Group, Ltd. The Notice stated that the Company was in default of one or more Convertible Promissory Notes which, prior to the default, had aggregate and outstanding principal balances of $97,950. The Notice stated that as a result of the default, 111 Recovery Corp is demanding immediate payment of $146,925.

 

On October 3, 2019, the Company and Adar Bays, LLC agreed to enter into a Payment Agreement to settle the amounts outstanding on two previously outstanding Notes, whereby the Company would repay the debt in three installments; $37,000 by October 4, 2019, $18,750 by October 23, 2019, and $18,750 by November 23, 2019. The Company subsequently met all the terms of the final settlement.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Product Warranties

The Company’s manufacturer(s) provide the Company with a 2 year warranty. The Company products are sold with a 1 year manufacturer’s warranty. The Company offers a 1 year extended warranty for a fee. The extended warranty expires at the end of the second year from the date of purchase with warranty costs during the two year period being born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.

 

Operating Leases

On November 15, 2017, the Company entered into a lease of office space at 1600 Olive Chapel Road, Apex, North Carolina 27502. The lease expires on November 30, 2020 and includes an option to extend the lease an additional term or three years. Rent is $1,650 per month and is increased each anniversary by 3%. The Company paid a $1,650 security deposit. As of April 30, 2018, the Company had adopted ASC 2016-2; Leases (Topic 842). As a result, the Company was required to estimate and record the right of use asset (“ROU Asset”) and lease liability on the face of the Company’s balance sheet. The Company determined the ROU Asset and lease liability to be $51,063 which compares to the total payments of the initial three year term of $61,200. The company determined that there was no discount rate implicit in the lease. Thus, the Company used its incremental borrowing rate of 12% to discount the lease payments in the determination of the ROU asset and lease liability.

 

On March 21, 2015, the Company entered into a lease of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. During January, 2018, the Company moved and this lease was terminated with no further obligations.

 

 
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The Company has no other non-cancelable operating leases. The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of January 31, 2020:

 

Fiscal Year

 

 

 

2019

 

$ 5,099

 

2020

 

$ 20,649

 

2021

 

$ 12,253

 

 

 

$ 38,001

 

  

As of January 31, 2019, total operating lease liability was as follows:

 

Total undiscounted cash flows

 

$ 38,001

 

Less unamortized interest

 

 

(4,068 )

Total operating lease liability

 

$ 33,933

 

  

During the nine months ended January 31, 2019 and 2018, operating lease expense for rent for office space totaled $15,300 and $3,300, respectively.

 

NOTE 5 –REDEEMABLE PREFERRED STOCK AND Stockholder's Equity

 

Redeemable Preferred Stock

As of January 31, 2019 and April 30, 2018, there were 5,000,000 shares of par value $0.0001, Series A Preferred Stock outstanding. The Preferred Stock pays no dividends and has no conversion rights into common stock. Each share of Preferred Stock is entitled to 200 votes per share and is redeemable in whole, but not in part, at the option of the holder for $0.0001 per share.

 

During the year ended April 30, 2018, the Company issued 4,000,000 shares of Series A Preferred Stock to Paul Feldman, CEO in exchange for $4,000. Each Series A preferred share is entitled to 200,000 (i.e., 200:1) votes per share and carries no right of conversion into shares of common stock.

 

Common Stock

As of January 31, 2019 and April 30, 2018, there were 841,184,289 and 194,415,754 shares of common stock outstanding, respectively.

 

On September 20, 2018, the Company amended its Articles of Incorporation to affect a 1:1,000 reverse stock split. As of the date of this filing, the Company is waiting for FINRA to approve this corporate action. All share amounts included in this quarterly report have not been updated to reflect the reverse split.

 

On May 17, 2018, the Company filed its Amended Articles of Incorporation which increased its authorized common stock to 20,000,000,000 shares and it Series A Preferred to 20,000,000 shares, with no changes in par value. The increase in the common stock was made necessary because of the reserves required by the Company’s holders of convertible notes.

 

During the nine months ended January 31, 2019, the Company issued an aggregate of 646,768,535 shares of common stock in exchange for convertible notes totaling $115,290.

 

During the year ended April 30, 2018, the Company issued 192,516,391 shares of common stock in exchange for convertible notes totaling $317,096. In addition, a total of 100,000 common shares were issued for cash in the amount of $600, and 100,000 common shares were issued for services and valued at $600.

 

 
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NOTE 6 – SUBSEQUENT EVENTS

 

On March 15, 2019 the Company received a Notice of Default from 111 Recovery Corp, as Assignee from Power Up Lending Group, Ltd.  The Notice stated that the Company was in default of one or more Convertible Promisory Notes which, prior to the default, had aggregate and outstanding principal balances of $97,950.  The Notice stated that as a result of the default, 111 Recovery Corp is demanding immediate payment of $146,925.  On October 8, 2018, the Company and the assignee of Power Up, “Recovery”, agreed to settle the amount of all outstanding Notes, in final settlement of all related claims for the aggregate sum of $146,925.  At closing, the Company was obligated to pay the first installment of $30,000; the second installment of $15,000 due on October 22, 2019, and the third and final amount of $15,000 by November 5, 2019.  Should the Company fail to pay the settlement amount by the deadline, Recovery shall have all rights under the Notes and SPA’s to convert the debt amount into common stock of the Company pursuant to the terms and provisions of the Notes.  Recovery, in addition, is entitled to obtain an affirmative injunction from the Court which injunction shall remain in full force and effect until Recovery has converted the debt obligation.  Recovery will also have the right to enter a money judgement and have immediate execution thereon for the default amount together with accrued and unpaid interest and full default interest against the Company, giving the Company credit for all sums received by Recovery prior to enforcement. The Company subsequently met all the terms of the final settlement.

 

On October 3, 2019, the Company and Adar Bays, LLC agreed to enter into a Payment Agreement to settle the amounts outstanding on two previously outstanding Notes, whereby the Company would repay the debt in three installments; $37,000 by October 4, 2019, $18,750 by October 23, 2019, and $18,750 by November 23, 2019. The Company subsequently met all the terms of the final settlement.

 

 
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Forward Looking Statements

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our April 30, 2018 Annual Report on Form 10-K.

 

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our estimates of our financial results and our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

 

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

 

As used herein, the “Company,” “our,” “we,” or “us” and similar terms refers to Enhance-Your-Reputation.com, Inc. unless the context indicates otherwise.

 

 
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Overview

 

The Company is in the business of selling video and audio capture devices initially targeted to law enforcement agencies. The Company has established a web site at www.forceprovideo.com whereby customers can view the Company’s products and place orders. We believe that given recent current events between law enforcement agencies and the public, which has been widely reported by the media, there is a significant market opportunity for the Company’s products.

 

Products

 

Our video and audio capture devices are compact, ergonomic, tamperproof and designed to capture HD video and/or audio on demand enabling our customers to capture content while engaged in a wide range of activity. We also sell accessories that enhance the functionality and versatility of our products, including mounts, such as the helmet, handlebar, roll bar and tripod mounts, as well as mounts that enable users to wear the camera on their bodies, such as the wrist housing, chest harness and head strap. Other accessories include spare batteries, charging accessories and memory drives. Our products are marketed primarily to law enforcement due to their unique need to capture important events in the course of their duties.

 

Our primary hardware products consist of our undercover surveillance devices which are restricted sales items to law enforcement agencies, the LE10 Law Enforcement Video Recorder, the LE15 and LE50 and the Recon 2000 HD Body Cams and evidence software as well as the SC1 Sunglass Camera.

 

Distribution

 

Customers purchase products from our website and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges.

 

Marketing

 

Currently, our sales and marketing efforts include print marketing catalogs featuring our products to state and local law enforcement agencies. We create and deliver brochures and catalogs to state and local law enforcement, every four (4) weeks, using U.S.Mail.

 

Results of Operations

 

As of January 31, 2019, we had total assets of $54,180 and total liabilities of $663,587. Since our inception to January 31, 2019, we have accumulated a deficit of $4,455,993. We anticipate that we will continue to incur losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through the sale of equity or debt securities.

 

For the Three and Nine months Ended January 31, 2019 Compared to the Three and Nine months ended January 31, 2018

 

Revenue

Revenue is generated from the sale of our video and audio capture devices and related accessories. For the three months ended January 31, 2019 and 2018, sales were $38,179 and $50,669 respectfully.  For the nine months ended January 31, 2019, the Company recognized $153,530 of revenue compared to $139,182 during the nine months ended January 31, 2018. Sales increased $14,348 due to increase of more accessories sold and less discounts provided to our customer base.

 

 
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Gross profit

Gross profit was $24,753 and $21,159 during the three months ended January 31, 2019 and 2018, respectively.  For the nine months ended January 31, 2019 and 2018, gross profit/(loss) was $(24,881) and $78,805, respectively. The decrease in gross margin was due to decreased volumes of higher margin product and the Company has written off $113,184 in obsolete inventory. The Company anticipates fluctuations in the mix of product sales and cannot meaningfully determine at this early stage if our gross margin will increase or decrease with any degree of accuracy.

 

Operating Expenses

General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance and other office related costs. General and administrative costs during the three months ended January 31, 2019 and 2018 were $41,019 and $108,662, respectively.  For the nine months ended January 31, 2019 and 2018, general and administrative costs were $197,247 and $348,279, respectfully.  The decrease is primarily due to decreased professional, personnel, and travel costs.

 

Sales and marketing costs include costs to promote and sell our products. Sales and marketing costs during the three months ended January 31, 2019 and 2018 were $1,305 and $4,483, respectively.  Sales and marketing costs during the nine months ended January 31, 2019 and 2018 were $8,489 and $74,417, respectively.

 

Other Income (Expense)

All the elements of other income (expense) relate to our convertible promissory notes. During the nine months ended January 31, 2019 and 2018, the Company incurred $67,011 and $30,756, respectively, of interest expense and $129,491 and $448,373, respectively, of debt discount accretion. Interest expense increased due to higher debt levels and accretion decreased due to the issuance of fewer notes.

 

Liquidity and Working Capital

 

Our principal source of liquidity is cash in the bank and salable inventory. As of January 31, 2019 our current assets totaled $7,153 and were comprised solely of accounts receivable. These conditions raise doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will try to raise additional funds through private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

For the nine months ended January 31, 2019, net cash flows used in operating activities was $35,062, compared to $361,753 for the nine months ended January 31,2018.

 

For the nine months ended January 31, 2019, net cash flows used in investing activities was $0, compared to $8,246 for the nine months ended January 31,2018. During the nine months ended January 31, 2019, the Company sold a desk and realized a gain of $588 on the sale of the asset.

 

For the nine months ended January 31, 2019, we generated cash flows from financing activities of $28,742 from the issuance of a convertible promissory note short term loan and shareholder advance compared to $237,900 from the issuance of one convertible promissory note for the nine months ended January 31, 2018. To date, we have financed our operations primarily through the issuance of debt and equity.

 

 
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Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recently Issued Accounting Pronouncements

 

See Note 1 to our Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of January 31, 2019, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended.  Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s assessment of ineffectiveness is due to the following:

 

(1) Lack of segregation of duties. Management has found it necessary to limit the Company’s administrative staffing in order to conserve cash, until the Company’s level of business activity increases. As a result, there is limited segregation of duties amongst the employees, and the Company has identified this as a material weakness in the Company’s internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of employees and limited segregation of duties, management believes that the Company is capable of following its disclosure controls and procedures effectively.

 

(2) Lack of in-house US GAAP Expertise. Our current accounting personnel perform adequately in the basic accounting and recordkeeping function. However, our operations and business practices include complex technical accounting issues that are outside the routine basic functions. These technical accounting issues are complex and require significant expertise to ensure that the accounting and reporting are accurate and in accordance with generally accepted accounting principles.

 

Changes in internal controls

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II- OTHER INFORMATION

 

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

 

During the nine months ended January 31, 2019, the Company issued 646,768,535 shares of common stock to pursuant to convertible note conversions of debt totaling $115,290.

 

ITEM 5. OTHER INFORMATION

 

On March 15, 2019 the Company received a Notice of Default from 111 Recovery Corp, as Assignee from Power Up Lending Group, Ltd.  The Notice stated that the Company was in default of one or more Convertible Promisory Notes which, prior to the default, had aggregate and outstanding principal balances of $97,950.  The Notice stated that as a result of the default, 111 Recovery Corp is demanding immediate payment of $146,925.On October 8, 2018, the Company and the assignee of Power Up, “Recovery”, agreed to settle the amount of all outstanding Notes, in final settlement of all related claims for the aggregate sum of $146,925.  At closing, the Company was obligated to pay the first installment of $30,000; the second installment of $15,000 due on October 22, 2019, and the third and final amount of $15,000 by November 5, 2019.  Should the Company fail to pay the settlement amount by the deadline, Recovery shall have all rights under the Notes and SPA’s to convert the debt amount into common stock of the Company pursuant to the terms and provisions of the Notes.  Recovery, in addition, is entitled to obtain an affirmative injunction from the Court which injunction shall remain in full force and effect until Recovery has converted the debt obligation.  Recovery will also have the right to enter a money judgement and have immediate execution thereon for the default amount together with accrued and unpaid interest and full default interest against the Company, giving the Company credit for all sums received by Recovery prior to enforcement. The Company subsequently met all the terms of the final settlement.

 

On October 3, 2019, the Company and Adar Bays, LLC agreed to enter into a Payment Agreement to settle the amounts outstanding on two previously outstanding Notes, whereby the Company would repay the debt in three installments; $37,000 by October 4, 2019, $18,750 by October 23, 2019, and $18,750 by November 23, 2019. The Company subsequently met all the terms of the final settlement.

 

 
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ITEM 6. EXHIBITS

 

(a) The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are incorporated herein by reference, as follows:

  

Exhibit No.

 

Description of Exhibit

3.1

Articles of Incorporation dated March 11, 2011(1)

3.2

Amendment to Articles of Incorporation dated March 28, 2011(1)

3.3

Amendment to Articles of Incorporation dated September 25, 2013(1)

3.4

Amendment to Articles of Incorporation dated January 30, 2015(1)

3.5

Amendment to Articles of Incorporation dated December 1, 2015(1)

3.6

Amendment to Articles of Incorporation filed on January 19, 2016 to increase the authorized common stock outstanding from 50,000,000 to 250,000,000; par value $0.0001 and to create a series of preferred stock consisting of 1,000,000 shares designated as Series A Preferred stock;  par value $0.0001(12)

3.7

Amendment to Articles of Incorporation effective September 8, 2016 to increase the authorized common stock outstanding to 750,000,000; par value $0.0001 and increase Series A Preferred stock to 5,000,000;  par value $0.0001(7)

3.8

Bylaws(1)

3.9

Amendment to Articles of Incorporation filed on March 31, 2017 to reduce the number of common shares outstanding in a 1:250 reverse stock split(8)

3.10

Amendment to Articles of Incorporation effective December 8, 2017 to increase the authorized common stock outstanding to 2,000,000,000 and increase Series A Preferred stock to 15,000,000(12)

10.1

Securities Purchase Agreement dated November 12, 2015 with RDW Capital, LLC(1)

10.2

First Amended Securities Purchase Agreement dated November 12, 2015 with RDW Capital LLC(1)

10.3

Second Amended Securities Purchase Agreement dated November 12, 2015 with RDW Capital, LLC(1)

10.4

Registration Rights Agreement dated November 12, 2015 with RDW Capital, LLC(1)

10.5

Convertible Promissory Note dated November 12, 2015 held by RDW Capital, LLC(1)

10.6

Convertible Promissory Note dated December 31, 2015 held by RDW Capital, LLC(2)

10.7

Convertible Promissory Note dated March 10, 2016 held by RDW Capital, LLC(5)

10.8

Third Amended Securities Purchase Agreement dated February 17, 2016 with RDW Capital, LLC(1)

10.9

Fourth Amended Securities Purchase Agreement dated February 17, 2016 with RDW Capital, LLC(3)

10.10

Securities Purchase Agreement dated May 9, 2016 with RDW Capital, LLC(4)

10.11

Convertible Promissory Note dated May 13, 2016  held by RDW Capital, LLC(4)

10.12

Convertible Promissory Note dated May 20, 2016  held by RDW Capital, LLC(5)

10.13

Registration Rights Agreement dated May 9, 2016 with RDW Capital, LLC(4)

10.14

Securities Purchase Agreement dated August 22, 2016 with RDW Capital, LLC(6)

10.15

Convertible Promissory Note dated August 22, 2016  held by RDW Capital, LLC(6)

10.16

Securities Purchase Agreement dated September 1, 2016 with RDW Capital, LLC(7)

10.17

Convertible Promissory Note dated September 1, 2016  held by RDW Capital, LLC(7)

10.18

Registration Rights Agreement dated September 1, 2016 with RDW Capital, LLC(7)

10.19

Convertible Promissory Note dated February 6, 2017  held by RDW Capital, LLC(9)

10.20

Securities Purchase Agreement dated March 31, 2017 with RDW Capital, LLC(8)

 

 
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10.21

Convertible Promissory Note dated March 30, 2017 held by RDW Capital, LLC(8)

10.22

Convertible Promissory Note dated April 26, 2017 held by RDW Capital, LLC(9)

10.23

Convertible Promissory Note dated May 30, 2017  held by RDW Capital, LLC(9)

10.24

Securities Purchase Agreement dated August 8, 2017 with RDW Capital, LLC(10)

10.25

 

Convertible Promissory Note dated August 7, 2017 held by RDW Capital, LLC(10)

10.26

Securities Purchase Agreement dated October 20, 2017 with Power Up Lending Group, Ltd.(11)

10.27

Convertible Promissory Note dated October 20, 2017 with Power Up Lending Group, Ltd.(11)

10.29

Employment Agreement Paul Feldman(1)

10.30

Shenzen AE Technology Purchase Order(1)

10.31

Agreement with Carter, Terry & Company(1)

10.32

Convertible Promissory Note dated November 16, 2017 with Power Up Lending Group, Ltd.(13)

10.33

Convertible Promissory Note dated January 5, 2018 with Power Up Lending Group, Ltd.(13)

10.34

Form of Adar Securities purchase Agreement dated March 5, 2018 with Adar bays , LLC(14)

10.35

Form of Convertible Promissory Note dated March 5, 2018 with Adar bays, LLC(14)

10.36

Form of Back end Note 1 dated March 5, 2018 with Adar bays, LLC(14)

10.37

Form of Back end Note 2 dated March 5, 2018 with Adar bays, LLC(14)

10.38

Form of Collateralized Secured Promissory Note 1 dated March 5, 2018 with Adar bays, LLC(14)

10.39

Form of Collateralized Secured Promissory Note 2 dated March 5, 2018 with Adar bays, LLC(14)

10.40

Securities Purchase Agreement dated March 5, 2018 with Power Up Lending Group, Ltd.(15)

10.41

Convertible Promissory Note dated October 20, 2017 with Power Up Lending Group, Ltd.(15)

10.42*

ACH Total Receipts Agreement dated June 8, 2018 with Reliant Funding

10.43*

Loan Agreement dated September 25, 2018 with Strategic Funding Source, Inc.

31.1 *

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1 *

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS

XBRL Instance Document**

101.SCH

XBRL Taxonomy Extension - Schema Document**

101.CAL

XBRL Taxonomy Extension - Calculation Linkbase Document**

101.DEF

XBRL Taxonomy Extension - Definition Linkbase Document**

101.LAB

XBRL Taxonomy Extension - Label Linkbase Document**

101.PRE

XBRL Taxonomy Extension - Presentation Linkbase Document**

__________  

* Filed herewith

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

(1) Incorporated by reference to Form S-1 filed on February 22, 2016.

(2) Incorporated by reference to Form 8-K filed on January 4, 2016.

(3) Incorporated by reference to Form S-1/A filed on March 7, 2016

(4) Incorporated by reference to Form 8-K filed on May 18, 2016.

(5) Incorporated by reference to Form 10-K filed on June 27, 2016.

(6) Incorporated by reference to Form 8-K filed on August 24, 2016.

(7) Incorporated by reference to Form S-1 filed on October 11, 2016.

(8) Incorporated by reference to Form 8-K filed on March 31, 2017.

(9) Incorporated by reference to Form 10-K filed on July 27, 2017.

(10) Incorporated by reference to Form 8-K filed on August 10, 2017.

(11) Incorporated by reference to Form 8-K filed on October 25, 2017.

(12) Incorporated by reference to Form 10-Q filed on December 14, 2017.

(13) Incorporated by reference to Form 10-Q filed on February 28, 2018.

(14) Incorporated by reference to Form 8-K filed on March 5, 2018.

(15) Incorporated by reference to Form 8-K filed on March 8, 2018.

 

 
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Signatures

 

In accordance with Section 13 or 15(d) of the Securities Act of 1933, as amended, the Company caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

 

Force Protection Video Equipment Corp.

 

 

(Registrant)

 

 

 

 

April 24, 2020

By:

/s/ Paul Feldman

 

 

 

Paul Feldman

Chief Executive Officer, Chief Financial Officer and Director

 

 

 

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