UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended April 30, 2020
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission file number 000-55519
| Force Protection Video Equipment Corp. |
| (Exact name of registrant as specified in its charter) |
| Florida |
| 45-1443512 |
| (State of other jurisdiction of incorporation or organization) |
| (IRS Employer Identification Number) |
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| 1249 Kildaire Farm Road Cary NC |
| 1 27511 |
| (Address of principal executive offices) |
| (Zip Code) |
(919) 271-2994
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 Par Value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12-months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
The aggregate market value of the common stock of the registrant held by non-affiliates was approximately $76,000 as of October 31, 2019, the last business day of the registrant’s most recently completed second fiscal quarter. As of September 14, 2020 there were 841,184,289 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
FORCE PROTECTION VIDEO EQUIPMENT CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED APRIL 30, 2020
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this Report may be “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. However, as the Company issues “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions, or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Report, including the risks described under “Risk Factors,” “Management’s Discussion and Analysis” and “Our Business.”
There are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors, include, without limitation, the following: our ability to develop our technology platform and our products; our ability to protect our intellectual property; the risk that we will not be able to develop our technology platform and products in the current projected timeframe; the risk that our products will not achieve performance standards in clinical trials; the risk that the clinical trial process will take longer than projected; the risk that our products will not receive regulatory approval; the risk that the regulatory review process will take longer than projected; the risk that we will not be unsuccessful in implementing our strategic, operating and personnel initiatives; the risk that we will not be able to commercialize our products; any of which could impact sales, costs and expenses and/or planned strategies. Additional information regarding factors that could cause results to differ can be found in this Report and in our other filings with the Securities and Exchange Commission.
The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act. Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to Force Protection Video Equipment Corp.
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Overview
The Company is in the business of selling video and audio capture devices initially targeted to law enforcement agencies. With over 30 years of marketing to law enforcement, the Company’s CEO, Paul Feldman is able to leverage his extensive knowledge and base of contacts to produce sales. The Company has established a web site at www.forceprovideo.com whereby customers can view the Company’s products and place orders. We believe that given recent current events between law enforcement agencies and the public, which has been widely reported by the media, there is a significant market opportunity for the Company’s products. In the first quarter of fiscal 2016, the Company received multiple orders for the LE10 camera System. The LE10 is a small bodied, high definition (HD) camera which is half the size and half the price of most law enforcement cameras currently available. The LE10 and more recent addition the LE50 are rich with features that make them ideal for on-demand video and audio capture. The LE10 and LE50 do not require special software or expensive storage contracts. The video files can quickly be downloaded into a standard law enforcement case file and the micro SD cards are sealed in the provided static evidence bags and then securely stored in the department’s evidence locker. The Company’s Video LE10 and LE50 cameras are a rugged design which incorporates Ambarella (NASDAQ “AMBA”) made chips that allow the cameras to record high definition video.
Product Development and Sales
Our on-body mini-camera was developed by Paul Feldman, our Chief Executive Officer, President and Director who has significant experience in the development and commercialization of security and surveillance related products. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc., a manufacturer of surveillance products and audio intelligent devices which were sold to the U.S. military and law enforcement. Patent technologies previously developed by Mr. Feldman include U.S. Patent Number 7,631,601 Surveillance Projectile and U.S. Patent Number 2006/0283,345 Surveillance Projectile.
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 products consist of video and audio recording devices as follows:
LE10 Law Enforcement Video Recorder. Retail price: $195. The LE10 on-body camera is designed for use by law enforcement and can be mounted on helmets, tactical vest, and riot shields. The LE10 provides high quality video and a sensor that allows the device to shoot in full HD at 30 fps, and 8 MP photos with shutter speed of 8fps in burst mode. In photo mode, the user can take pictures with a delayed timer. The device has three (3) resolutions and slow-motion capability allowing its user to create highly quality video while engaged in a variety of physical activity. The LE10 has built-in Wi-Fi, providing connectivity with a smartphone or tablet to enable remote control and content viewing functionality. Video taken by the LE10 is stored on a micro HD SD card which can be transferred to a computer for use as evidence. Downloading the video into evidence requires no special software or expensive cloud storage contracts. The LE10 is equipped with a high definition microphone to capture and record audio. The LE10 can also be used only as a standalone audio recorder to record witness statements or conduct interviews.
LE50 HD Body Cam. Retail price: $495. The LE50 includes many of the LE10 features in an on-body camera designed for use by law enforcement which can be mounted on helmets, tactical vest, and riot shields. The LE50 provides up to 10 hours of high quality video with a built in audio announcement feature, 50 hours of standby time, sound and vibration operation indication, 2″ TFT-LCD High Resolution Color Display, 32 GB of internal tamper proof storage, supports up to 128GB of memory, 140 degree field of view, white led illumination, waterproof level of IP65, metal clip with 360 degrees rotation, one button tag of important file feature and GPS recording.
SC1 Sunglass Camera. Retail price: $199.95. The SC1 Sunglass Camera is made from TR90 high impact resistant and flexible material and features a 150° wide-angle full HD 1080p video camera, with one-hour record time, built between the eyes with the controls and battery built into the glasses’ ultra slim frame. A full range of polarized and clear lenses are available and easily interchangeable.
Surveillance Cameras. Retail price: $100-$1,800. The Surveillance cameras now offered are state of the art, disguised cameras sold exclusively to law enforcement. Due to the sensitive nature of these products no further information may be disclosed.
Our manufacturer provides a one (1) year warranty for our products, and customers can purchase another year.
Our customers include the federal government and more than twenty-five thousand (25,000) state and local law enforcement agencies.
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Distribution
Customers purchase products from our website, printed catalogs and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges for orders less than $200.
Manufacturing
We purchase our finished products on an as needed basis from several manufacturers in Shenzhen China, Taiwan, and the USA. Our manufacturers provide production, labeling and packaging of our finished product according to our specifications which is confirmed with each order placed. We are not subject to any supplier agreements which means we are not obligated to purchase a minimum amount of product or place orders in the future. We pay for all products we order at the time the order is placed. Upon placing an order, our manufacturer creates a purchase order reflecting: (i) the product ordered, (ii) price per item (iii) total cost for the order, (iv) total cost to ship product ordered from our manufacturer to our facility, (iv) that immediate payment in required at the time of the order, and (v) the delivery date and delivery address. All material used to manufacture our products is located, purchased and paid for by our manufacturers who invoices us only for our finished product. All products offered by Force Protection Video have a twelve (12) month warranty.
Marketing
Currently, our sales and marketing efforts include printed marketing brochures catalogs featuring our products which we distribute to state and local law enforcement agencies. We create and deliver brochures to state and local law enforcement, every four (4) weeks, using U.S. Mail. Our data base contains over 25,000 law enforcement agencies nationwide.
We believe that a marketing strategy focused on print marketing to law enforcement will provide our target customers with the opportunity to view our specific information about our products and their features, which is an optimal strategy to increase sales.
Product Development
We expense all product development costs as incurred. Product development costs have been negligible for the past few years but are incurred as needed to support new product ideas and launches.
Product Warranty
We accept returns of products two (2) weeks after purchase. Additionally, our manufacturer provides a twelve (12) month warranty on all products manufactured and the Company offers an extended warranty for year two. The occurrence of any material defects or product recalls could make us liable for damages and warranty claims. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor, and customer demand, and adversely affect our operating results and financial condition. Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.
Competition
The market for on-body cameras is highly competitive. Further, we expect competition to increase in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets. We compete against established, well-known camera manufacturers such as Axon-Taser, WatchGuard and Provision. Many of our current competitors have substantial market share, diversified product lines, well- established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.
In addition, many of our existing and potential competitors have substantial competitive advantages, such as:
| · | longer operating histories; |
| · | the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; |
| · | broader distribution and established relationships with channel partners; |
| · | access to larger established customer bases; |
| · | greater financial resources; |
| · | large intellectual property portfolios; and |
| · | the ability to bundle competitive offerings with other products and services |
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Moreover, smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc. and Samsung, may design them for use in a range of conditions, including challenging physical environments, or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products. Further, we are aware that certain companies have developed cameras designed and labeled to appear similar to our products, which may confuse consumers or distract consumers from purchasing our products.
Increased competition may result in pricing pressures and reduced profit margins and may impede our ability to continue to increase the sales of our products or cause us to lose market share, any of which could substantially harm our business and results of operations
Seasonality
Our business, as well as the industry in which we operate, is not seasonal.
Intellectual Property
We currently have a patent pending on a new product
Other than the aforementioned pending patent, we have no registered or patented intellectual property. Trademarks and trade names distinguish the various companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.
Employees
As of the date of this report, we have three full time employees including Paul Feldman who is our Director, Chief Executive Officer and Chief Financial Officer. Mr. Feldman spends approximately sixty (60) hours per week on our business. We have one full time employees who provide clerical and administrative services and one full time salesperson.
None of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppages. We maintain good relationships with our employees.
Our business could be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments could cause disruption to our operations and sales activities. Our third-party manufacturers, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions which could adversely affect our business, operations and customer relationships. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.
We previously occupied approximately 1600 square feet at 1600 Olive Chapel Rd., Apex, NC 27502-6764 pursuant to a lease agreement which was set to expire on November 30, 2020. Our annual rent payments for this location were $19,800 in year 1 and $20,394 in year 2. On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding lease, there were no additional amounts due related to the lease termination.
We are not aware of any pending or threatened litigation against us that we expect will have a material adverse effect on our business, financial condition, liquidity, or operating results. We cannot assure you that we will not be adversely affected in the future by legal proceedings.
ITEM 4: MINE SAFETY DISCLOSURE
Not Applicable.
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Market Information
Our common stock trades on the Over the Counter Markets Group Inc. Pink tier under the symbol “FPVD”.
The following table sets forth the closing high and low bid quotations of our common stock for each quarter during the past two fiscal years as reported by the OTC:
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| As of April 30, 2020 |
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| Fiscal Year 2020 |
| High |
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| Low |
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| First quarter ended July 31, 2019 |
| $ | 0.0001 |
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| $ | 0.0001 |
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| Second quarter ended October 31, 2019 |
| $ | 0.0001 |
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| $ | 0.0001 |
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| Third quarter ended January 31, 2020 |
| $ | 0.0001 |
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| $ | 0.0001 |
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| Fourth quarter ended April 30, 2020 |
| $ | 0.0001 |
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| $ | 0.0001 |
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| As of April 30, 2019 |
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| Fiscal Year 2019 |
| High |
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| Low |
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| First quarter ended July 31, 2018 |
| $ | 0.0012 |
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| $ | 0.0002 |
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| Second quarter ended October 31, 2018 |
| $ | 0.0003 |
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| $ | 0.0001 |
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| Third quarter ended January 31, 2019 |
| $ | 0.0003 |
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| $ | 0.0001 |
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| Fourth quarter ended April 30, 2019 |
| $ | 0.0002 |
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| $ | 0.0001 |
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Transfer Agent
Our Transfer Agent is Issuer Direct, formerly Interwest Transfer Co., Inc. located at 1 Glenwood Avenue, Suite 1001, Raleigh, North Carolina, 276603. Their telephone number is 919-481-4000 and their website is www.issuerdirect.com
Holders
As of September 14, 2020, there are approximately 41 holders of record of our common stock in certificate form, exclusive of those brokerage firms and/or clearing houses holding our Common Stock in street name for their clientele (with each such brokerage house and/or clearing house being considered as one holder). We have 841,184,289 shares of common stock issued and outstanding.
Dividend Policy
We have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.
Securities Authorized for Issuance Under Equity Compensation Plans
At the present time, we have no securities authorized for issuance under equity compensation plans.
Additional Information
Copies of our annual reports, quarterly reports, current reports, and any amendments to those reports, are available free of charge on the internet at www.sec.gov. All statements made in any of our filings, including all forward-looking statements, are made as of the date of the document, in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report. Some of the statements contained in this Report that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
| · | Our ability to attract and retain management, and to integrate and maintain technical information and management information systems; |
| · | Our ability to raise capital when needed and on acceptable terms and conditions; |
| · | The intensity of competition; |
| · | General economic conditions; and |
| · | Changes in government regulations. |
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The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.
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 April 30, 2020, we had total assets of $4,621 and total liabilities of $740,444. Since our inception to April 30, 2020, we have an accumulated a deficit of $4,605,504 and negative cash flows from operations of $38,962. 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.
Year Ended April 30, 2020 Compared with the year ended April 30, 2019
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| For the Year Ended April 30 |
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| 2020 |
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| 2019 |
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| Revenues |
| $ | 63,324 |
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| $ | 163,740 |
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| $ | (100,416 | ) |
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| -61 | % |
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| 1 |
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| Gross profit (loss) |
| $ | 35,332 |
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| $ | (20,668 | ) |
| $ | 56,000 |
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| -271 | % |
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| General and administrative expenses |
| $ | 46,135 |
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| $ | 222,217 |
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| $ | (176,082 | ) |
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| -79 | % |
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| Total other income (expense) - net |
| $ | (21,414 | ) |
| $ | (300,940 | ) |
| $ | 279,526 |
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| -93 | % |
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___________
| 1 | Revenues decreased due to lack of expected sales and a reduction in marketing and advertising. |
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| 2 | The gross loss in 2019 was related to cost of revenues in the ordinary course of business as well as the impairment of inventory of $113,184. Overall, however, in 2020, there was a decrease in the volume of higher margin products. Additionally, during the year ended April 30, 2020, the Company stopped carrying inventory, and as a result, only had cost of revenues related to items purchased and immediately sold, thus reflecting a gross profit. The Company does not have sufficient cash resources to keep inventory on hand, which prevents the Company from making potential sales. The Company anticipates fluctuations in the mix of its product sales and expects its gross margin to fluctuate due to changes in product mix. |
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| 3 | General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance, and other office related costs. The decrease is primarily due to decreased professional, personnel, and travel costs as business has slumped. Additionally, sales and marketing costs include costs to promote and sell our products. Sales and marketing costs during the year ended April 30, 2020 and 2019 were $7,918 and $9,303, respectively. The decrease of $1,385 coincides with the Company’s lack of available cash resources to maintain sufficient spending in this area. |
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| 4 | Other income and expense during 2019, primarily consisted of interest expense on the Company's debt as well the accretion of debt discount on various convertible promissory notes. In 2019, we recognized $63,788 in default penalties associated with three convertible notes. While in 2020, the Company continued to reflect interest on its debt, the Company also recognized a gain on debt settlement of $62,031 related to the elimination of certain convertible debt instruments and related accrued interest and the Strategic Funding loan. All convertible debt that contained debt discounts had been fully accreted as of April 30, 2019. Interest expense for 2020 and 2019 was $77,774 and $103,992, respectively. During the year ended April 30, 2020, the Company recognized a gain on ROU lease liability termination of $603 and a related impairment charge of $6,274 for the property and equipment that was no longer being used for operations. During 2019, the Company recorded a gain on sale of asset of $1,593. |
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Liquidity and Working Capital
Our principal source of liquidity is cash in the bank. As of April 30, 2020, our current assets totaled $4,621, of which $2,505 was cash on hand. The Company also has accounts receivable of $2,116. These conditions help 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 year ended April 30, 2020, net cash flows used in operating activities was $38,962, which primarily related to the Company's net loss adjusted for the recognition of prepaid interest of $10,234, impairment of property and equipment of $6,274 and gain on debt settlement of convertible promissory notes and related accrued interest and a note with Strategic Funding of $62,031, compared to net cash used in operating activities of $41,461 for the year ended April 30, 2019, which primarily consisted of the Company's net loss adjusted for the accretion of debt discount of $134,753, debt financing penalties related to convertible notes of $63,788 and the impairment of inventory of $110,418.
For the year ended April 30, 2020, net cash flows provided by investing activities was $0, compared to $6,646 for the year ended April 30, 2019, which consisted of proceeds from the sale of a vehicle.
For the year ended April 30, 2020, net cash flows provided by financing activities were $41,070 primarily related to net proceeds and repayments of debt totaling $43,570 and the repayment of a related party advance for $2,500, compared to the year ended April 30, 2019, which reflected net cash provided by financing activities of $28,892, primarily related to net proceeds and repayments of debt of $21,742 and proceeds from a shareholder advance of $13,150 with a related repayment of these advances of $6,000.
During the period October 11, 2019 through April 30, 2020, the Company issued to Red Diamond Partners, LLC, unsecured, 8% convertible notes for $175,756 and a 5% note for $27,500 which is secured by all 5,000,000 issued and outstanding shares of Series A, Redeemable Preferred Stock, held by the Company’s Chief Executive Officer. As of the date these financial statements were issued, the Company was in default on the term note for $27,500. All related accrued interest under this note of approximately $1,300 is also in default.
The note for $27,500, has not been called for payment and to date no action has been taken seeking the underlying collateral of 5,000,000 shares of Series A, Redeemable, Preferred Stock. Should the lender seek the collateral, this would result in a change of control of the Company due to the voting control currently held by the Company’s Chief Executive Officer.
Effective August 1, 2020, the Company’s outstanding convertible notes payable (8%) and related accrued interest of approximately $700,000 were no longer in default as these debt instruments were extended to February 1, 2021.
Also, effective August 1, 2020, all principal and accrued interest outstanding under the convertible notes as of July 31, 2020 were consolidated into one single convertible note. Additional financing subsequent to July 31, 2020 retains the same terms as the original convertible notes payable.
The Company’s lenders at April 30, 2020 and as of September 14, 2020 are RDW and Red Diamond Partners, LLC.
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Publicly Reporting Company Considerations
We will face several material challenges of operating as a publicly reporting company and we expect to incur significant costs and expenses applicable to us as a public company. We anticipate that our ongoing costs and expenses of complying with our public reporting company obligations will be approximately $50,000 annually, which we expect to pay for out of proceeds from our financing efforts during the next twelve months from the date of this report. Subsequent to the next twelve-month reporting and compliance period, we expect to pay for our publicly reporting company compliance and reporting costs from our gross profits, although there is no assurance that sufficient revenues will be generated to cover said costs. We must structure, establish, maintain and operate our Company under corporate policies designed to ensure compliance with all required public company laws, rules and regulations, including, without limitation, the Securities Act of 1933, the Securities Act of 1934, the Sarbanes- Oxley Act of 2002, the Foreign Corrupt Practices Act and the respective rules and regulations promulgated thereunder. Some of our more significant challenges of being a publicly reporting company will include the following:
| · | We will have to carefully prepare and file, in the format mandated by the SEC, all periodic filings as required by the Securities Exchange Act of 1934 (Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and interim reports of material significant events on Form 8-K), as well as insider reporting compliance for all officers and director under Section 16 of the Securities Exchange Act of 1934 on Forms 3, 4 and 5; |
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| · | We will have to assure that our corporate governance principles and Board minutes are properly drafted and maintained; |
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| · | We will have to carefully analyze and assess all disclosures in all forms of public communications, including periodic SEC filings, press releases, website postings, and investor conferences to assure legal compliance; |
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| · | We will have assured corporate and SEC legal compliance with respect to proxy statements and information statements circulated for our annual shareholder meetings, shareholder solicitations and other shareholder information events; |
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| · | We will have to assure securities law compliance for all equity-based employee benefit plans, including registration statements and prospectus distribution procedures; |
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| · | We will have to continuously analyze the specific impact on our Company of all significant SEC initiatives, policies, proposals, and developments, as well as assess the rules of the Public Company Accounting Oversight Committee on governance procedures of the Company and our audit committee; |
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| · | We will have to comply with the specific listing requirements of a stock exchange if we qualify and apply for such listing; |
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| · | Being a public company increases our director and officer liability insurance costs; |
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| · | We will have to interface with our Transfer Agent regarding issuance and trading of our common stock, which may include Rule 144 stock transfer compliance matters; and |
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| · | We will incur additional costs for legal services as a function of our needs to seek guidance on securities law disclosure questions and evolving compliance standards. |
We have assigned a high priority to corporate compliance and our public company reporting obligations, however, there can be no assurance that we will have sufficient cash resources available to satisfy our public company reporting and compliance obligations. If we are unable to cover the cost of proper administration of our public company compliance and reporting obligations, we could become subject to sanctions, fines and penalties, our stock could be barred from trading in public capital markets and we may have to cease operations.
Our actual results may differ from our projections if there are material changes in any of the factors or assumptions upon which we have based our projections. Such factors and assumptions, include, without limitation, the development of our proprietary technology platform and our products, the timing of such development, market acceptance of our products, protection of our intellectual property, our success in implementing our strategic, operating and personnel initiatives and our ability to commercialize our products, any of which could impact sales, costs and expenses and/or planned strategies and timing. As a result, it is possible that we may require significantly more capital resources to meet our capital needs.
| 10 |
| Table of Contents |
Off- Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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:
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| · | we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and |
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| · | 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. |
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.
Our most critical accounting estimates include:
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| · | the recognition and measurement of current and deferred income taxes, which impact our provision for taxes |
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| · | Fair value measurements |
Below, we discuss this policy further, as well as the estimates and judgments involved.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.
When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company’s utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
| 11 |
| Table of Contents |
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income, and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 — Quoted prices for identical assets and liabilities traded in active exchange markets, such as the national stock exchanges.
Level 2 — Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data.
Level 3 — Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data.
The Company has various processes and controls in place to ensure that fair value is reasonably estimated. Where market information is not available to support internal valuations, independent reviews of the valuations are performed, and any material exposures are evaluated.
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.
| 12 |
| Table of Contents |
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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| 13 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Force Protection Video Equipment, Corp
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Force Protection Video Equipment, Corp. (the “Company”) as of April 30, 2020 and 2019, the related consolidated statements of operations, statement of changes in stockholders’ deficit and cash flows for each of the two years in the period ended April 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of April 30, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended April 30, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a net loss of $32,217 and net cash used in operations of $38,962 for the year ended of April 30, 2020 and a working capital deficit of $735,823 and stockholders’ deficit of $740,823 as of April 30, 2020. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits include performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Assurance Dimensions
Certified Public Accountants
We have served as the Company’s auditor since 2019.
Margate, Florida
September 14, 2020
| 14 |
| Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Balance Sheets
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| April 30, 2020 |
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| April 30, 2019 |
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| Assets |
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| Current Assets |
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| Cash |
| $ | 2,505 |
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| $ | 397 |
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| Accounts receivable |
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| 2,116 |
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| 6,813 |
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| Total Current Assets |
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| 4,621 |
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| 7,210 |
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| Property and Equipment - net |
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| - |
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| 6,274 |
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| Other Assets |
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| Operating lease - right of-use asset - net |
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| - |
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| 29,208 |
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| Deposits |
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| - |
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| 1,650 |
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| Total Other Assets |
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| - |
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| 30,858 |
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| Total Assets |
| $ | 4,621 |
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| $ | 44,342 |
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| Liabilities and Stockholders' Deficit | ||||||||
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| Current Liabilities |
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| Accounts payable and accrued expenses |
| $ | 237,233 |
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| $ | 263,173 |
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| Related party advance |
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| 12,150 |
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| 14,650 |
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| Deferred software maintenance revenue |
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| - |
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| 1,270 |
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| Operating lease - right-of-use liability - net |
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| 18,033 |
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| Loan - net |
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| - |
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| 17,966 |
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| Note payable |
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| 27,500 |
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| Convertible notes payable - net |
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| 463,561 |
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| 439,465 |
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| Total Current Liabilities |
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| 740,444 |
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| 754,557 |
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| Long-Term Liabilities |
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| Operating lease - right of-use liability - net |
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| 11,778 |
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| Warranty |
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| 136 |
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| Total Long-Term Liabilities |
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| 11,914 |
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| Total Liabilities |
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| 740,444 |
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| 766,471 |
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| Commitments and Contingencies (Note 5) |
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| Series A, Redeemable Preferred Stock - Related Party - $0.0001 par value, 20,000,000 shares authorized 5,000,000 shares issued and outstanding, respectively |
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| 5,000 |
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| 5,000 |
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| Stockholders' Deficit |
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| Common stock, $0.00001 par value, 20,000,000,000 shares authorized 841,184,289 shares issued and outstanding, respectively |
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| 84,119 |
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| 84,119 |
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| Additional paid-in capital |
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| 3,780,562 |
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| 3,762,039 |
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| Accumulated deficit |
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| (4,605,504 | ) |
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| (4,573,287 | ) |
| Total Stockholders' Deficit |
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| (740,823 | ) |
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| (727,129 | ) |
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| Liabilities and Stockholders' Deficit |
| $ | 4,621 |
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| $ | 44,342 |
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The accompanying notes are an integral part of these consolidated financial statements
| 15 |
| Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Statements of Operations
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| 2020 |
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| 2019 |
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| Revenues |
| $ | 63,324 |
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| $ | 163,740 |
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| Cost of revenues |
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| 27,992 |
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| 184,408 |
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| Gross profit (loss) |
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| 35,332 |
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| (20,668 | ) |
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| General and administrative expenses |
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| 46,135 |
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| 222,217 |
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| Loss from operations |
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| (10,803 | ) |
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| (242,885 | ) |
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| Other income (expense) |
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| Interest expense |
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| (77,774 | ) |
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| (103,992 | ) |
| Accretion of debt discount |
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| - |
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| (134,753 | ) |
| Impairment of property and equipment |
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| (6,274 | ) |
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| - |
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| Gain on debt settlements - net |
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| 62,031 |
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| - |
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| Gain on lease termination |
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| 603 |
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| - |
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| Default financing penalties |
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| - |
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| (63,788 | ) |
| Gain on sale of asset |
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| - |
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| 1,593 |
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| Total other income (expense) - net |
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| (21,414 | ) |
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| (300,940 | ) |
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| Net loss |
| $ | (32,217 | ) |
| $ | (543,825 | ) |
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| Loss per share - basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
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| Weighted average number of shares - basic and diluted |
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| 841,184,289 |
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| 832,752,965 |
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The accompanying notes are an integral part of these consolidated financial statements
| 16 |
| Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Statements of Changes in Stockholders' Deficit
For the Years Ended April 30, 2020 and 2019
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| Additional |
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| Total |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Deficit |
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| Deficit |
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| April 30, 2019 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,762,039 |
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| $ | (4,573,287 | ) |
| $ | (727,129 | ) |
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| Forgiveness of accrued payroll - related party |
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| - |
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| - |
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| 18,523 |
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| - |
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| 18,523 |
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| Net loss - year ended April 30, 2020 |
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| - |
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| - |
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| - |
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| (32,217 | ) |
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| (32,217 | ) |
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| April 30, 2020 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,780,562 |
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| $ | (4,605,504 | ) |
| $ | (740,823 | ) |
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| April 30, 2018 |
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| 194,415,754 |
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| $ | 19,441 |
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| $ | 3,598,589 |
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| $ | (4,029,462 | ) |
| $ | (411,432 | ) |
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| Shares issued in satisfaction of loan debt and related accrued interest |
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| 646,768,535 |
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| 64,678 |
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| 50,611 |
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| - |
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| 115,289 |
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| Discount on convertible promissory note due to beneficial conversion feature |
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| - |
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| - |
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| 112,839 |
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| - |
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| 112,839 |
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| Net loss - year ended April 30, 2019 |
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| - |
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| - |
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| - |
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| (543,825 | ) |
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| (543,825 | ) |
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| April 30, 2019 |
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| 841,184,289 |
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| $ | 84,119 |
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| $ | 3,762,039 |
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| $ | (4,573,287 | ) |
| $ | (727,129 | ) |
The accompanying notes are an integral part of these consolidated financial statements
| 17 |
| Table of Contents |
Force Protection Video Equipment Corp.
Consolidated Statements of Cash Flows
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| For the Year Ended April 30, |
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| 2020 |
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| 2019 |
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| Operating activities |
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| Net loss |
| $ | (32,217 | ) |
| $ | (543,825 | ) |
| Adjustments to reconcile net loss to net cash used in operations |
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| Bad debt |
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| 343 |
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| - |
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| Depreciation and amortization |
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| - |
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| 5,418 |
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| Accretion of debt discount and beneficial conversion feature |
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| - |
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| 134,753 |
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| Debt financing penalties |
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| 63,788 |
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| Recognition of prepaid interest expense |
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| 10,234 |
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| - |
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| Impairment of inventory |
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| - |
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| 110,418 |
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| Impairment of property and equipment |
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| 6,274 |
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| - |
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| Gain on ROU lease liability termination |
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| (603 | ) |
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| - |
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| Gain on debt settlements - net |
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| (62,031 | ) |
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| - |
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| Gain on sale of asset |
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| - |
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| (1,593 | ) |
| Changes in operating assets and liabilities |
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| (Increase) decrease in |
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| Accounts receivable |
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| 4,354 |
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| 2,422 |
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| Inventory |
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| - |
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| 4,722 |
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| Deposits and other assets |
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| 1,650 |
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| 15,793 |
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| Increase (decrease) in |
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| Accounts payable and accrued expenses |
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| 34,440 |
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| 162,780 |
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| Deferred software maintenance revenue |
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| (1,270 | ) |
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| - |
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| Other |
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| - |
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| 3,863 |
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| Warranty |
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| (136 | ) |
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| - |
|
| Net cash used in operating activities |
|
| (38,962 | ) |
|
| (41,461 | ) |
|
|
|
|
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
|
|
|
| Proceeds from disposal of vehicle |
|
| - |
|
|
| 6,646 |
|
| Net cash provided by financing activities |
|
| - |
|
|
| 6,646 |
|
|
|
|
|
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
|
|
|
| Proceeds from related party advance |
|
| - |
|
|
| 13,150 |
|
| Repayments on related party advance |
|
| (2,500 | ) |
|
| (6,000 | ) |
| Proceeds from note payable |
|
| 27,500 |
|
|
| - |
|
| Proceeds from loans |
|
| - |
|
|
| 39,574 |
|
| Repayments on loans |
|
| (27,226 | ) |
|
| (23,332 | ) |
| Proceeds from issuance of convertible notes payable |
|
| 175,756 |
|
|
| 5,500 |
|
| Repayments on convertible notes payable |
|
| (132,460 | ) |
|
| - |
|
| Net cash provided by financing activities |
|
| 41,070 |
|
|
| 28,892 |
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash |
|
| 2,108 |
|
|
| (5,923 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash - beginning of year |
|
| 397 |
|
|
| 6,320 |
|
|
|
|
|
|
|
|
|
|
|
| Cash - end of year |
| $ | 2,505 |
|
| $ | 397 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
| Cash paid for interest |
| $ | 56,304 |
|
| $ | 1,060 |
|
| Cash paid for income tax |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
| Forgiveness of accrued payroll - related party |
| $ | 18,523 |
|
| $ | - |
|
| Termination of ROU lease asset and related liability |
| $ | 29,208 |
|
| $ | - |
|
| Stock issued to settle convertible notes payable and related accrued interest |
| $ | - |
|
| $ | 115,289 |
|
The accompanying notes are an integral part of these consolidated financial statements
| 18 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Note 1 - Organization and Nature of Operations
Organization
Force Protection Video Equipment Corp., together with its wholly owned subsidiary, Cobraxtreme HD Corp. (collectively, “we”, “us”, “our” or the “Company”), sells video and audio capture devices and accessories to consumers and law enforcement. The Company was incorporated on March 11, 2011, under the laws of the State of Florida. Cobraxtreme HD Corp. was incorporated under the laws of the State of North Carolina on September 19, 2017 and currently is non-operating. On February 2, 2015, the Company changed its name to Force Protection Video Equipment Corp.
The Company’s fiscal year end is April 30.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Liquidity and Going Concern
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying consolidated financial statements, for the year ended April 30, 2020, the Company had:
| · | Net loss from operations of $32,217 |
| · | Net cash used in operations was $38,962 |
Additionally, at April 30, 2020, the Company had:
| · | Accumulated deficit of $4,605,504, |
| · | Stockholders’ deficit of $740,823; and |
| · | Working capital deficit of $735,823 |
The Company is currently in default on certain convertible debt instruments. In September and October 2019, the Company reached an agreement to settle certain of its in-default convertible notes, loans, and related accrued interest (See Note 4 for additional changes to the Company’s convertible notes and term note). Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.
| 19 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from the sales of its goods and services to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis.
In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flow and cash usage forecasts for the year ending April 30, 2020, and our current capital structure including equity-based instruments and our obligations and debts.
We expect that our existing cash and cash equivalents as of April 30, 2020, will not be sufficient to enable us to fund our anticipated level of operations based on our current operating plans, through the fiscal year end 2021. Accordingly, we will require additional capital to fund our operations. We anticipate raising additional capital through the private and public sales of our equity or debt securities, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurance that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us.
At April 30, 2020, the Company had $2,505 in cash. If we do not raise sufficient capital in a timely manner, among other things, we may be forced to scale back our operations or cease operations all together.
During the year ended April 30, 2020, the Company was able to raise $203,256 in gross proceeds in convertible promissory notes ($175,756) and a note payable ($27,500). The Company’s capital-raising efforts are ongoing, and the Company has undertaken the following to reduce its burn rate: an ongoing review and reduction of monthly operating expenses. If sufficient capital cannot be raised during fiscal year 2021, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations to the extent practicable.
Because COVID-19 infections have been reported throughout the United States, certain federal, state, and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.
| 20 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition, and results of operations.
The significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time. In light of the COVID-19 pandemic, the Company has taken proactive steps to manage its costs and discretionary spending.
These factors create substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with US GAAP and include the accounts of the Company and its wholly owned subsidiary, Cobraxtreme HD Corp. All intercompany transactions and balances have been eliminated.
Business Segments
The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics.
| 21 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make certain 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, and those estimates may be material.
Significant estimates during the year ended April 30, 2020 include estimated useful life and related impairment of property and equipment, valuation of operating lease right-of-use (“ROU”) assets and liabilities and the related lease termination and estimates of current and deferred income taxes and deferred tax valuation allowance.
Fair Value of Financial Instruments
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
|
| · | Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
| · | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
|
| · | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions.
| 22 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments, including cash, net accounts receivable, accounts payable and accrued expenses, are carried at historical cost. At April 30, 2020 and April 30, 2019, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Concentrations of Risk
During the years ended April 30, 2020 and 2019, respectively, the following customers accounted for greater than 10% of sales as follows:
|
|
| Year Ended |
| |||||
| Customer |
| April 30, 2020 |
|
| April 30, 2019 |
| ||
| A |
|
| 11 | % |
|
| - |
|
| B |
|
| 10 | % |
|
| - |
|
| Total |
|
| 21 | % |
|
| - |
|
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At April 30, 2020 and 2019, respectively, the Company did not have any cash equivalents.
| 23 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels and the Company has not experienced any losses in such accounts at April 30, 2020 and 2019, respectively.
Accounts Receivable
Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.
Allowance for doubtful accounts was $0 and $0 at April 30, 2020 and 2019, respectively.
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 revenues upon sale using the average-cost method. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company plans to become a drop ship third-party seller that will reduce the need to carry inventory.
During the years ended April 30, 2020 and 2019, the Company wrote down $0 and $110,418, respectively, of obsolete inventory.
Long-lived Assets
Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company’s stock price for a sustained period of time; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.
| 24 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets ranging from three to seven years.
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.
On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. All related property and equipment at that time were determined to be impaired.
During the years ended April 30, 2020 and 2019, the Company recorded impairment losses of property and equipment of $6,274 and $0, respectively. See Notes 3 and 5.
Right of Use Assets and Lease Obligations
The Right of Use (“ROU”) Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.
Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the Company’s operations remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company.
Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of operations.
| 25 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. The Company had an ROU asset of $29,208 and a lease liability of $29,811 at the date of termination, resulting in a gain on lease termination of $603. See Note 5.
Derivative Liabilities
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. The Company uses a Black-Scholes option pricing model to determine fair value.
Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment recognized in the Company’s consolidated statements of operations
The Company has adopted ASU 2017-11, “Earnings per share (Topic 260)”, provided that when determining whether certain financial instruments should be classified as liability 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. If a down round feature on the conversion option embedded in the note is triggered, the Company will evaluate whether a beneficial conversion feature exists, the Company will record the amount as a debt discount and will amortize it over the remaining term of the debt.
If the down round feature in the warrants that are classified as equity is triggered, the Company will recognize the effect of the down round as a deemed dividend, which will reduce the income available to common stockholders.
At April 30, 2020 and 2019, respectively, the Company did not have any derivative liabilities.
Stock Warrant Liability
The Company accounts for certain stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company are estimated using a Black-Scholes option pricing model, at each measurement date.
At April 30, 2020 and 2019, respectively, the Company did not have any warrant liabilities.
| 26 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Debt Discounts (Derivative Liabilities)
The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes (ASC 815) in accordance with ASC 470-20, Debt with Conversion and Other Options. These costs are classified as a component of debt discount on the consolidated balance sheets as a direct deduction from the debt liability. The Company amortizes these costs over the term of the related debt agreement as interest expense (accretion) - debt discount, in the consolidated statements of operations.
At April 30, 2020 and 2019, respectively, the Company did not have any debt discounts recorded in connection with any derivative or stock warrant liabilities.
Beneficial Conversion Features and Debt Discounts
For instruments that are not considered liabilities under ASC 480 or ASC 815, the Company applies ASC 470-20 to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock (whereby the conversion price is lower than the fair market value) into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this debt discount amount to the proceeds allocated to the convertible instrument.
Revenue Recognition
Our revenue is generated from the sale of products consisting primarily of video and audio capture devices and accessories. Payment or invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue is recorded net of discounts and promotions and is disaggregated based on significant product lines, types of customers and timing of revenue recognition. See Note 7.
ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive.
| 27 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows:
Identification of the contract, or contracts, with a customer
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer.
Identification of the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.
When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.
Determination of the transaction price
The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Variable consideration is described in detail below.
| 28 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Allocation of the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.
Recognition of revenue when, or as, we satisfy a performance obligation
We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.
Principal versus Agent Considerations
When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.
Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:
We are primarily responsible for fulfilling the promise to provide the specified good or service
When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.
We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer.
We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.
| 29 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The entity has discretion in establishing the price for the specified good or service
We have discretion in establishing the price our customer pays for the specified goods or services.
Contract Liabilities
Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities have been historically low and are generally recorded as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. We have no Long-term contract liabilities which would represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year.
| 30 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Cost of Revenues
Cost of revenues represents costs directly related to the production, manufacturing and freight-in of the Company’s product inventory purchased from third-party manufacturers.
Income Taxes
The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. At April 30, 2020 and 2019, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded for the year ended April 30, 2020 and 2019, respectively. As of April 30, 2020, tax years 2017-2020 remain open for IRS audit.
Marketing and Advertising Costs
Marketing and advertising costs are expensed as incurred.
The Company recognized $3,313 and $9,303 in marketing and advertising costs during the years ended April 30, 2020 and 2019, respectively, and are included as a component of general and administrative expense on the consolidated statements of operations.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value, the Company considers the following assumptions in the Black-Scholes model:
| · | Exercise price, |
| · | Expected dividends, |
| · | Expected volatility, |
| · | Risk-free interest rate, |
| · | Expected life of option; and |
| · | Expected forfeiture rate |
There were no stock option grants during the years ended April 30, 2020 and 2019, respectively.
Additionally, there were no stock options issued, outstanding or exercisable as of April 30, 2020 and April 30, 2019, respectively.
Common stock awards
The Company may grant common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded in accordance with ASU 2018-07 (June 2018) on the consolidated statement of operations in the same manner and charged to the same account as if such settlements had been made in cash.
There were no stock awards granted during the years ended April 30, 2020 and 2019, respectively.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Stock Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance if there is not a service period.
There were no warrants grants during the years ended April 30, 2020 and 2019, respectively. Additionally, there were no warrants issued, outstanding or exercisable as of April 30, 2020 and 2019, respectively.
Basic and diluted loss per share
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
The following potentially dilutive equity securities outstanding as of April 30, 2020 and 2019, respectively, were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:
|
|
| April 30, 2020 |
|
| April 30, 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Convertible notes (P&I) |
|
| 3,312,069,399 |
|
|
| 9,649,685,143 |
|
| 33 |
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Recently Issued Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 (with amendments issued in 2018), which changes the accounting for leases and requires expanded disclosures about leasing activities. This new guidance also requires lessees to recognize a ROU asset and a lease liability at the commencement date for all leases with terms greater than twelve months. Accounting by lessors is largely unchanged. ASU 2016-02 is effective for fiscal periods beginning after December 15, 2018. We adopted ASU 2016-02 on January 1, 2019 using the modified retrospective optional transition method. Thus, the standard was applied starting January 1, 2019 and prior periods were not restated.
We applied the package of practical expedients permitted under the transition guidance. As a result, we did not reassess the identification, classification and initial direct costs of leases commencing before the effective date. We also applied the practical expedient to not separate lease and non-lease components to all new leases as well as leases commencing before the effective date. See Note 5.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” This guidance simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal periods beginning after December 31, 2019.
Early adoption is permitted. We adopted ASU 2017-04 and it did not have a material impact on our consolidated financial statements.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
In June 2018, the FASB issued ASU 2018-07, “Improvements to Non-employee Share-Based Payment Accounting.” This guidance expands the scope of Topic 718 “Compensation - Stock Compensation” to include share-based payment transactions for acquiring goods and services from non-employees, but excludes awards granted in conjunction with selling goods or services to a customer as part of a contract accounted for under ASC 606, “Revenue from Contracts with Customers.” The adoption of ASU 2018-07 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement”, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2018-13 during the quarter ended April 30, 2020 and its adoption did not have any material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which amends ASC 350-40, “Intangibles - Goodwill and Other - Internal-Use Software.” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and requires the capitalized implementation costs to be expensed over the term of the hosting arrangement. The accounting for the service element of a hosting arrangement that is a service contract is not affected. ASU 2018-15 is effective for fiscal periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of ASU 2018-15, effective January 1, 2019, did not have a material impact on our consolidated financial statements.
Recent Accounting Updates Not Yet Effective
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Note 3 – Property and Equipment
Property and equipment consisted of the following:
|
|
|
|
|
|
| Estimated Useful | |||||
|
|
| April 30, 2020 |
|
| April 30, 2019 |
|
| Lives (Years) | |||
|
|
|
|
|
|
|
|
|
| |||
| Furniture and fixtures |
| $ | - |
|
| $ | 9,656 |
|
| 5 - 7 | |
| Computers and office equipment |
|
| - |
|
|
| 4,226 |
|
| 3 - 5 | |
| Leasehold improvements |
|
| - |
|
|
| 1,775 |
|
| Life of lease | |
|
|
|
| - |
|
|
| 15,657 |
|
|
| |
| Accumulated depreciation |
|
| - |
|
|
| (9,383 | ) |
|
| |
| Total property and equipment - net |
| $ | - |
|
| $ | 6,274 |
|
|
| |
Depreciation expense for the years ended April 30, 2020 and 2019 was $0 and $5,418, respectively.
The Company sold two vehicles during the year ended April 30, 2019 for $6,646. The Company recognized a gain on the sale of assets in the amount of $1,593.
On May 1, 2019, the Company recorded an impairment loss of $6,274. See Note 5 regarding related ROU lease liability termination.
Note 4 – Debt
Convertible Notes Payable
The Company has issued numerous convertible promissory notes. In certain cases, these notes contained conversion features that require a discount to the market price based upon a formula using the Company’s stock prices. The Company has 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.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The following represents a summary of the Company’s lenders, key terms of the debt and outstanding balances at April 30, 2020 and 2019, respectively. See Note 11 regarding the extension of the maturity date for the Company’s 8% convertible notes to February 1, 2021.
Lenders
RDW Capital, LLC (“RDW”) - Convertible Notes (6 Notes)
| Term of Convertible Notes |
| Approximately 6 months |
| Maturity Dates |
| September 10, 2016 – October 31, 2018 |
| Interest Rate |
| 8% |
| Default Interest Rate |
| 24% |
| Collateral |
| Unsecured |
| Conversion Discount |
| 60% of the lowest trading price twenty (20) days immediately preceding conversion |
| Conversion Restriction |
| Ownership cannot exceed 4.99% |
| Prepayment Penalty (P&I) |
| 130% |
| Default Penalty (P&I) |
| 150% |
| Common Share Reserve |
| Three (3) times the possible shares needed upon conversion |
Effective May 1, 2019, the lender amended the conversion price for all outstanding notes to a fixed price of$0.0003. As a result of this amendment, the Company determined that the present value of the cash flows of the outstanding debt were similar (less than 10%) to the present value of the cash flows of the new debt.
The Company had no debt issuance costs left to amortize from the prior outstanding, in-default notes. Additionally, in connection with the change in conversion price, there were no fees paid to the lender or other third parties. The change in terms (conversion price fixed at $0.0003) resulted in a debt modification, accordingly, there is no effect for financial reporting.
Additionally, on May 1, 2019, the lenders amended all of their 8% convertible promissory notes previously outstanding as well as those issued after May 1, 2019 to suspend the default provision which would allow for a default penalty of 150% on the outstanding principal and accrued interest at the time of default and upon the lender accelerating the amounts due. The notes, while in default, have not been accelerated for payment. The lender has reserved the right to reinstate the default provision at their discretion.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Power Up Lending Group Ltd. (“Power Up”) - Convertible Notes (3 Notes)
| Term of Convertible Notes |
| Approximately 9 months |
| Maturity Dates |
| November 16, 2017 – December 15, 2018 |
| Interest Rate |
| 12% |
| Default Interest Rate |
| 22% |
| Collateral |
| Unsecured |
| Conversion Discount |
| 61% of the average of the lowest two (2) trading prices twenty (20) days immediately preceding conversion |
| Conversion Restriction #1 |
| Ownership cannot exceed 4.99% |
| Conversion Restriction #2 |
| Not convertible until 180 days after issuance of convertible note |
| Prepayment Penalty (P&I) |
| 115% - 140% (within 1st 180 days of note being outstanding) |
| Default Penalty (P&I) |
| 150% |
| Common Share Reserve |
| N/A |
Adar Bays, LLC (“Adar”) - Convertible Note (1 Note)
| Term of Convertible Notes |
| Approximately 12 months |
| Maturity Dates |
| March 5, 2018 – March 5, 2019 |
| Interest Rate |
| 8% |
| Default Interest Rate |
| 24% |
| Collateral |
| Unsecured |
| Conversion Discount |
| 60% of the lowest trading price twenty (20) days immediately preceding conversion |
| Conversion Restriction |
| Not convertible until 180 days after issuance of convertible note |
| Prepayment Penalty (P&I) |
| N/A |
| Default Penalty (P&I) |
| N/A |
| Common Share Reserve |
| Three (3) times the possible shares needed upon conversion |
| 38 |
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Red Diamond Partners, LLC (“Red”) – Convertible Notes (8 Notes)
| Issuance Date of Convertible Notes |
| October 11, 2019 – January 14, 2020 |
| Term of Convertible Notes |
| Approximately 6 months |
| Maturity Dates |
| April 11, 2020 – July 14, 2020 |
| Gross Proceeds |
| $175,756 |
| Interest Rate |
| 8% |
| Default Interest Rate |
| 24% |
| Collateral |
| Unsecured |
| Conversion Feature |
| Fixed at $0.0003 |
| Conversion Restriction |
| Ownership cannot exceed 4.99% |
| Prepayment Penalty (P&I) |
| 130% |
| Default Penalty (P&I) |
| 150% |
| Common Share Reserve |
| Three (3) times the possible shares needed upon conversion |
Red Diamond Partners, LLC (“Red”) – Term Note (1 Note)
| Issuance Date of Note |
| October 11, 2019 |
| Term of Note |
| Approximately 6 months |
| Maturity Date |
| April 11, 2020 |
| Gross Proceeds |
| $27,500 |
| Interest Rate |
| 5% |
| Default Interest Rate |
| 24% |
| Collateral |
| 5,000,000 shares, Series A, Redeemable Preferred Stock – all held by the Company’s CEO |
| Conversion Feature |
| None |
| Conversion Restriction |
| N/A |
| Prepayment Penalty (P&I) |
| 130% |
| Default Penalty (P&I) |
| N/A |
| Common Share Reserve |
| N/A |
As of April 30, 2020 and September 14, 2020, the term note of $27,500 was in default.
The lender has not called this debt and is not seeking to foreclose on the collateral and obtain the 5,000,000 shares of Series A, Redeemable, Preferred Stock. See Note 6.
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| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
The following is a summary of the Company’s convertible notes and related accrued interest (included as a component of accounts payable and accrued expenses) at April 30, 2020 and 2019, respectively:
|
|
| Convertible Notes Payable |
| |||||
|
|
|
|
|
|
|
| ||
|
|
| Amounts |
|
| In-Default |
| ||
| Balance - April 30, 2018 |
|
| 480,623 |
|
| $ | 210,000 |
|
| Proceeds |
|
| 5,500 |
|
|
|
|
|
| Default Penalties |
|
| 63,788 |
|
|
|
|
|
| Conversions |
|
| (110,446 | ) |
|
|
|
|
| Balance - April 30, 2019 |
|
| 439,465 |
|
|
| 439,465 |
|
| Proceeds |
|
| 175,756 |
|
|
|
|
|
| Repayments |
|
| (132,460 | ) |
|
|
|
|
| Gain on Debt Settlements - Net |
|
| (19,200 | ) |
|
|
|
|
| Balance - April 30, 2020 |
| $ | 463,561 |
|
| $ | 420,661 |
|
|
|
| Accrued Interest Payable |
| |||||
|
|
|
|
|
|
|
| ||
|
|
| Amounts |
|
| In-Default |
| ||
| Balance - April 30, 2018 |
|
| 62,281 |
|
| $ | 62,281 |
|
| Interest Expense - Net |
|
| 103,992 |
|
|
|
|
|
| Conversions |
|
| (16,637 | ) |
|
|
|
|
| Balance - April 30, 2019 |
|
| 149,636 |
|
|
| 149,636 |
|
| Interest Expense - Net |
|
| 65,367 |
|
|
|
|
|
| Repayments |
|
| (2,040 | ) |
|
|
|
|
| Gain on Debt Settlements - Net |
|
| (41,857 | ) |
|
|
|
|
| Balance - April 30, 2020 |
| $ | 171,106 |
|
| $ | 168,174 |
|
Convertible Note Settlements
(A) Power Up Lending Group Ltd.
On October 8, 2019, the Company executed a settlement agreement for $60,000. All outstanding notes and accrued interest totaling $129,938 were paid in three installments:
|
| 1. | October 11, 2019 for $30,000, |
|
| 2. | October 24, 2019 for $15,000; and |
|
| 3. | November 19, 2019 for $15,000 |
For the fiscal year end April 30, 2020, the Company recognized a gain on debt settlement (principal and interest) of $69,938.
| 40 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
(B) Adar Bays, LLC
On October 3, 2019, the Company executed a settlement agreement for $74,750. All outstanding notes and accrued interest totaling $65,619 were paid in three installments:
|
| 1. | October 11, 2019 for $37,000, |
|
| 2. | October 24, 2019 for $18,750; and |
|
| 3. | November 26, 2019 for $18,750 |
For the fiscal year end April 30, 2020, the Company recognized a loss on debt settlement (principal and interest) of $8,881.
Gain on debt settlement – net, related to convertible notes and related accrued interest for the fiscal year end April 30, 2020 was $61,057.
Loan Settlement
On September 25, 2018, the Company repaid an outstanding loan totaling $13,372 with funds received from Strategic Funding Source, Inc.
On September 25, 2018, the Company borrowed $39,574 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 was to be achieved through 246 daily bank account withdrawals of $156.
The Loan Agreement was secured by all current and future assets of the Company. As of April 30, 2019, the Company was in arrears under the terms of the Agreement by $13,104 and the balance owed on the note was $17,966, after a debt discount of $10,234.
On September 4, 2019, the Company executed a settlement agreement with Strategic Funding Source, Inc. for $27,226. The outstanding balance of the loan was $28,200. Payment was made on October 18, 2019. For the fiscal year end April 30, 2020, the Company recognized a gain on debt settlement (principal and interest) of $974.
Additionally, the $10,234 debt discount was expensed during the year ended April 30, 2020.
Total gain on debt settlement – net, related to convertible notes and related accrued interest and the loan above for the fiscal year end April 30, 2020 was $62,031.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Note 5 – 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.
Right of Use Assets and Liabilities (“ROU”)
In February 2016, the FASB issued ASU No. 2016-02 (“ASC 842”), “Leases”, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. Subsequently, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842”, “Leases”, ASU No. 2018-11, “Targeted Improvements”, ASU No. 2018-20, “Narrow-Scope Improvements for Lessors”, and ASU 2019-01, “Codification Improvements”, to clarify and amend the guidance in ASU No. 2016-02. ASC 842 eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. This standard is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company early adopted the provisions of ASC 842 during the fiscal year ended April 30, 2018.
On November 15, 2017, the Company entered into a lease for office space. The lease expires on November 30, 2020 and includes an option to extend the lease an additional term of three years.
During fiscal year 2018, the Company determined the ROU Asset and lease liability to be $51,063 which compares to the total, undiscounted cash flow payments of the initial three-year term of $61,200. As of April 30, 2018, since the right of use asset and lease liability were the same, no adjustment to retained earnings was required. 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 related lease liability.
Rent is $1,650 per month and is increased each anniversary by 3%. The Company paid a $1,650 security deposit. In connection with the lease termination noted below, the $1,650 deposit was recognized as rent expense on May 1, 2019.
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding lease. The following summarizes the lease termination:
| Operating lease assets - termination date - May 1, 2019 |
| $ | 29,208 |
|
| Operating lease liabilities - termination date - May 1, 2019 |
|
| 29,811 |
|
| Operating lease asset and (liability) - net - termination date May 1, 2019 |
|
| (603 | ) |
| Gain on lease termination |
|
| 603 |
|
| Operating lease asset and (liability) - net - April 30, 2020 |
| $ | - |
|
We recognized lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying Consolidated Statements of Operations.
During the year ended April 30, 2020 and 2019, operating lease expense was $0 and $15,300, respectively.
NOTE 6 – SERIES A, REDEEMABLE PREFERRED STOCK – RELATED PARTY
At April 30, 2020 and 2019, respectively, there were 5,000,000 shares of $0.0001 par value, Series A, Redeemable Preferred Stock outstanding held by the Company’s Chief Executive Officer (“CEO”). The Preferred Stock pays no dividends and has no conversion rights into common stock. Each share of Preferred Stock is entitled to 200 votes per share and is redeemable in whole, but not in part, at the option of the holder for $0.0001 per share. Due to the redemption feature being at the option of the holder, the Company classifies the purchase price in the temporary equity section of the balance sheet.
See Note 4 regarding these 5,000,000 shares serving as collateral for a debt issuance to Red Diamond Partners, LLC (“Red”) on October 11, 2019 for $27,500.
| 43 |
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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
NOTE 7 – REVENUES
All of the Company’s revenues are derived from business in North America. The following tables disaggregate our revenue by major product line, types of customers, and timing of revenue recognition for the years ended April 30, 2020 and 2019, respectively:
|
|
| April 30, 2020 |
|
| April 30, 2019 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Major Product Lines |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cameras |
| $ | 38,701 |
|
|
| 61 | % |
| $ | 150,490 |
|
|
| 92 | % |
| Accessories |
|
| 24,623 |
|
|
| 39 | % |
|
| 7,210 |
|
|
| 4 | % |
| Software |
|
| - |
|
|
| - |
|
|
| 6,040 |
|
|
| 4 | % |
| Total Net Revenue |
| $ | 63,324 |
|
|
| 100 | % |
| $ | 163,740 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Types of Customers |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Federal |
| $ | 3,166 |
|
|
| 5 | % |
| $ | 149,003 |
|
|
| 91 | % |
| State and Local |
|
| 58,258 |
|
|
| 92 | % |
|
| 3,275 |
|
|
| 2 | % |
| Non-government |
|
| 1,900 |
|
|
| 3 | % |
|
| 11,462 |
|
|
| 7 | % |
|
|
| $ | 63,324 |
|
|
| 100 | % |
| $ | 163,740 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Timing of Revenue Recognition |
| Revenue |
|
| % of Revenues |
|
| Revenue |
|
| % of Revenues |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Transferred at a point in time |
| $ | 63,324 |
|
|
| 100 | % |
| $ | 163,740 |
|
|
| 100 | % |
| Transferred over time |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| $ | 63,324 |
|
|
| 100 | % |
| $ | 163,740 |
|
|
| 100 | % |
| 44 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
NOTE 8 - STOCKHOLDER’S DEFICIT
April 30, 2020
During the year ended April 30, 2020, the Company’s CEO forgave accrued payroll of $18,523. Since the forgiveness occurred with a related party, accordingly, there can be no gain or loss, this results in a contribution to equity. See Note 9.
April 30, 2019
During the year ended April 30, 2019, the Company had the following activity:
| · | 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 its 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, |
| · | 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 report have not been updated to reflect the reverse split. |
| · | Issued 646,768,535 shares of common stock in satisfaction of loan debt and related accrued interest, having a fair value of $115,289; and |
| · | Recorded a debt discount of $112,839 on convertible promissory notes due to a beneficial conversion feature. |
NOTE 9 – RELATED PARTY TRANSACTIONS
Shareholder advances (repayments)
From time to time, the Company receives advances from and repays such advances to the Company’s CEO for working capital purposes and to repay indebtedness. The advances are non-interest bearing, unsecured and due on demand.
April 30, 2020
During the year ended April 30, 2020, the Company repaid $2,500, resulting in an outstanding balance of $12,150.
April 30, 2019
During the year ended April 30, 2019, the Company received proceeds of $13,150 and made repayments of $6,000, resulting in an outstanding balance of $14,650.
| 45 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
Pursuant to an employment agreement for the Company’s CEO (effective through November 30, 2020), the CEO is entitled to an annual salary of $100,000.
As of April 30, 2019, the Company owed deferred compensation in the amount of $16,538, an additional $1,985 was accrued for in 2020 bringing the total to $18,523. During the first quarter of 2020, all deferred compensation was forgiven (see Note 8). Additionally, the CEO agreed to suspend all compensation until such time the Company has sufficient cash flows to pay this salary under the terms of the agreement.
NOTE 10 – INCOME TAXES
The Company's tax expense differs from the "expected" tax expense for the period (computed by applying the blended corporate tax rate to loss before taxes), are approximately as follows:
|
|
| April 30, 2020 |
|
| April 30, 2019 |
| ||
| Federal income tax benefit net of state benefit - at 20.48% |
| $ | (7,000 | ) |
| $ | (114,000 | ) |
| State income tax - net of federal tax effect - 2.5% |
|
| (1,000 | ) |
|
| (18,000 | ) |
| Non-deductible items |
|
| (12,000 | ) |
|
| - |
|
| Subtotal |
|
| (20,000 | ) |
|
| (132,000 | ) |
| Valuation allowance |
|
| 20,000 |
|
|
| 132,000 |
|
|
|
| $ | - |
|
| $ | - |
|
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at April 30, 2020 and 2019 are approximately as follows:
|
|
| April 30, 2020 |
|
| April 30, 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Deferred Tax Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Net operating loss carryforwards |
| $ | (1,036,000 | ) |
| $ | (1,016,000 | ) |
| Total deferred tax assets |
|
| (1,036,000 | ) |
|
| (1,016,000 | ) |
| Less: valuation allowance |
|
| 1,036,000 |
|
|
| 1,016,000 |
|
| Net deferred tax asset recorded |
| $ | - |
|
| $ | - |
|
Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.
| 46 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
During the years ended April 30, 2020 and 2019, the valuation allowance increased by approximately $20,000 and $123,000, respectively. The increase for both years was primarily attributable to the increase in our net operating loss carryforwards. The total valuation allowance results from the Company’s estimate of its inability to recover its net deferred tax assets.
At April 30, 2020, the Company has federal and state net operating loss carryforwards, which are available to offset future taxable income, of approximately $4,511,000. The Company is in the process of analyzing their NOL and has not determined if the company has had any change of control issues that could limit the future use of NOL's. NOL carryforwards that were generated after 2017 of approximately $1,669,000 may only be used to offset 80% of taxable income and are carried forward indefinitely. NOL's totaling approximately $2,842,000 expired as of April 30, 2017.
These carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not completed an IRC Section 382/383 analysis. If a change in ownership were to have occurred, NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.
The Company files income tax returns in the United States and the state of North Carolina jurisdictions. Due to the Company’s net operating loss posture, all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At April 30, 2020 and 2019, there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.
| 47 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
NOTE 11 - SUBSEQUENT EVENTS
Effective August 1, 2020, the Company’s outstanding convertible notes payable (8%) and related accrued interest of approximately $589,000 were no longer in default as these debt instruments were extended to February 1, 2021.
Also, effective August 1, 2020, all principal and accrued interest outstanding under the convertible notes as of July 31, 2020 were consolidated into one single convertible note. Additional financing subsequent to July 31, 2020 retains the same terms as the original convertible notes payable.
The Company’s lenders at April 30, 2020 and as of September 14, 2020 are RDW and Red.
The following is a summary of the Company’s convertible notes payable and related accrued interest (included as a component of accounts payable and accrued expenses) for the fiscal year ended April 30, 2020 through September 14, 2020:
|
|
| Convertible Notes Payable |
| |||||
|
|
|
|
|
| ||||
|
|
| Amounts |
|
| In-Default |
| ||
| Balance - April 30, 2018 |
|
| 480,623 |
|
| $ | 210,000 |
|
| Proceeds |
|
| 5,500 |
|
|
|
|
|
| Default Penalties |
|
| 63,788 |
|
|
|
|
|
| Conversions |
|
| (110,446 | ) |
|
|
|
|
| Balance - April 30, 2019 |
|
| 439,465 |
|
|
| 439,465 |
|
| Proceeds |
|
| 175,756 |
|
|
|
|
|
| Repayments |
|
| (132,460 | ) |
|
|
|
|
| Gain on Debt Settlements - Net |
|
| (19,200 | ) |
|
|
|
|
| Balance - April 30, 2020 |
|
| 463,561 |
|
|
| 420,661 |
|
| Proceeds |
|
| 36,050 |
|
|
|
|
|
| Balance - July 31, 2020 |
|
| 499,611 |
|
|
| 491,061 |
|
| Proceeds |
|
| 41,195 |
|
|
|
|
|
| Balance - September 14, 2020 |
| $ | 540,806 |
|
| $ | - |
|
| 48 |
| Table of Contents |
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2020 AND 2019
|
|
| Accrued Interest Payable |
| |||||
|
|
|
|
|
|
|
| ||
|
|
| Amounts |
|
| In-Default |
| ||
| Balance - April 30, 2018 |
|
| 62,281 |
|
| $ | 62,281 |
|
| Interest Expense - Net |
|
| 103,992 |
|
|
|
|
|
| Conversions |
|
| (16,637 | ) |
|
|
|
|
| Balance - April 30, 2019 |
|
| 149,636 |
|
|
| 149,636 |
|
| Interest Expense - Net |
|
| 65,367 |
|
|
|
|
|
| Repayments |
|
| (2,040 | ) |
|
|
|
|
| Gain on Debt Settlements - Net |
|
| (41,857 | ) |
|
|
|
|
| Balance - April 30, 2020 |
|
| 171,106 |
|
|
| 168,174 |
|
| Interest Expense |
|
| 27,732 |
|
|
|
|
|
| Balance - July 31, 2020 |
| $ | 198,838 |
|
| $ | 198,701 |
|
| Interest Expense |
|
| 27,732 |
|
|
|
|
|
| Balance -July 31, 2020 |
|
| 198,88 |
|
|
| 198,701 |
|
| Interest Expense |
|
| 5,436 |
|
|
|
|
|
| Balance – September 14, 2020 |
| $ | 204,274 |
|
|
| - |
|
| 49 |
| Table of Contents |
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On October 16, 2019, the Registrant retained Assurance Dimensions as its principal independent accountants. The decision to retain Assurance Dimensions as the Registrant’s principal independent accountants was approved by the Registrant’s Board of Directors.
ITEM 9A: CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of April 30, 2020, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended. Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’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.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
| 50 |
| Table of Contents |
Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of April 30, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on that evaluation, our management concluded that as of the end of the fiscal year covered by this Annual Report on Form 10-K that our internal control over financial reporting has not been effective due to the following material weaknesses:
(1) Lack of segregation of duties. Management has found it necessary to limit the Company’s administrative staffing in order to conserve cash, until the Company’s level of business activity increases. As a result, there is limited segregation of duties amongst the employees, and the Company has identified this as a material weakness in the Company’s internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of employees and limited segregation of duties, management believes that the Company is capable of following its disclosure controls and procedures effectively.
(2) Lack of in-house US GAAP Expertise. Our current accounting personnel perform adequately in the basic accounting and recordkeeping function. However, our operations and business practices include complex technical accounting issues that are outside the routine basic functions. These technical accounting issues are complex and require significant expertise to ensure that the accounting and reporting are accurate and in accordance with generally accepted accounting principles.
(3) Lack of formal documentation. We maintain very informal controls over the billing and invoicing procedures. As a result, invoicing delays have occurred. This is a significant material weakness in the billing cycle because this will cause inaccuracies in the ultimate completion of the sale, which is the collection of cash. Also, sales cutoff complications could arise due to these delays in billing. Bills should be sent to customers as soon as possible to expedite payment and otherwise keep the accounting system current.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers (generally issuers with a public float under $75 million) from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.
(c) Changes in Internal Control over Financial Reporting
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.
None.
| 51 |
| Table of Contents |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE DIRECTORS AND EXECUTIVE OFFICERS
The following table presents information with respect to our officers, directors, and significant employees as of April 30, 2020:
| Name |
| Age |
| Position |
| Paul Feldman |
| 64 |
| Chief Executive Officer, President and Chief Financial Officer, Director |
Biographical Information Regarding Officers and Directors
Mr. Feldman has served as our sole Director, President, CEO and CFO since February 1, 2015. From October 2011 to January 29, 2015, Mr. Feldman served as President of Cobra Xtreme Video, Inc. which sold video cameras to consumers and had sales in excess of $300,000 Prior to that, Mr. Feldman had been an officer and director of a publicly traded company. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc. (LEA) whose common stock was previously listed on the OTCBB and the American Stock Exchange. LEA was in the business of manufacturing surveillance products and audio intelligent devices which were sold to the military and law enforcement. In his last year at LEA, Mr. Feldman helped LEA increase its net sales to over $10,000,000. In addition, Mr. Feldman was a named inventor on multiple patents relating to video surveillance
Term of Office
All of our directors are appointed for a one-year term to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation, or removal. Executive officers serve at the discretion of the Board of Directors and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders. Our executive officers are appointed by our Board of Directors and hold office until removed by the Board.
Significant Employees
At the present time, we have only one significant employee, our President, Mr. Paul Feldman whose employment agreement provides for a base salary of $100,000 per year. For the year ended April 30, 2020, Mr. Feldman has agreed to permanently forego his compensation until such time the Company’s revenues support the agreed upon compensation.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present director (or person nominated to become director), executive officer, founder, promoter or control person: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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| Table of Contents |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires our Directors, executive officers, and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of beneficial ownership (Form 3) and reports of changes in beneficial ownership (Forms 4 and 5) of our Common Stock and our other equity securities. Officers, Directors, and greater than 10% shareholders are required by the SEC’s regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely upon a review of Forms 3 and 4 furnished to the company under Rule 16a-3(e) of the Securities Exchange Act during its most recent fiscal year and Forms 5 furnished to the company with respect to its most recent fiscal year and any written representations received by the company from persons required to file such forms, the following persons – either officers, directors or beneficial owners of more than ten percent of any class of equity of the company registered pursuant to Section 12 of the Securities Exchange Act – failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act during the most recent fiscal year or prior fiscal years:
|
|
| # of Late Reports |
|
| # of Transactions Not Timely Reported |
|
| # of Failures to File a Required Report |
| |||
| Paul Feldman |
|
| 0 |
|
|
| 8 |
|
|
| 1 |
|
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To the knowledge of the Company, there have been no reported violations of the Code of Ethics.
Whistleblower Procedures Policy
In accordance with the requirements of Section 301 of the Sarbanes-Oxley Act of 2002, the Board of Directors of the Company has adopted a Whistleblower Procedures Policy, stating that all employees of the Company are strongly encouraged to report any evidence of financial irregularities which they may become aware of, including those with respect to internal controls, accounting or auditing matters. Under the Whistleblower Procedures Policy, the management of the Company shall promptly and periodically communicate to all employees with access to accounting, payroll, and financial information the means by which they may report any such irregularities. In the event an employee is uncomfortable for any reason reporting irregularities to his or her supervisor or other management of the Company, employees may report directly to any member of the Board of Directors of the Company. The identity of any employee reporting under these procedures will be maintained as confidential at the request of the employee or may be made on an anonymous basis. Notice must be provided to all of the Company’s employees with access to accounting, payroll, and financial information in respect of these procedures.
The Company does not have any Committees of the Board
CORPORATE GOVERNANCE
Director Independence
We are not listed on a major U.S. securities exchange and, therefore, are not subject to the corporate governance requirements of any such exchange, including those related to the independence of directors. Upon our listing on any national securities exchange or any inter-dealer quotation system, we will elect such independent directors as is necessary under the rules of any such securities exchange.
Board Leadership Structure
We currently have one executive officer who is also a Director. Our Board has reviewed the Company’s current Board leadership structure. In light of the Company’s size, nature of the Company’s business, regulatory framework under which the Company operates, stockholder base, the Company’s peer group and other relevant factors, the Company has determined that this structure is currently the most appropriate Board leadership structure for our company. Nevertheless, the Board intends to carefully evaluate from time to time whether our current structure should be modified based on what the Board believes is best for the Company and our stockholders.
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| Table of Contents |
Board Role in Risk Oversight
Risk is inherent in every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including strategic risks, enterprise risks, financial risks, and regulatory risks. While our management is responsible for day to day management of various risks we face, the Board, as a whole, is responsible for evaluating our exposure to risk and to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board reviews and discusses policies with respect to risk assessment and risk management. The Board also has oversight responsibility with respect to the integrity of the Company’s financial reporting process and systems of internal control regarding finance and accounting, as well as its financial statements.
Audit Committee
The Board does not currently have a standing Audit Committee. The full Board performs the principal functions of the Audit Committee. The full Board monitors our financial reporting process and internal control system and reviews and appraises the audit efforts of our independent accountants.
Compensation Committee
The Board does not currently have a standing Compensation Committee. The full Board establishes our overall compensation policies and reviews recommendations submitted by our management.
Nominating Committee
The Board does not currently have a standing Nominating Committee. We do not maintain a policy for considering nominees. Our Bylaws provides that the number of Directors shall be fixed from time to time by the Board, but in no event shall be less than the minimum required by law. The Board of Directors shall be large enough to maintain our required expertise but not too large to function efficiently. Director nominees are recommended, reviewed, and approved by the entire Board. The Board believes that this process is appropriate due to the relatively small number of directors on the Board and the opportunity to benefit from a variety of opinions and perspectives in determining director nominees by involving the full Board.
While the Board is solely responsible for the selection and nomination of directors, the Board may consider nominees recommended by stockholders as it deems appropriate. The Board evaluates each potential nominee in the same manner regardless of the source of the potential nominee’s recommendation. Although we do not have a policy regarding diversity, the Board does take into consideration the value of diversity among Board members in background, experience, education, and perspective in considering potential nominees for recommendation to the Board for selection. Stockholders who wish to recommend a nominee should send nominations to our President, Paul Feldman, 1600 Olive Chapel Rd., Apex, NC 27502, that includes all information relating to such person that is required to be disclosed in solicitations of proxies for the election of directors. The recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected.
Compensation Consultants
We have not historically relied upon the advice of compensation consultants in determining Named Executive Officer compensation. Instead, the full Board reviews compensation levels and makes adjustments based on their personal knowledge of competition in the marketplace, publicly available information, and informal surveys of human resource professionals.
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| Table of Contents |
Stockholder Communications
Stockholders who wish to communicate with the Board may do so by addressing their correspondence 1249 Kildaire Farm Road Cary NC 27511 The Board shall review and respond to all correspondence received, as appropriate.
ITEM 11: EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth compensation for each of the past three fiscal years with respect to each person who served as an Executive Officer of the Company and each of the four most highly-compensated executive officers of the Company who earned a total annual salary and bonuses that exceeded $100,000 in any of the two preceding fiscal years.
Summary Compensation Table
| Name and Principal Position |
| Year Ended April 30, |
| Salary ($) |
|
| Bonus ($) |
|
| Option Awards ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||
| Paul Feldman (1), |
| 2020 |
| $ | 1,985 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 1,985 |
|
| CEO, CFO |
| 2019 |
| $ | 16,538 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 16,538 |
|
|
|
| 2018 |
| $ | 105,769 |
|
|
| - |
|
|
| - |
|
|
| 6,000 |
|
| $ | 111,769 |
|
(1) Mr. Feldman became the Company’s Director, President, Secretary, Chief Executive officer and Chief Financial Officer on February 1, 2015. On November 24, 2015, the Company and Mr. Feldman entered into an employment agreement. Pursuant to Mr. Feldman’s Employment Agreement, he is entitled to an annual salary of $100,000 for a term of 2 years. On December 1, 2017, Mr. Feldman’s employment agreement was extended for an additional three years to November 30, 2020. During the year ended April 30, 2019, Mr. Feldman agreed to suspend his compensation until such time the Company’s revenues support the agreed upon compensation. As of April 30, 2019, the balance owed to Mr. Feldman was $16,538. During 2020, the Company accrued an additional $1,985 in executive compensation bringing the accrual to $18,523. The $18,523 was forgiven by Mr. Feldman during the 1st quarter of fiscal year ended April 30, 2020, and no other accruals are being made at this time. Other Compensation consisted of a car allowance in 2018. We may award our officers and directors shares of common stock or stock purchase options as non-cash compensation as determined by the Board of Directors from time to time.
Director Compensation
For the years ended April 30, 2020 and 2019, respectively, the directors were not awarded any options or paid any cash compensation.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of July 1, 2020 by (i) all persons who are known by us to beneficially own more than 5% of our outstanding shares of common stock, (ii) each director, director nominee, and Named Executive Officer; and (iii) all executive officers and directors as a group:
|
|
| Title of Class |
|
|
| |||||||||||||||||||
|
|
| Series A Preferred Stock |
|
| Common Stock |
|
|
| ||||||||||||||||
| Name and Address of Beneficial Owner (1) |
| Number of shares Beneficially Owned (2) |
|
| % of Class (2) |
|
| Shares Owned |
|
| Number of Shares Beneficially Owned |
|
| % of Class (2) |
|
| Total Voting Power (3) |
| ||||||
| Directors and Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Paul Feldman |
|
| 5,000,000 |
|
|
| 100.0 | % |
|
| 40,000 |
|
|
| 40,000 |
|
|
| 1.1 | % |
|
| 54.32 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5% shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of Company preferred stock and common stock. Except as indicated the address of each beneficial owner is 1249 Kildare Farm Road, Cary, NC 27511.
(2) Calculated pursuant to rule 13d-3(d) of the Exchange Act. Beneficial ownership is calculated based on 841,184,284 shares of Common Stock and 5,000,000 shares of Series A Preferred Stock issued and outstanding on a fully diluted basis as of July1, 2020. Each share of preferred stock is entitled to vote on all matters submitted to the Company's stockholders and are entitled to such number of votes as is equal to 200,000 times the number of shares of Series A Preferred Stock such holder owns. The Series A Preferred Stock is not convertible into shares of common stock. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.
(3) Calculated based on 841,184,289 shares of Common Stock and 5,000,000 shares of Series A Preferred Stock, with common stock equivalent voting rights of 200:1, issued and outstanding as of July 20, 20208. Holders of the Series A Preferred Stock are entitled to vote on all matters submitted to the Company's stockholders.
Potential Changes in Control
At the present time, since the $27,500 term-note is currently in default, Red Diamond Partners, LLC (the “lender”) is entitled to foreclose upon the collateral, which would provide voting control of the Company. The lender has not called this debt and is not seeking to foreclose on the collateral and obtain the 5,000,000 shares of Series A, Redeemable, Preferred Stock. There are no other arrangements known, including any pledge by any person of securities, the operation of which may at a subsequent date result in a change in control of the Company.
Stock Option Plan Information
To date, the Company has not adopted a Stock Option Plan. The Company may adopt an option plan in the future.
Adverse Interests
The Company is not aware of any material proceeding to which any director, officer, or affiliate of the Company, or any owner of record or beneficially of more than five percent of any class of the Company’s voting securities, or security holder is a party adverse to the Company or has a material interest adverse to the Company.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Except as otherwise disclosed herein, since the beginning of the last fiscal year the Company has not entered into any other transactions, nor are there any currently proposed transactions, in which the Company was, or is, to be a participant and in which any related person had or will have a direct or indirect material interest.
During the past five years, none of the following occurred with respect to any founder, promoter or control person: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
On October 16, 2019, the Registrant appointed Assurance Dimensions as its principal independent accountant. Prior to the appointment of Assurance Dimensions, Soles, Heyn, & Company, LLP acted as the Company’s principal independent accountant.
The aggregate fees of our principal independent accountants for professional services rendered for the audit of the financial statements included in our Annual Report on Form 10-K and review of interim financial statements included in the quarterly reports on Form 10-Q for the year ended April 30, 2020 and 2019, totaled $27,300 and $16,000, respectively.
Audit- Related Fees
The Company did not pay any audit-related fees for the year ended April 30, 2020 and 2019 which are not disclosed in “Audit Fees” above.
Tax Fees
There were no tax fees billed by our principal independent accountants for tax compliance for the year ended April 30, 2020 and 2019.
All Other Fees
There were no other fees billed for services other than those described above for the years ended April 30, 2020 and 2019.
Audit Committee Pre--Approval Policies
Our sole Director reviewed the audit and non-audit services rendered by Assurance Dimensions during the periods set forth above and concluded that such services were compatible with maintaining the auditors’ independence. All audit and non-audit services performed by our independent accountants are pre-approved by our Board of Directors to assure that such services do not impair the auditors’ independence from us.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this Form 10-K:
1. Financial Statements
The following financial statements are included in Part II, Item 8 of this Form 10-K:
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| · | Report of Independent Registered Public Accounting Firm |
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| · | Consolidated Balance Sheets as of April 30, 2020 and 2019 |
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| · | Consolidated Statements of Operations for the Years Ended April 30, 2020 and 2019 |
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| · | Consolidated Statements of Stockholders’ Deficit for the Years Ended April 30, 2020 and 2019 |
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| · | Consolidated Statements of Cash Flows for the Years Ended April 30, 2020 and 2019 |
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| · | Notes to Consolidated Financial Statements |
2. Exhibits
The exhibits listed in the Exhibit Index, which appears immediately following the signature page, are incorporated herein by reference, and are filed as part of this Form 10-K.
3. Financial Statement Schedules
Financial statement schedules are omitted because they are not required or are not applicable, or the required information is provided in the financial statements or notes described in Item 15(a)(1) above.
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Pursuant to the requirements of Sections 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Force Protection Video Equipment Corp. | ||
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| (Registrant) |
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| September 14, 2020 | By: | /s/ Paul Feldman | |
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| Paul Feldman |
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| Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer and Principal Financial Officer) |
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| 10.42* |
| ACH Total Receipts Agreement dated June 8, 2018 with Reliant Funding |
| 10.43* |
| Loan Agreement dated September 25, 2018 with Strategic Funding Source, Inc. |
| 10.44 |
| Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC |
| 10.45 |
| Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC |
| 10.46 |
| Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC |
| 10.47 |
| Promissory Note dated October 24, 2019 with Red Diamond Partners, LLC |
| 10.48 |
| Promissory Note dated November 19, 2019 with Red Diamond Partners, LLC |
| 10.49 |
| Promissory Note dated November 26, 2019 with Red Diamond Partners, LLC |
| 10.50 |
| Promissory Note dated December 24, 2019 with Red Diamond Partners, LLC |
| 10.51 |
| Promissory Note dated January 14, 2020 with Red Diamond Partners, LLC |
| 10.52 |
| Promissory Note dated June 18, 2020 with Red Diamond Partners, LLC |
| 10.53 |
| Promissory Note dated July 13, 2020 with Red Diamond Partners, LLC |
| 10.54 |
| Promissory Note dated July 16, 2020 with Red Diamond Partners, LLC |
| 10.55 |
| Promissory Note dated July 23, 2020 with Red Diamond Partners, LLC |
| 10.56 |
| Promissory Note dated August 21, 2020 with Red Diamond Partners, LLC |
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| 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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