UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 31, 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 000-54851
DEFENSE TECHNOLOGIES INTERNATIONAL CORP.(Exact name of registrant as specified in its charter)
Delaware | 99-0363802 |
(State of Incorporation) | (I.R.S. Employer Identification Number) |
2683 Via De La Valle, Suite G418, Del Mar CA 92014(Address of principal executive offices)
(800) 520-9485(Registrant’s telephone number, including area code)
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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company
Large accelerated filer | [ ] |
| Accelerated filer | [ ] |
Non-accelerated filer | [X] |
| Smaller reporting company | [X] |
|
|
| Emerging Growth Company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of September 21, 2020, there were 29,419,282 shares of the registrant’s common stock, and 2,925,369 Series A preferred and 520,000 Series B preferred: $0.0001 par value, outstanding.
1
DEFENSE TECHNOLOGIES INTERNATIONAL CORP.
FORM 10-Q
FOR THE THREE MONTH PERIODS ENDED JULY 31, 2020 AND 2019
TABLE OF CONTENTS
| PART I — FINANCIAL INFORMATION | Page |
Item 1. | Financial Statements: |
|
| Condensed Consolidated Balance Sheets as of July 31, 2020 (Unaudited) and April 30, 2020 (Audited) | 3 |
| 4 | |
| 5 | |
| 6 | |
| 7 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3. | 17 | |
Item 4. | 17 | |
| PART II — OTHER INFORMATION |
|
Item 1. | 18 | |
Item 1A. | 18 | |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds. | 18 |
Item 3. | 18 | |
Item 4. | 18 | |
Item 5. | 18 | |
Item 6. | 19 | |
| 19 |
2
PART I — FINANCIAL INFORMATION
Item 1.Financial Statements
Defense Technologies International Corp. |
Condensed Consolidated Balance Sheets |
| July 31, 2020 | April 30, 2020 |
| (Unaudited) | (Audited) |
ASSETS | ||
Current assets: |
|
|
Cash | $ 117 | $ 70,416 |
Inventory | 23,235 | 21,368 |
Prepaid | 20,000 | 20,000 |
Total current assets | 43,352 | 111,784 |
|
|
|
Fixed assets, net of depreciation | 29,080 | 31,996 |
Total assets | $ 72,432 | $ 143,780 |
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|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
| |
Current liabilities: |
|
|
Accounts payable and accrued expense | $ 412,486 | $ 364,199 |
Accrued licenses agreement payable | 83,800 | 71,300 |
Accrued interest and fees payable | 211,895 | 178,066 |
Convertible notes payable, net of discount | 825,780 | 821,949 |
Derivative liabilities | 1,029,799 | 1,333,288 |
Payables – related parties | 1,028,122 | 970,547 |
Customer deposits | 45,695 | 45,694 |
Notes payable | 424,226 | 424,226 |
Total current liabilities | 4,061,803 | 4,209,270 |
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|
|
Total liabilities | 4,061,803 | 4,209,270 |
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|
Commitments and Contingencies | -- | -- |
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|
|
Stockholders’ deficit: |
|
|
Preferred stock, $0.0001 par value; 20,000,000 shares authorized, | 292 | 292 |
Series B – 520,000 shares issued and outstanding, respectively | 52 | 52 |
Common stock, $0.0001 par value; 200,000,000 shares | 1,968 | 905 |
Additional paid-in capital | 6,656,204 | 6,288,325 |
Accumulated deficit | (10,475,804) | (10,193,808) |
Total | (3,817,288) | (3,904,234) |
Non-controlling interest | (172,083) | (161,256) |
Total stockholders’ deficit | (3,989,371) | (4,065,490) |
|
|
|
Total liabilities and stockholders’ deficit | $ 72,432 | $ 143,780 |
See notes to condensed consolidated financial statements
3
Defense Technologies International Corp. |
(Unaudited) |
|
| |
2020 | 2019 | |
Expenses: |
|
|
General and administrative | $ 178,882 | $ 221,822 |
|
|
|
Total expenses | 178,882 | 221,822 |
|
|
|
Loss from operations | (178,882) | (221,822) |
|
|
|
Other income (expense): |
|
|
Interest expense | (34,860) | (44,524) |
Gain (loss) on derivative liability | 66,056 | 863,032 |
Gain (loss) on extinguishment of debt | -- | 204,129 |
Finance costs | (5,380) | -- |
Interest- note discount | (128,930) | -- |
Gain (loss) on notes | ---- | (69,548) |
|
|
|
Total other income (expense) | (103,114) | 953,089 |
|
|
|
Income (loss) before income taxes | (292,823) | 731,267 |
|
|
|
Provision for income taxes |
|
|
|
|
|
(292,823) | 731,267 | |
|
|
|
Non-controlling interest in net loss of the consolidated subsidiary | 10,827 | 8,154 |
|
|
|
$ (281,996) | $739,421 | |
|
|
|
Net income (loss) per common share: |
|
|
Basic | $ (0.02) | $ (0.10) |
Diluted | $ (0.02) | $ (0.00) |
|
|
|
Weighted average common shares outstanding: |
|
|
Basic | 13,349,602 | 7,603,100 |
Diluted | 13,349,602 | 51,688,646 |
See notes to condensed consolidated financial statements
4
Defense Technologies International Corp. and Subsidiary
Condensed Consolidated Statements of Stockholders’ Deficit
For the Three Months Ended July 31, 2020 and 2019
(Unaudited)
Preferred Stock | Additional | Accumulated | Non-Controlling | Total Stockholders’ | ||||||
| Series A Series B | Common Stock | Capital | Deficit | Interest | Deficit | ||||
Three Months Ended July 31, 2019 |
|
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|
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|
|
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Balance, April 30, 2019 | 2,925,369 | $ 292 | 520,000 | $ 52 | 5,022,224 | $ 502 | $5,496,972 | $(9,276,082) | $(129,603) | $(3,908,211) |
Common stock issued for debt | -- | -- | -- | -- | 161,050 | 16 | 39,694 | -- | -- | 39,711 |
Common stock issued for service | -- | -- | -- | -- | 325,000 | 33 | 80,567 | -- | -- | 80,600 |
Net loss | -- | -- | -- | -- | -- | -- | -- | 739,421 | (8,154) | 731,267 |
Balance July 31, 2019 | 2,925,369 | $292 | 520,000 | $52 | 8,339,644 | $834 | $5,616,979 | $(8,536,661) | $(137,757) | $(3,056,289) |
Three Months Ended July 31, 2020 |
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Balance April 30, 2020 | 2,925,369 | $292 | 520,000 | $ 52 | 9,056,524 | $905 | $6,288,325 | $(10,193,808) | $(161,256) | $(4,065,490) |
Common stock issued for debt | -- | -- | -- | -- | 10,635,623 | 1,063 | 130,446 | -- | -- | 131,509 |
Retirement of derivative on debt conversion | -- | -- | -- | -- | -- | -- | 237,433 |
|
| 237,433 |
Net income (loss) | -- | -- | -- | -- |
|
|
| (281,996) | (10,827) | (292,823) |
Balance July 31, 2020 | 2,925,369 | $292 | 520,000 | $52 | 19,692,147 | $ 1,968 | $6,656,204 | $(10,475,804) | $ (172,083) | $(3,989,371) |
See notes to condensed consolidated financial statements
5
Defense Technologies International Corp. |
(Unaudited) |
| Three Months Ended July 31, | |
2020 | 2019 | |
|
| |
Net income (loss) | $ (292,823) | $ 731,267 |
Adjustments to reconcile net income (loss) to net cash |
|
|
Amortization of debt discount to interest expense and finance charges | 135,340 | 19,145 |
Common stock issued for debt | -- | 80,600 |
(Gain) loss on derivative liability | (66,056) | (863,032) |
(Gain) loss on debt extinguishment | -- | (204,129) |
Operating lease expense | -- | 9,669 |
Loss on note | -- | 69,548 |
Depreciation | 2,916 | -- |
Change in operating assets and liabilities: |
|
|
Deposits | -- | 7,500 |
(Increase) decrease in inventory | (1,867) | -- |
Increase (decrease) in accounts payable | 94,616 | 27,709 |
Operating lease liability | -- | (9,669) |
Customer deposits | -- | 30,375 |
Increase in payables – related parties | 57,575 | 66,913 |
Net cash provided by (used in) operating activities | (70,299) | (34,102) |
|
|
|
|
| |
Repayment of convertible notes payable | -- | (65,000) |
Proceeds from convertible notes | -- | 115,500 |
|
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|
Net cash provided by financing activities | -- | 50,500 |
|
|
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Net increase (decrease) in cash | (70,299) | 16,398 |
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|
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Cash at beginning of period | 70,416 | 60 |
Cash at end of period | $ 117 | $ 16,458 |
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Supplement Disclosures |
|
|
Interest Paid | $ -- | $ -- |
Income tax Paid | $ -- | $ -- |
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Noncash financing and investing activities |
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Retirement of derivative at debt conversion | $ 237,433 | $ -- |
Common stock issued for the conversion of preferred shares | -- | $ 283 |
Common stock issued for convertible debt | $ 131,509 | $ 39,711 |
See notes to condensed consolidated financial statements
6
Defense Technologies International Corp.
Notes to Condensed Consolidated Financial Statements
As of July 31, 2020
(Unaudited)
NOTE -1: BASIS OF PRESENTATION AND ORGANIZATION
Defense Technologies International Corp. (the "Company ") was incorporated in the State of Delaware on May 27, 1998. Effective June 15, 2016, the Company changed its name to Defense Technologies International Corp. from Canyon Gold Corp. to more fully represent the Company's expansion goals into the advanced technology sector.
On October 19, 2016, the Company entered into a Definitive Agreement with Controlled Capture Systems, LLC (“CCS”), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement. Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products and improvements. The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties as defined in the Definitive Agreement. On May 30, 2018 the Company and Control Capture Systems, LLC amended their license agreement as follows (1) Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter (2) All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive (3) Invoices for parts and materials will be billed separate of the license fees noted above.
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company. The Company currently owns 76.28% of PSSI with 23.72% acquired by several individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.
Basis of Presentation
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year end is April 30.
The interim condensed consolidated financial statements have been prepared without audit in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended April 30, 2020 included in its Annual Report on Form 10-K filed with the SEC.
The interim condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position as of July 31, 2020, the consolidated results of its operations and its consolidated cash flows for the three months ended July 31, 2020 and 2019 The results of operations for any interim period are not necessarily indicative of the results to be expected for the full fiscal year.
7
Consolidation and Non-Controlling Interest
These consolidated financial statements include the accounts of the Company, and its majority-owned subsidiary, PSSI, from its formation on January 12, 2017 to date. All inter-company transactions and balances have been eliminated.
Inventory
Inventories are stated at the lower of cost using the first-in, first-out (FIFO) cost method of accounting. Inventories as of July 31, 2020 consist of parts used in assembly of the units being sold with no work in progress or finished goods. As of July 31, 2020 and April 30, 2020 the value of the inventory was $23,235 and $21,368, respectively.
Equipment
Equipment is carried at the cost of acquisition and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance is expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets of three years. As of July 31, 2020 had fixed assets net of depreciation of $29,080 compared to $31,996 as of April 30, 2020.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. On April 30, 2019, the Company elected to impair its licenses agreement of $378,600 so as of July 31, 2020, no impairment of asset was necessary.
Net Income (Loss) per Common Share
Basic net income or loss per common share is calculated by dividing the Company’s net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per common share is calculated by dividing the Company’s net income or loss by sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon exercise of outstanding stock options and warrants, using the treasury stock method and the average market price per share during the period, and conversion of convertible debt, using the if converted method. As of July 31, 2020, the Company had potential shares issuable under convertible preferred shares, outstanding options, warrants and convertible debt for a total of 95,542,005. With the loss in operations for the three-month period ended July 31, 2020, the additional shares were determined to be non-dilutive.
8
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees is required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and is recording a lease use asset and lease liability as of May 31, 2019.
NOTE - 2: GOING CONCERN
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern. Through July 31, 2020, the Company has no revenues, has accumulated deficit of $10,486,631 and a working capital deficit of $4,018,451 and expects to incur further losses in the development of its business. The Company has not yet established an ongoing source of revenue sufficient to cover operating costs, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Management plans to continue to provide for the Company's capital needs during the year ending April 30, 2020 by issuing debt and equity securities and by the continued support of its related parties. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
NOTE – 3: INVESTMENTS
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company for 17,500 shares of PSSI valued at $378,600 for 76.28% of PSSI. The balance of PSSI was acquired by four individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI. The investment was impaired as of April 30, 2019.
NOTE - 4: RELATED PARTY TRANSACTIONS
Management and administrative services are currently compensated as per a Service Agreement between the Company and its Chief Executive Officer and Director executed on April 25, 2016 and a Service Agreement with the subsidiary PSSI executed on January 12, 2017, a Service Agreement between the Company and a Director executed on May 20, 2016, and an Administration Agreement with a related party executed on March 15, 2011 and renewed on May 1, 2017 plus the assumption of a Service Agreement with the subsidiary PSSI assumed on January 12, 2017, whereby the fee is based on services provided and invoiced by the related parties on a monthly basis and the fees are paid in cash when possible or with common stock. The Company also, from time to time, has some of its expenses paid by related parties with the intent to repay. These types of transactions, when incurred, result in payables to related parties in the Company’s consolidated financial statements as a necessary part of funding the Company’s operations.
As of July 31, 2020, and April 30, 2020, the Company had payable balances due to related parties totaling $1,028,122 and $970,547, respectively, which resulted from transactions with these related parties and other significant shareholders.
9
NOTE – 5: NOTES PAYABLE
On July 6, 2018, the Company signed an investment agreement with a third party. Under the terms of the agreement the Company received $250,000 through the Company attorney’s trust account. On July 12, 2018, the Company received the $250,000 less wire and legal payment of $10,045. In addition the note holder will receive a royalty of 5% up to $250,000 and then a royalty of 3.5% for two years thereafter. The note holder will receive 150,000 shares of the Company’s common stock plus 100,000 warrants to purchase common shares within three years at $2.50 per share.
On January 26, 2019, the Company approved a loan from Brian McLain of $275,000. The note is convertible into common stock of the Company and is non-dilutive for 2 years from date of the note. In addition the Company granted the lender 100,000 warrants convertible into common shares at $1.00 per share. As of July 31, 2020, $25,000 of the loan was funded by the lender.
As of July 31, 2020 and April 30, 2020 the outstanding balances of notes payable was $424,226, respectively.
NOTE – 6: CONVERTIBLE DEBT
On May 22, 2018, the Company signed an agreement with an investor for a loan of $25,000. The note is convertible 180 days after the date of the note to shares of the Company’s common stock at $0.75 per share or a 25% discount to the 10 day trading average prior to conversion; whichever is lower. The total amount of the loan must be converted on the date of conversion. The note has an annual interest rate of 6%.
On July 10, 2018 RAB Investments AG agreed to buy the outstanding convertible debt from Jabro Funds for $35,000. The Company as part of the agreement paid Jabro Funds the $35,000 for the debt and considered it retired and paid in full.
On May 6, 2019, the Company issued an 8% convertible note to Black Ice Advisors, LLC for $57,500 which matures on May 6, 2020. The note redeemable at a premium up to 140% of the face value within 180 days of issuance or is convertible after 180 days to the Company common stock at 60% of the lowest trading price twenty days prior to conversion.
On May 10, 2019, the Company entered into a settlement agreement with Firstfire Global for payment of the original note for $189,000 issued on July 18, 2016. Under the terms of the agreement the Company paid Firstfire $65,000 on May 10, 2019 and $10,000 to be paid on or before May 31, 2019. In addition Firstfire received 150,000 shares of the Company. On September 12, 2019, the $10,000 was converted in to 123,456 shares of common stock.
On July 11, 2019, the Company issued an 8% convertible note to GS Capital Partners, LLC for $58,000 which matures on July 11, 2020. The note redeemable at a premium up to 135% of the face value within 180 days of issuance or is convertible after 180 days to the Company common stock at 62% of the lowest trading price twenty days prior to conversion. On January 16, 2020, the Company paid GS Capital partners $80,620 consisting of principal of the face amount of the note of $58,000 plus $22,600 in prepayment penalty which was charged to interest.
On November 1, 2019, the Company issued a convertible note to Adar Alef, LLC for $40,700 with a $3,700 original discount. The note matures on October 31, 2020 bearing interest at the rate of 8% per annum. The note is convertible into common stock of the Company after 180 days at the rate of 70% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 115% to135% above face value.
On November 12, 2019, the Company issued a convertible note to Platinum Point Capital, LLC for $41,250 with an original discount of $3,750. The note matures on November 12, 2020 bearing interest at the rate of 8% per annum with a default rate of 24%. The note is convertible into common stock of the Company
10
after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer after 90 days and within 180 days from issuance at a premium rates of 140% above face value
On November 12, 2019, the Company issued a convertible note to Jefferson Street Capital, LLC for $41,250 with an original discount of $3,750. The note matures on November 12, 2020 bearing interest at the rate of 8% per annum with a default rate of 24%. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer after 90 days and within 180 days from issuance at a premium rates of 140% above face value.
On December 20, 2019, the Company issued a convertible note to Lliah for $63,950 with an original discount of $8,950. The note matures on December 19, 2020 bearing interest at the rate of 8% per annum. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 115% to 135% above face value.
On January 10, 2020, the Company issued a convertible note to Crown Bridge Partners, LLC with a principal; amount of $171,000 and a prorate original discount of $15,000. The first tranche of the note received by the Company was a face value of $57,000 and net amount received of $50,000. Each tranche of the note matures twelve months from receipt of the tranche and bears interest at the rate of 10% per annum with a default rate of 15%. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 125% above face value.
On January 13, 2020, the Company issued an additional note to Ionic Ventures, LLC for $220,000 with an original discount of $20,000. The note is part of a securities purchase agreement dated August 31, 2018. The note matures on June 20, 2020 bearing interest at the rate of 15% per annum. The note is convertible into common stock of the Company at $0.60 per share or of 60% of the lowest trading price for twenty days prior to conversion, whichever is the lowest.
During the three months ended July 31, 2019 the Company issued 161,050 shares of common stock with a value of $39,711 for the conversion of debt.
During the three months ended July 31, 2020 the Company issued 10,635,623 shares of common stock with a value of $131,509 for debt.
As of July 31, 2020, and April 30, 2020, the convertible debt outstanding, net of discount, was $825,780 and $821,949, respectively.
NOTE – 7: FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES
As defined in (Financial Accounting Standards Board ASC 820), 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 (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
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The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
As of July 31, 2020, the Company believes the amounts reported for cash, payables, accrued liabilities and amounts due to related parties approximate their fair values due to the nature or duration of these instruments.
The following table represents the change in the fair value of the derivative liabilities during the three months ended July 31, 2020:
| Level 1 | Level 2 | Level 3 |
Balance at April 30, 2020 | $ -- | $ -- | $ 1,333,288 |
Retirement of derivative at conversion |
|
| (237,433) |
Change in fair value of derivative liability | $ -- | $ -- | $ (66,056) |
|
|
|
|
$ -- | $ -- | $ 1,029,799 |
The estimated fair value of the derivative liabilities at July 31, 2020 was calculated using the Binomial Lattice pricing model with the following assumptions:
Risk-free interest rate | 2.00% |
Expected life in years | 0.25 to 0.85 |
Dividend yield | 0% |
Expected volatility | 443.00% |
NOTE – 8: EQUITY
During the three month period ended July 31, 2019, the Company issued 325,000 shares of its common stock for service with a value of $80,600.
During the three months ended July 31, 2020 the Company issued 10,635,623 shares of common stock with a value of $131,509 for debt.
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Preferred Stock
The Company has 20,000,000 shares of $0.0001 par value preferred stock authorized and has designated Series A and Series B preferred stock. Each share of the Series A preferred stock is convertible into ten common shares and carries voting rights on the basis of 100 votes per share. Each share of the Series B preferred stock is convertible into ten common shares and carries no voting rights.
On May 20, 2019, the Company approved the issuance of 2,831,350 shares of its common stock for the conversion of 283,135 for Series A preferred with a value of $28. As of July 31, 2020 the common shares had not been issued and the conversion was not completed.
As of July 31, 2020 the Company had 2,925,369 Series A and 520,000 Series B preferred share issued and outstanding.
NOTE – 9: STOCK OPTIONS AND WARRANTS
A summary of the Company’s stock options and warrants as of July 31, 2020, and changes during the three months then ended is as follows:
|
|
| Weighted Average |
| |
|
|
|
|
|
|
Outstanding at April 30, 2020 | 850,000 | $ | 1.14 | 2.00 | $ 882,300 |
Granted | -- | $ | -- | -- | -- |
Exercised | -- | $ | -- | -- | -- |
Forfeited or expired | -- | $ | -- | -- | -- |
Outstanding and exercisable | 850,000 | $ | 1.14 | 1.50 | $ 967,185 |
NOTE – 10: COMMITMENTS AND CONTINGENCIES
The Company has the following material commitments as of July 31, 2020:
a) | Administration Agreement with EMAC Handel’s AG, renewed effective May 1, 2017 for a period of three years. Monthly fee for administration services of $5,000, office rent of $250 and office supplies of $125. Extraordinary expenses are invoiced by EMAC on a quarterly basis. The fee may be paid in cash and or with common stock. |
b) | Service Agreement signed April 25, 2016 with Merrill W. Moses, President, Director and CEO, for services of $7,500 per month beginning May 2016 and the issuance of 233 restricted common shares of the Company. The fees may be paid in cash and or with common stock. |
c) | Service Agreement signed May 20, 2016 with Charles C. Hooper, Director, for services of $5,000 per month beginning May 2016 and the issuance of 233 restricted common shares of the Company. The fees may be paid in cash and or with common stock. |
d) | Administration and Management Agreement of PSSI signed January 12, 2017 with EMAC Handel Investments AG, for general fees of $5,000 per month, office rent of $250 and telephone of $125 beginning January 2017, the issuance of 2,000 common shares of PSSI and a 12% royalty calculated on defines sales revenues payable within 10 days after the monthly sales. |
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e) | Service Agreement of PSSI signed January 12, 2017 with Merrill W. Moses, President, Director and CEO, for services of $2,500 per month beginning February 2017 and the issuance of 333 common shares of PSSI. |
f) | Business Development and Consulting Agreement of PSSI signed January 15, 2017 with WSMG Advisors, Inc., for finder’s fees of 10% of funding raised for PSSI and the issuance of 1,000 common shares of PSSI. |
On May 30, 2018, the Company and Control Capture Systems, LLC amended their license agreement as follows.
·Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter.
·All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive.
·Invoices for parts and materials will be billed separate of the license fees noted above.
On October 16, 2018, the Company signed a three year lease for the Company’s warehouse space effective on November 1, 2018 through October 31, 2021. The lease is for approximately 4,700 square feet of warehouse space with a gross monthly rental cost including common area charges of $3,250. The lease was terminated by the landlord on August 30, 2019 with the outstanding balance due of $11,230.
NOTE - 12: SUBSEQUENT EVENTS
During the period from August 1, 2020 to September 18, 2020 the Company issued 9,727,135 shares of common stock for debt with a value of $63,657 on conversion of notes.
The Company has evaluated subsequent events to determine events occurring after July 31, 2020 through September 21, 2020 that would have a material impact on the Company’s financial results or require disclosure and have determined none exist.
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Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following information should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Defense Technologies International Corp. (the "Company ") was incorporated in the State of Delaware on May 27, 1998. Effective June 15, 2016, the Company changed its name to Defense Technologies International Corp. from Canyon Gold Corp. to more fully represent the Company's expansion goals into the advanced technology sector.
On October 19, 2016, the Company entered into a Definitive Agreement with Controlled Capture Systems, LLC (“CCS”), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement. Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products, and improvements. The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties as defined in the Definitive Agreement.
On May 30, 2018 the Company and Control Capture Systems, LLC amended their license agreement as follows (1) Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter (2) All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive.
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company. The Company owns 79.8% of PSSI with 20.2% acquired by several individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.
The occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. A pandemic typically results in social distancing, travel bans, and quarantine. This may limit access to our, customers, management, support staff and professional advisors. As the Company’s operations, are the continual building and sales of units we cannot measure what the impact may be but we do not anticipate a significant impact on our operations or financial condition, except for potential initial reduction for the sale of our product.
Forward Looking and Cautionary Statements
This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Results of Operations
We currently have no operating revenue for the three months ended July 31, 2020. We do have customer deposits of $45,695 which will be recognized as revenue when the units are shipped to the buyers.
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Our general and administrative expenses for the three months ended July 31, 2020 was $189,709 compared to $221,822 for the same period ended July 31, 2019. The decrease was due primarily to consulting costs.
Interest expenses incurred in the three months ended July 31, 2020 was $34,860 compared to $44,524 for the three ended July 31, 2019.
Change in derivative liability resulted in a gain of $66,056 for the three months period ended July 31, 2020, compared to a gain of $863,032 for the same periods ended July 31, 2019. We estimate the fair value of the derivative for the conversion feature of our convertible notes payable using the American Binominal Lattice pricing model at the inception of the debt, at the date of conversions to equity, cash payments and at reporting date, recording a derivative liability, debt discount and a gain or loss on change in derivative liability as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, and variable conversion prices based on market prices as defined in the respective loan agreements. These inputs are subject to significant changes from period to period; therefore, the estimated fair value of the derivative liability will fluctuate from period to period and the fluctuation may be material.
Total other income and expense for the three months periods ended July 31, 2020 was expense of $103,114 compared to other income of $953,089 for the three months period in 2019. The variance is primarily due to the change in derivative liability and debt extinguishment in the three months period in both 2020 and 2019 and loss on notes in the period ended Jul 31, 2020 versus the same period in 2019.
Net income and loss before non-controlling interest for the three and ended July 31, 2020 was a net loss of $292,823 compared net income of 731,267 for the same three months periods in 2019. After adjusting for our consolidated subsidiary, net loss and net income for the three months ended July 31, 2020 a net loss of $ 281,996 compared to a net income of $739,421 for the same periods in 2019, respectively.
Liquidity and Capital Resources
At July 31, 2020, we had total current assets of $43,352, and total current liabilities of $4,061,803, resulting in a working capital deficit of $4,018,451. Included in our current liabilities and working capital deficit at July 31, 2020 are derivative liabilities totaling $1,029,799 related to the conversion features of certain of our convertible notes payable, convertible notes of $825,780, net of discount, notes payable related parties of $1,028,122, accounts payable and accrued expense of $412,486 and notes payables of $424,226. We anticipate that in the short-term, operating funds will continue to be provided by related parties and other lenders.
As of July 31, 2020, we had total convertible notes payable of $825,780, net of discount. Several of the note agreements require repayment through conversion of principal and interest into shares of the Company’s common stock. We anticipate, therefore, converting these notes payable into shares of our common stock without the need for replacement financing; however, there can be no assurance that we will be successful in accomplishing this.
During the three months ended July 31, 2020, net cash used in operating activities was $70,299 compared to cash used of $34,102 in the same period in 2019. Net cash used in 2020 consisted of net loss of $292,823 offset by gain in derivative liability of $66,056 and increase in payables to related parties of $57,575.
During the three months ended July 31, 2020 net cash provided by financing activities was zero compared to $50,500 in 2019.
We have had minimal revenue and paid expenses and costs with proceeds from the issuance of securities as well as by loans from investor, stockholders and other related parties.
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Our immediate goal is to provide funding for the completion of the initial production of the Offender Alert Passive Scan licensed from CCS. The Offender Alert Passive Scan is an advanced passive scanning system for detecting and identifying concealed threats.
On September 6, 2018, we received funding for the production of up to 100 units at a cost of $84,500. We built 4 Passive Portal units, two of which will be used in the previously announced BETA Test at a school near Austin Tx. The units have been tested multiple times and performed with a 100% success every time. We are confident that upon the successful conclusion of the Beta Test, we will receive the first orders from school districts that will generate initial revenues to the Company.
We believe a related party and other lenders will provide sufficient funds to carry on general operations in the near term and fund DTC’s production and sales. We expect to raise additional funds from the sale of securities, stockholder loans and convertible debt. However, we may not be successful in our efforts to obtain financing to carry out our business plan.
See the notes to our condensed consolidated financial statements for a discussion of recently issued accounting pronouncements that we have either implemented or that may have a material future impact on our financial position or results of operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not required for a smaller reporting company.
Item 4.Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) (“Exchange Act”). Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, in a manner that allows timely decisions regarding required disclosures.
We operate with a limited number of accounting and financial personnel. Although we retain the services of an experienced certified public accountant, we have been unable to implement proper segregation of duties over certain accounting and financial reporting processes, including timely and proper documentation of material transactions and agreements. We believe these control deficiencies represent material weaknesses in internal control over financial reporting.
Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.
Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our most recently
17
completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.
This item is not required for a smaller reporting company.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended July 31, 2020 the Company issued 10,635,623 shares of common stock with a value of $131,509 for debt.
The issuances of the Company’s common stock set forth above were in private transactions to a persons familiar with the Company’s business, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.
Item 3.Defaults Upon Senior Securities
This item is not applicable.
This item is not applicable.
Not applicable
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Item 6.Exhibits
The following exhibits are filed as part of this report:
Exhibit No. | Description of Exhibit |
31.1 | Section 302 Certification of Chief Executive Officer and Chief Financial Officer |
32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
101 INS* | XBRL Instance Document |
101SCH* | XBRL Taxonomy Extension Schema |
101 CAL* | XBRL Taxonomy Extension Calculation Linkbase |
101 DEF* | XBRL Taxonomy Extension Definition Linkbase |
101 LAB* | XBRL Taxonomy Extension Label Linkbase |
101 PRE* | XBRL Taxonomy Extension Presentation Linkbase |
* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Exchange Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DEFENSE TECHNOLOGIES INTERNATIONAL CORP.
Date: September 21, 2020 By: /S/ MERRILL W. MOSES
Merrill W. Moses
Chief Executive Officer
Acting Chief Financial Officer
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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Merrill W. Moses, certify that:
1.I have reviewed this quarterly report on Form 10-Q of DEFENSE TECHNOLGIES INTERNATIONAL CORP.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September_21, 2020
/S/ MERRILL W. MOSES
Merrill W. Moses
Chief Executive Officer
Acting Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of DEFENSE TECHNOLGIES INTERNATIONAL CORP. (the “Company”) on Form 10-Q for the period ending July 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Merrill W. Moses, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/S/ MERRILL W. MOSES
Merrill W. Moses
Chief Executive Officer
Acting Chief Financial Officer
September_21, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certifications are accompanying the Company's Form 10-Q solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.
4. Related Party Transactions |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 4. Related Party Transactions | NOTE - 4: RELATED PARTY TRANSACTIONS
Management and administrative services are currently compensated as per a Service Agreement between the Company and its Chief Executive Officer and Director executed on April 25, 2016 and a Service Agreement with the subsidiary PSSI executed on January 12, 2017, a Service Agreement between the Company and a Director executed on May 20, 2016, and an Administration Agreement with a related party executed on March 15, 2011 and renewed on May 1, 2017 plus the assumption of a Service Agreement with the subsidiary PSSI assumed on January 12, 2017, whereby the fee is based on services provided and invoiced by the related parties on a monthly basis and the fees are paid in cash when possible or with common stock. The Company also, from time to time, has some of its expenses paid by related parties with the intent to repay. These types of transactions, when incurred, result in payables to related parties in the Company’s consolidated financial statements as a necessary part of funding the Company’s operations.
As of July 31, 2020, and April 30, 2020, the Company had payable balances due to related parties totaling $1,028,122 and $970,547, respectively, which resulted from transactions with these related parties and other significant shareholders.
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5. Notes Payable |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 5. Notes Payable | NOTE – 5: NOTES PAYABLE
On July 6, 2018, the Company signed an investment agreement with a third party. Under the terms of the agreement the Company received $250,000 through the Company attorney’s trust account. On July 12, 2018, the Company received the $250,000 less wire and legal payment of $10,045. In addition the note holder will receive a royalty of 5% up to $250,000 and then a royalty of 3.5% for two years thereafter. The note holder will receive 150,000 shares of the Company’s common stock plus 100,000 warrants to purchase common shares within three years at $2.50 per share.
On January 26, 2019, the Company approved a loan from Brian McLain of $275,000. The note is convertible into common stock of the Company and is non-dilutive for 2 years from date of the note. In addition the Company granted the lender 100,000 warrants convertible into common shares at $1.00 per share. As of July 31, 2020, $25,000 of the loan was funded by the lender.
As of July 31, 2020 and April 30, 2020 the outstanding balances of notes payable was $424,226, respectively.
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6. Convertible Debt |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 6. Convertible Debt | NOTE – 6: CONVERTIBLE DEBT
On May 22, 2018, the Company signed an agreement with an investor for a loan of $25,000. The note is convertible 180 days after the date of the note to shares of the Company’s common stock at $0.75 per share or a 25% discount to the 10 day trading average prior to conversion; whichever is lower. The total amount of the loan must be converted on the date of conversion. The note has an annual interest rate of 6%.
On July 10, 2018 RAB Investments AG agreed to buy the outstanding convertible debt from Jabro Funds for $35,000. The Company as part of the agreement paid Jabro Funds the $35,000 for the debt and considered it retired and paid in full.
On May 6, 2019, the Company issued an 8% convertible note to Black Ice Advisors, LLC for $57,500 which matures on May 6, 2020. The note redeemable at a premium up to 140% of the face value within 180 days of issuance or is convertible after 180 days to the Company common stock at 60% of the lowest trading price twenty days prior to conversion.
On May 10, 2019, the Company entered into a settlement agreement with Firstfire Global for payment of the original note for $189,000 issued on July 18, 2016. Under the terms of the agreement the Company paid Firstfire $65,000 on May 10, 2019 and $10,000 to be paid on or before May 31, 2019. In addition Firstfire received 150,000 shares of the Company. On September 12, 2019, the $10,000 was converted in to 123,456 shares of common stock.
On July 11, 2019, the Company issued an 8% convertible note to GS Capital Partners, LLC for $58,000 which matures on July 11, 2020. The note redeemable at a premium up to 135% of the face value within 180 days of issuance or is convertible after 180 days to the Company common stock at 62% of the lowest trading price twenty days prior to conversion. On January 16, 2020, the Company paid GS Capital partners $80,620 consisting of principal of the face amount of the note of $58,000 plus $22,600 in prepayment penalty which was charged to interest.
On November 1, 2019, the Company issued a convertible note to Adar Alef, LLC for $40,700 with a $3,700 original discount. The note matures on October 31, 2020 bearing interest at the rate of 8% per annum. The note is convertible into common stock of the Company after 180 days at the rate of 70% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 115% to135% above face value.
On November 12, 2019, the Company issued a convertible note to Platinum Point Capital, LLC for $41,250 with an original discount of $3,750. The note matures on November 12, 2020 bearing interest at the rate of 8% per annum with a default rate of 24%. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer after 90 days and within 180 days from issuance at a premium rates of 140% above face value
On November 12, 2019, the Company issued a convertible note to Jefferson Street Capital, LLC for $41,250 with an original discount of $3,750. The note matures on November 12, 2020 bearing interest at the rate of 8% per annum with a default rate of 24%. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer after 90 days and within 180 days from issuance at a premium rates of 140% above face value.
On December 20, 2019, the Company issued a convertible note to Lliah for $63,950 with an original discount of $8,950. The note matures on December 19, 2020 bearing interest at the rate of 8% per annum. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 115% to 135% above face value.
On January 10, 2020, the Company issued a convertible note to Crown Bridge Partners, LLC with a principal; amount of $171,000 and a prorate original discount of $15,000. The first tranche of the note received by the Company was a face value of $57,000 and net amount received of $50,000. Each tranche of the note matures twelve months from receipt of the tranche and bears interest at the rate of 10% per annum with a default rate of 15%. The note is convertible into common stock of the Company after 180 days at the rate of 60% of the lowest trading price for twenty days prior to conversion. The note may be repaid to the issuer within 180 days from issuance at variable premium rates of 125% above face value.
On January 13, 2020, the Company issued an additional note to Ionic Ventures, LLC for $220,000 with an original discount of $20,000. The note is part of a securities purchase agreement dated August 31, 2018. The note matures on June 20, 2020 bearing interest at the rate of 15% per annum. The note is convertible into common stock of the Company at $0.60 per share or of 60% of the lowest trading price for twenty days prior to conversion, whichever is the lowest.
During the three months ended July 31, 2019 the Company issued 161,050 shares of common stock with a value of $39,711 for the conversion of debt.
During the three months ended July 31, 2020 the Company issued 10,635,623 shares of common stock with a value of $131,509 for debt.
As of July 31, 2020, and April 30, 2020, the convertible debt outstanding, net of discount, was $825,780 and $821,949, respectively.
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7. Fair Value Measurements and Derivative Liabilities |
3 Months Ended | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||||||||||||||||||||||||||
| Notes | |||||||||||||||||||||||||||||||||
| 7. Fair Value Measurements and Derivative Liabilities | NOTE – 7: FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES
As defined in (Financial Accounting Standards Board ASC 820), 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 (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. As of July 31, 2020, the Company believes the amounts reported for cash, payables, accrued liabilities and amounts due to related parties approximate their fair values due to the nature or duration of these instruments.
The following table represents the change in the fair value of the derivative liabilities during the three months ended July 31, 2020:
The estimated fair value of the derivative liabilities at July 31, 2020 was calculated using the Binomial Lattice pricing model with the following assumptions:
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8. Equity |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 8. Equity | NOTE – 8: EQUITY
Common Stock
During the three month period ended July 31, 2019, the Company issued 325,000 shares of its common stock for service with a value of $80,600.
During the three months ended July 31, 2020 the Company issued 10,635,623 shares of common stock with a value of $131,509 for debt.
Preferred Stock
The Company has 20,000,000 shares of $0.0001 par value preferred stock authorized and has designated Series A and Series B preferred stock. Each share of the Series A preferred stock is convertible into ten common shares and carries voting rights on the basis of 100 votes per share. Each share of the Series B preferred stock is convertible into ten common shares and carries no voting rights.
On May 20, 2019, the Company approved the issuance of 2,831,350 shares of its common stock for the conversion of 283,135 for Series A preferred with a value of $28. As of July 31, 2020 the common shares had not been issued and the conversion was not completed.
As of July 31, 2020 the Company had 2,925,369 Series A and 520,000 Series B preferred share issued and outstanding.
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9. Stock Options |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Notes | |||||||||||||||||||||||||||||||||||||||||||
| 9. Stock Options | NOTE – 9: STOCK OPTIONS AND WARRANTS
A summary of the Company’s stock options and warrants as of July 31, 2020, and changes during the three months then ended is as follows:
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10. Contingencies and Commitments |
3 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||||||
| Notes | |||||||||||||
| 10. Contingencies and Commitments | NOTE – 10: COMMITMENTS AND CONTINGENCIES
The Company has the following material commitments as of July 31, 2020:
On May 30, 2018, the Company and Control Capture Systems, LLC amended their license agreement as follows.
·Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter. ·All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive. ·Invoices for parts and materials will be billed separate of the license fees noted above.
|
11. Lease |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 11. Lease | NOTE - 11: LEASE
On October 16, 2018, the Company signed a three year lease for the Company’s warehouse space effective on November 1, 2018 through October 31, 2021. The lease is for approximately 4,700 square feet of warehouse space with a gross monthly rental cost including common area charges of $3,250. The lease was terminated by the landlord on August 30, 2019 with the outstanding balance due of $11,230.
|
12. Subsequent Events |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 12. Subsequent Events | NOTE - 12: SUBSEQUENT EVENTS
During the period from August 1, 2020 to September 18, 2020 the Company issued 9,727,135 shares of common stock for debt with a value of $63,657 on conversion of notes.
The Company has evaluated subsequent events to determine events occurring after July 31, 2020 through September 21, 2020 that would have a material impact on the Company’s financial results or require disclosure and have determined none exist.
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1. Nature of Operations and Continuation of Business: Consolidation and Non-Controlling Interest (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Consolidation and Non-Controlling Interest | Consolidation and Non-Controlling Interest
These consolidated financial statements include the accounts of the Company, and its majority-owned subsidiary, PSSI, from its formation on January 12, 2017 to date. All inter-company transactions and balances have been eliminated.
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1. Nature of Operations and Continuation of Business: Inventory (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Inventory | Inventory
Inventories are stated at the lower of cost using the first-in, first-out (FIFO) cost method of accounting. Inventories as of July 31, 2020 consist of parts used in assembly of the units being sold with no work in progress or finished goods. As of July 31, 2020 and April 30, 2020 the value of the inventory was $23,235 and $21,368, respectively.
|
1. Nature of Operations and Continuation of Business: Equipment (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Equipment | Equipment
Equipment is carried at the cost of acquisition and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance is expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets of three years. As of July 31, 2020 had fixed assets net of depreciation of $29,080 compared to $31,996 as of April 30, 2020.
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1. Nature of Operations and Continuation of Business: Use of Estimates (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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1. Nature of Operations and Continuation of Business: Impairment of Long-lived Assets (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Impairment of Long-lived Assets | Impairment of Long-Lived Assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. On April 30, 2019, the Company elected to impair its licenses agreement of $378,600 so as of July 31, 2020, no impairment of asset was necessary.
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1. Nature of Operations and Continuation of Business: Net Income (Loss) Per Common Share (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Net Income (Loss) Per Common Share | Net Income (Loss) per Common Share
Basic net income or loss per common share is calculated by dividing the Company’s net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per common share is calculated by dividing the Company’s net income or loss by sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon exercise of outstanding stock options and warrants, using the treasury stock method and the average market price per share during the period, and conversion of convertible debt, using the if converted method. As of July 31, 2020, the Company had potential shares issuable under convertible preferred shares, outstanding options, warrants and convertible debt for a total of 95,542,005. With the loss in operations for the three-month period ended July 31, 2020, the additional shares were determined to be non-dilutive.
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1. Nature of Operations and Continuation of Business: Recent Accounting Pronouncements (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees is required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and is recording a lease use asset and lease liability as of May 31, 2019.
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7. Fair Value Measurements and Derivative Liabilities: Fair Value of Financial Instruments, Policy (Policies) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Policies | |
| Fair Value of Financial Instruments, Policy | As defined in (Financial Accounting Standards Board ASC 820), 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 (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
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7. Fair Value Measurements and Derivative Liabilities: Schedule of Derivative Liability Related to the Conversion Feature (Tables) |
3 Months Ended | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||||||||||||||||||
| Tables/Schedules | |||||||||||||||||||||||||
| Schedule of Derivative Liability Related to the Conversion Feature |
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7. Fair Value Measurements and Derivative Liabilities: Schedule of Assumptions Used (Tables) |
3 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||
| Tables/Schedules | |||||||||
| Schedule of Assumptions Used |
|
9. Stock Options: Disclosure of Share-based Compensation Arrangements by Share-based Payment Award (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Stock Options | |||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Share-based Compensation Arrangements by Share-based Payment Award |
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1. Nature of Operations and Continuation of Business (Details) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Details | |
| Entity Incorporation, State Country Name | Delaware |
| Entity Incorporation, Date of Incorporation | May 27, 1998 |
1. Nature of Operations and Continuation of Business: Inventory (Details) - USD ($) |
Jul. 31, 2020 |
Apr. 30, 2020 |
|---|---|---|
| Details | ||
| Inventory | $ 23,235 | $ 21,368 |
1. Nature of Operations and Continuation of Business: Impairment of Long-lived Assets (Details) |
Jul. 31, 2020
USD ($)
|
|---|---|
| Details | |
| Investments | $ 378,600 |
1. Nature of Operations and Continuation of Business: Net Income (Loss) Per Common Share (Details) |
3 Months Ended |
|---|---|
|
Jul. 31, 2020
shares
| |
| Details | |
| Potential shares issuable under outstanding options, warrants and convertible debt | 95,542,005 |
2. Going Concern (Details) - USD ($) |
3 Months Ended | 145 Months Ended | |
|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
|
| Details | |||
| Net income (loss) attributed to the Company | $ 281,996 | $ (739,421) | $ 10,486,631 |
| Working capital deficit | $ 4,018,451 | $ 4,018,451 | |
3. Investments (Details) |
Jul. 31, 2020
USD ($)
|
|---|---|
| Details | |
| Investments | $ 378,600 |
4. Related Party Transactions (Details) - USD ($) |
Jul. 31, 2020 |
Apr. 30, 2020 |
|---|---|---|
| Details | ||
| Payables - related parties | $ 1,028,122 | $ 970,547 |
5. Notes Payable (Details) - USD ($) |
Jul. 31, 2020 |
Apr. 30, 2020 |
|---|---|---|
| Notes payable | $ 424,226 | $ 424,226 |
| July 6, 2018 Note Payable | ||
| Notes payable | $ 250,000 | |
| January 26, 2019 Note Payable | ||
| Notes payable | $ 275,000 |
7. Fair Value Measurements and Derivative Liabilities: Schedule of Derivative Liability Related to the Conversion Feature (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Apr. 30, 2020 |
|
| Retirement of derivative at conversion | $ 237,433 | $ 0 | |
| (Gain) loss on derivative liability | (66,056) | $ (863,032) | |
| Fair Value, Inputs, Level 3 | |||
| Derivative Liability | $ 1,029,799 | $ 1,333,288 | |
Condensed Consolidated Balance Sheets - Parenthetical - $ / shares |
Jul. 31, 2020 |
Apr. 30, 2020 |
|---|---|---|
| Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | |
| Preferred Stock, Shares Authorized | 20,000,000 | |
| Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
| Common Stock, Shares Authorized | 200,000,000 | 200,000,000 |
| Common Stock, Shares, Issued | 19,692,147 | 9,056,524 |
| Common Stock, Shares, Outstanding | 19,692,147 | 9,056,524 |
| Series A Preferred Stock | ||
| Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
| Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
| Preferred Stock, Shares Issued | 2,925,369 | 2,925,369 |
| Preferred Stock, Shares Outstanding | 2,925,369 | 2,925,369 |
| Series B Preferred Stock | ||
| Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
| Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
| Preferred Stock, Shares Issued | 520,000 | 520,000 |
| Preferred Stock, Shares Outstanding | 520,000 | 520,000 |
7. Fair Value Measurements and Derivative Liabilities: Schedule of Assumptions Used (Details) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Fair Value Assumptions, Risk Free Interest Rate | 0.0200 |
| Fair Value Assumptions, Expected Dividend Rate | 0.0000 |
| Fair Value Assumptions, Expected Volatility Rate | 4.4300 |
| Minimum | |
| Fair Value Assumptions, Expected Term | 3 months |
| Maximum | |
| Fair Value Assumptions, Expected Term | 10 months 6 days |
10. Contingencies and Commitments (Details) |
3 Months Ended |
|---|---|
|
Jul. 31, 2020
USD ($)
| |
| EMAC Handels Ag | |
| Monthly fee for administration services | $ 5,000 |
| Monthly fee for Office Rent | 250 |
| Monthly fee for Office Supplies | 125 |
| Merrill W Moses | |
| Monthly fee for administration services | 2,500 |
| Monthly Director's fee per Service Agreement | 7,500 |
| Charles C Hooper | |
| Monthly fee for administration services | 5,000 |
| RAB Investments | |
| Monthly fee for administration services | 5,000 |
| Monthly fee for Office Rent | 250 |
| Monthly fee for telephone | $ 125 |
11. Lease (Details) |
3 Months Ended |
|---|---|
|
Jul. 31, 2020
USD ($)
| |
| Details | |
| Operating Lease Monthly Rental Obligation | $ 3,250 |
| Operating Leases, Future Minimum Payments Due | $ 11,230 |
12. Subsequent Events (Details) |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Subsequent Event 1 | |
| Subsequent Event, Description | During the period from August 1, 2020 to September 18, 2020 the Company issued 9,727,135 shares of common stock for debt with a value of $63,657 on conversion of notes. |
1. Nature of Operations and Continuation of Business |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 1. Nature of Operations and Continuation of Business | NOTE -1: BASIS OF PRESENTATION AND ORGANIZATION
Defense Technologies International Corp. (the "Company ") was incorporated in the State of Delaware on May 27, 1998. Effective June 15, 2016, the Company changed its name to Defense Technologies International Corp. from Canyon Gold Corp. to more fully represent the Company's expansion goals into the advanced technology sector.
On October 19, 2016, the Company entered into a Definitive Agreement with Controlled Capture Systems, LLC (“CCS”), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement. Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products and improvements. The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties as defined in the Definitive Agreement. On May 30, 2018 the Company and Control Capture Systems, LLC amended their license agreement as follows (1) Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter (2) All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive (3) Invoices for parts and materials will be billed separate of the license fees noted above.
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company. The Company currently owns 76.28% of PSSI with 23.72% acquired by several individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.
Basis of Presentation
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year end is April 30.
The interim condensed consolidated financial statements have been prepared without audit in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended April 30, 2020 included in its Annual Report on Form 10-K filed with the SEC.
The interim condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position as of July 31, 2020, the consolidated results of its operations and its consolidated cash flows for the three months ended July 31, 2020 and 2019 The results of operations for any interim period are not necessarily indicative of the results to be expected for the full fiscal year.
Consolidation and Non-Controlling Interest
These consolidated financial statements include the accounts of the Company, and its majority-owned subsidiary, PSSI, from its formation on January 12, 2017 to date. All inter-company transactions and balances have been eliminated.
Inventory
Inventories are stated at the lower of cost using the first-in, first-out (FIFO) cost method of accounting. Inventories as of July 31, 2020 consist of parts used in assembly of the units being sold with no work in progress or finished goods. As of July 31, 2020 and April 30, 2020 the value of the inventory was $23,235 and $21,368, respectively.
Equipment
Equipment is carried at the cost of acquisition and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance is expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets of three years. As of July 31, 2020 had fixed assets net of depreciation of $29,080 compared to $31,996 as of April 30, 2020.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. On April 30, 2019, the Company elected to impair its licenses agreement of $378,600 so as of July 31, 2020, no impairment of asset was necessary.
Net Income (Loss) per Common Share
Basic net income or loss per common share is calculated by dividing the Company’s net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per common share is calculated by dividing the Company’s net income or loss by sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon exercise of outstanding stock options and warrants, using the treasury stock method and the average market price per share during the period, and conversion of convertible debt, using the if converted method. As of July 31, 2020, the Company had potential shares issuable under convertible preferred shares, outstanding options, warrants and convertible debt for a total of 95,542,005. With the loss in operations for the three-month period ended July 31, 2020, the additional shares were determined to be non-dilutive.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees is required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has adopted the new accounting pronouncement and is recording a lease use asset and lease liability as of May 31, 2019.
|
2. Going Concern |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 2. Going Concern | NOTE - 2: GOING CONCERN
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern. Through July 31, 2020, the Company has no revenues, has accumulated deficit of $10,486,631 and a working capital deficit of $4,018,451 and expects to incur further losses in the development of its business. The Company has not yet established an ongoing source of revenue sufficient to cover operating costs, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Management plans to continue to provide for the Company's capital needs during the year ending April 30, 2020 by issuing debt and equity securities and by the continued support of its related parties. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
|
3. Investments |
3 Months Ended |
|---|---|
Jul. 31, 2020 | |
| Notes | |
| 3. Investments | NOTE – 3: INVESTMENTS
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company for 17,500 shares of PSSI valued at $378,600 for 76.28% of PSSI. The balance of PSSI was acquired by four individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI. The investment was impaired as of April 30, 2019.
|
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