NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE NINE MONTHS ENDED JANUARY 31, 2019 AND 2018

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

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

Going Concern

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

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

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

Basis of Presentation

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

Earnings Per Share

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

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

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

Concentrations of risk

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

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

Summary of Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

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

Cash Flow Reporting

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

Inventory

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

Accounts Receivable

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

Leases

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

Property and Equipment

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

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

Long-Lived Assets

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

Income Taxes

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

Revenue Recognition

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

Marketing and Advertising Costs

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

Stock Based Compensation

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

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

Critical Accounting Estimates

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

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

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

Financial Instruments

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

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

Beneficial Conversion Features

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

Recent Accounting Pronouncements

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

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

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

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

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

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

NOTE 3 – DEBT

Short-Term Loans

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

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

Convertible Promissory Notes

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

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

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

RDW Capital, LLC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Power Up Lending Group Ltd.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Power Up Settlement

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

Adar Bays, LLC

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

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

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

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

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

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

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

Adar Settlement

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

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

NOTE 4 – COMMITMENTS AND CONTINGENCIES

Product Warranties

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

Operating Leases

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

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

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

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

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

NOTE 5 –REDEEMABLE PREFERRED STOCK AND Stockholder's Equity

Redeemable Preferred Stock

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

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

Common Stock

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

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

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

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

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