Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☐	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the transition period from August 1, 2020 to October 31, 2020

Commission file number 000-55519

Force Protection Video Equipment Corp.

(Exact name of registrant as specified in its charter)

Florida		45-1443512
(State of other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

1249 Kildaire Farm Road Cary NC		27511
(Address of principal executive offices)		(Zip Code)

(919) 271-2994

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Common Stock, $0.0001 Par Value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)		Emerging growth company	☐

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 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: 841,184,289 shares of common stock, par value $0.0001, were outstanding on December 10, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

None.

FORCE PROTECTION VIDEO EQUIPMENT CORP

FORM 10-Q

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of October 31, 2020 (Unaudited) and April 30, 2020	3
	Consolidated Statements of Operations for the Three and Six Months Ended October 31, 2020 and 2019 (Unaudited)	4
	Consolidated Statements of Stockholders’ Deficit for the Three and Six Months Ended October 31, 2020 and 2019 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended October 31, 2020 and 2019 (Unaudited)	6
	Condensed Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	43

Item 3.	Defaults upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

Signatures		46

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Force Protection Video Equipment Corp.

Consolidated Balance Sheets

	October 31, 2020			April 30, 2020
	(Unaudited)

Assets

Current Assets
Cash	$	1,049,557		$	2,505
Accounts receivable		826			2,116
Total Current Assets		1,050,383			4,621

Total Assets	$	1,050,383		$	4,621

Liabilities and Stockholders' Deficit

Current Liabilities
Accounts payable and accrued expenses	$	71,375		$	237,233
Related party advance		8,050			12,150
Note payable		27,500			27,500
Convertible notes payable		788,020			463,561
Total Current Liabilities		894,945			740,444

Commitments and Contingencies (Note 4)

Series A, Redeemable Preferred Stock - Related Party - $0.0001 par value, 20,000,000 shares authorized 5,000,000 shares issued and outstanding, respectively		5,000			5,000

Series B, Redeemable Preferred Stock - stated value of $100/share 34,729 shares authorized, 10,500 and 0 shares issued, respectively and outstanding, respectively		1,050,000			-

Stockholders' Deficit

Common stock, $0.0001 par value, 20,000,000,000 shares authorized 841,184,289 shares issued and outstanding, respectively		84,119			84,119
Additional paid-in capital		3,780,562			3,780,562
Accumulated deficit		(4,764,243	)		(4,605,504	)
Total Stockholders' Deficit		(899,562	)		(740,823	)

Liabilities and Stockholders' Deficit	$	1,050,383		$	4,621

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

Table of Contents

Force Protection Video Equipment Corp.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	2020			2019			2020			2019

Revenues	$	9,389		$	9,895		$	13,997		$	35,043

Cost of revenues		3,887			2,509			6,614			15,929

Gross profit		5,502			7,386			7,383			19,114

General and administrative expenses		95,855			6,913			121,343			18,845

(Income) loss from operations		(90,353	)		473			(113,960	)		269

Other income (expense) - net
Interest expense		(15,682	)		(25,103	)		(44,779	)		(32,375	)
Impairment of property and equipment		-			-			-			(6,274	)
Gain on debt settlement		-			974			-			974
Gain on lease termination		-			-			-			603
Total other income (expense) - net		(15,682	)		(24,129	)		(44,779	)		(37,072	)

Net loss	$	(106,035	)	$	(23,656	)	$	(158,739	)	$	(36,803	)

Loss per share - basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)		(0.00	)

Weighted average number of shares - basic and diluted		841,184,289			841,184,289			841,184,289			841,184,289

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

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Force Protection Video Equipment Corp.

Consolidated Statements of Changes in Stockholders' Deficit

For the Three and Six Months Ended October 31, 2020 and 2019

(Unaudited)

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Deficit

April 30, 2020		841,184,289	$	84,119	$	3,780,562	$	(4,605,504	)	$	(740,823	)

Net loss - three months ended July 31, 2020		-		-		-		(52,704	)		(52,704	)

July 31, 2020		841,184,289		84,119		3,780,562		(4,658,208	)		(793,527	)

Net loss - three months ended October 31, 2020		-		-		-		(106,035	)		(106,035	)

October 31, 2020		841,184,289	$	84,119	$	3,780,562	$	(4,764,243	)	$	(899,562	)


April 30, 2019		841,184,289	$	84,119	$	3,762,039	$	(4,573,287	)	$	(727,129	)

Forgiveness of accrued payroll - related party		-		-		18,523		-			18,523

Net loss - three months ended July 31, 2019		-		-		-		(13,147	)		(13,147	)

July 31, 2019		841,184,289		84,119		3,780,562		(4,586,434	)		(721,753	)

Net loss - three months ended October 31, 2019		-		-		-		(23,656	)		(23,656	)

October 31, 2019		841,184,289	$	84,119	$	3,780,562	$	(4,610,090	)	$	(745,409	)

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

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Force Protection Video Equipment Corp.

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended October 31,
	2020			2019

Operating activities
Net loss	$	(158,739	)	$	(36,803	)
Adjustments to reconcile net loss to net cash used in operations
Bad debt		756			343
Recognition of prepaid interest expense		-			10,234
Impairment of property and equipment		-			6,274
Gain on debt settlements - net		-			(974	)
Gain on ROU lease liability termination		-			(603	)
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable		534			3,988
Deposits and other assets		-			1,650
Increase (decrease) in
Accounts payable and accrued expenses		31,872			(11,854	)
Deferred software maintenance revenue		-			(1,270	)
Warranty		-			(136	)
Net cash used in operating activities		(125,577	)		(29,151	)

Financing activities
Repayments on related party advance		(4,100	)		(2,500	)
Proceeds from note		-			27,500
Repayments on loans		-			(27,226	)
Proceeds from issuance of convertible promissory notes		126,729			132,856
Repayments on convertible promissory notes		-			(98,710	)
Proceeds from sale of Series B, redeemable preferred stock		1,050,000			-
Net cash provided by financing activities		1,172,629			31,920

Net increase (decrease) in cash		1,047,052			2,769

Cash - beginning of period		2,505			397

Cash - end of period	$	1,049,557		$	3,166

Supplemental disclosure of cash flow information
Cash paid for interest	$	1,711		$	12,177
Cash paid for income tax	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities
Reclassification of accrued interest to convertible note payable	$	197,730		$	-
Forgiveness of accrued payroll - related party	$	-		$	18,523
Termination of ROU lease asset and related liability	$	-		$	29,208

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

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Note 1 - Organization and Nature of Operations

Organization

Force Protection Video Equipment Corp., together with its wholly owned subsidiary, Cobraxtreme HD Corp. (collectively, “we”, “us”, “our” or the “Company”), sells video and audio capture devices and accessories to consumers and law enforcement. The Company was incorporated on March 11, 2011, under the laws of the State of Florida. Cobraxtreme HD Corp. was incorporated under the laws of the State of North Carolina on September 19, 2017 and currently is non-operating. On February 2, 2015, the Company changed its name to Force Protection Video Equipment Corp.

The Company’s fiscal year end is April 30.

See Note 10 regarding share exchange agreement with SRAX, Inc. (“SRAX”) and expected change in control.

Basis of Presentation

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions to Article 8-03 of Regulation S-X.

Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements.

These unaudited consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year ended April 30, 2020 of the Company which were included in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on September 14, 2020.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Liquidity and Going Concern

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying unaudited consolidated financial statements, for the six months ended October 31, 2020, the Company had:

·	Net loss of $158,739; and
·	Net cash used in operations was $125,576

Additionally, at October 31, 2020, the Company had:

·	Accumulated deficit of $4,764,243,
·	Stockholders’ deficit of $899,562; and
·	Working capital of $155,438

At July 31, 2020, the Company was in default on certain convertible notes and related accrued interest. On August 1, 2020, the Company reached an agreement with its lenders to extend the due dates of its in-default convertible notes to February 1, 2021 (Note 3).

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from the sales of its goods and services to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis.

In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flow and cash usage forecasts for the period ending October 31, 2020, and our current capital structure including equity-based instruments and our obligations and debts.

At October 31, 2020, the Company had $1,049,558 in cash. If we do not raise sufficient capital in a timely manner, among other things, we may be forced scale back our operations or cease operations all together. We expect that our existing cash and cash equivalents as of October 31, 2020, will not be sufficient to enable us to fund our anticipated level of operations based on our current operating plans, through the second quarter of fiscal year end 2022. Accordingly, we will require additional capital to fund our operations. We anticipate raising additional capital through the private and public sales of our equity or debt securities, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurance that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

During the six months ended of fiscal year 2021, the Company sold Series B, Redeemable Preferred Stock for $1,050,000 (Note 6). Additionally, the Company was able to raise $126,729 in 8%, convertible notes, under similar terms as its previous convertible note financings (Note 3). The Company’s capital-raising efforts are ongoing, and the Company has undertaken the following to reduce its burn rate: an ongoing review and reduction of monthly operating expenses. If sufficient capital cannot be raised during fiscal year 2021, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations to the extent practicable.

Because COVID-19 infections have been reported throughout the United States, certain federal, state, and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future.

The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition, and results of operations.

The significance of the impact of the COVID-19 outbreak on the Company’s business has been significant and has affected our ability to generate revenues and positive cash flows from operations. In light of the COVID-19 pandemic, the Company has taken proactive steps to manage its costs and discretionary spending.

These factors create substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

These consolidated financial statements have been prepared in accordance with US GAAP and include the accounts of the Company and its wholly owned subsidiary, Cobraxtreme HD Corp. All intercompany transactions and balances have been eliminated.

Business Segments

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics.

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, and those estimates may be material.

Significant estimates during the six months ended October 31, 2020 included allowance for doubtful accounts on accounts receivable and estimates of current and deferred income taxes and deferred tax valuation allowance.

Significant estimates during the six months ended October 31, 2019 included allowance for doubtful accounts on accounts receivable, estimated useful life and related impairment of property and equipment, valuation of operating lease right-of-use (“ROU”) assets and liabilities and the related lease termination and estimates of current and deferred income taxes and deferred tax valuation allowance.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Fair Value of Financial Instruments

The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

	·	Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
	·	Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
	·	Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, are carried at historical cost. At October 31, 2020 and April 30, 2020, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

Concentrations of Risk

During the six months ended October 31, 2020 and 2019, the following customers accounted for greater than 10% of sales as follows:

	Six Months Ended
Customer	October 31, 2020			October 31, 2019
A		16	%		-
B		15	%		-
C		12	%		-
D		10	%		-
E		-			18	%
Total		53	%		18	%

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At October 31, 2020 and April 30, 2020, the Company did not have any cash equivalents.

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. At October 31, 2020, there were balances in excess of FDIC insured levels of approximately $800,000, however, the Company has not experienced any losses in such accounts through October 31, 2020 and April 30, 2020, respectively.

Accounts Receivable

Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Allowance for doubtful accounts was $0 and $0 at October 31, 2020 and April 30, 2020, respectively. For the three and six months ended October 31, 2020 and 2019, the Company recorded bad debt expense of $756 and $343, respectively.

Long-lived Assets

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company’s stock price for a sustained period of time; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets ranging from three to seven years.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.

On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. All related property and equipment at that time was determined to be impaired. The Company recorded an impairment loss of property and equipment of $6,274 for the six months ended October 31, 2019.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Right of Use Assets and Lease Obligations

The Right of Use (“ROU”) Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the Company’s operations remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company.

Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of operations.

On May 1, 2019, the Company and its landlord mutually agreed to terminate the outstanding office lease. The Company had an ROU asset of $29,208 and a lease liability of $29,811 at the date of termination, resulting in a gain on lease termination of $603 for the six months ended October 31, 2019.

Derivative Liabilities

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. The Company uses a Black-Scholes option pricing model to determine fair value.

Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment recognized in the Company’s consolidated statements of operations. At October 31, 2020 and April 30, 2020, the Company did not have any derivative liabilities.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Stock Warrant Liability

The Company accounts for certain stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company are estimated using a Black-Scholes option pricing model, at each measurement date.

At October 31, 2020 and April 30, 2020, the Company did not have any warrant liabilities.

Debt Discounts (Derivative Liabilities)

The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes (ASC 815) in accordance with ASC 470-20, Debt with Conversion and Other Options. These costs are classified as a component of debt discount on the consolidated balance sheets as a direct deduction from the debt liability. The Company amortizes these costs over the term of the related debt agreement as interest expense (accretion) - debt discount, in the consolidated statements of operations.

At October 31, 2020 and April 30, 2020, the Company did not have any debt discounts recorded in connection with any derivative or stock warrant liabilities.

Beneficial Conversion Features and Debt Discounts

For instruments that are not considered liabilities under ASC 480 or ASC 815, the Company applies ASC 470-20 to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the effective conversion price and the fair market value of the common stock (whereby the conversion price is lower than the fair market value) into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this debt discount amount to the proceeds allocated to the convertible instrument.

Debt Issue Cost

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense in the consolidated statements of operations, over the life of the underlying debt instrument.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Revenue Recognition

Our revenue is generated from the sale of products consisting primarily of video and audio capture devices and accessories. Payment or invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue is recorded net of discounts and promotions and is disaggregated based on significant product lines. See Note 7 for segments and geographic data.

ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows:

Identification of the contract, or contracts, with a customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer.

Identification of the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

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OCTOBER 31, 2020

Determination of the transaction price

The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Variable consideration is described in detail below.

Allocation of the transaction price to the performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.

Recognition of revenue when, or as, we satisfy a performance obligation

We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.

Principal versus Agent Considerations

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.

Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:

We are primarily responsible for fulfilling the promise to provide the specified good or service

When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.

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OCTOBER 31, 2020

We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer.

We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.

The entity has discretion in establishing the price for the specified good or service

We have discretion in establishing the price our customer pays for the specified goods or services.

Contract Liabilities

Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities have been historically low and are generally recorded as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. We have no Long-term contract liabilities which would represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year.

Cost of Revenues

Cost of revenues represents costs directly related to the production, manufacturing and freight-in of the Company’s product inventory purchased from third-party manufacturers.

Income Taxes

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

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OCTOBER 31, 2020

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of October 31, 2020, and April 30, 2020, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded for the three and six months ended October 31, 2020 and 2019.

Marketing and Advertising Costs

Marketing and advertising costs are expensed as incurred.

The Company recognized $749 and $804 in marketing and advertising costs during the three months ended October 31, 2020 and 2019, respectively, and are included as a component of general and administrative expenses on the consolidated statements of operations.

The Company recognized $857 and $3,776 in marketing and advertising costs during the six months ended October 31, 2020 and 2019, respectively, and are included as a component of general and administrative expenses on the consolidated statements of operations.

Stock-Based Compensation

We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

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OCTOBER 31, 2020

When determining fair value, the Company considers the following assumptions in the Black-Scholes model:

·	Exercise price,
·	Expected dividends,
·	Expected volatility,
·	Risk-free interest rate,
·	Expected life of option; and
·	Expected forfeiture rate

There were no stock option grants during the three and six months ended October 31, 2020 and 2019, respectively. Additionally, there were no stock options outstanding or exercisable as of October 31, 2020 and April 30, 2020, respectively.

Common stock awards

The Company may grant common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded in accordance with ASU 2018-07 (June 2018) on the consolidated statement of operations in the same manner and charged to the same account as if such settlements had been made in cash.

There were no stock awards granted during the three and six months ended October 31, 2020 and 2019, respectively.

Stock Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance if there is not a service period.

There were no warrants grants during the three and six months ended October 31, 2020 and 2019, respectively. Additionally, there were no warrants outstanding or exercisable as of October 31, 2020 and April 30, 2020, respectively.

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Basic and diluted loss per share

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.

The following potentially dilutive equity securities outstanding for the six months ended October 31, 2020 and 2019 were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:

October 31,

2020

October 31,

2019

Convertible notes (P&I)

2,676,696,667

6,739,747,705

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Recently Issued Accounting Standards

Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement”, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2018-13 during the quarter ended January 31, 2020 and its adoption did not have any material impact on the Company’s consolidated financial statements.

On May 1, 2020, the Company adopted ASU 2017-11, “Earnings per share (Topic 260)”, provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. If a down round feature on the conversion option embedded in the note is triggered, the Company will evaluate whether a beneficial conversion feature exists, the Company will record the amount as a debt discount and will amortize it over the remaining term of the debt.

If the down round feature in the warrants that are classified as equity is triggered, the Company will recognize the effect of the down round as a deemed dividend, which will reduce the income available to common stockholders.

Recent Accounting Updates Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.

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OCTOBER 31, 2020

Note 3 – Debt

Fiscal Year Ended April 30, 2021

Through July 31, 2020, the Company had issued numerous convertible promissory notes that were held by Red Diamond Partners, LLC, and their affiliates. In certain cases, these notes contained conversion features that required a discount to the market price based upon a formula using the Company’s stock prices. The Company has determined that each convertible promissory note conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes met 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.

On August 1, 2020, the Company consolidated all of the convertible note principal $499,611 and related accrued interest $197,730 totaling $697,341 into one master note, with subsequent convertible debt financings having the same terms and conditions as the master note (see below). Several of these notes were in default at the time of creating the new master note. The master note only amended these prior convertible notes to a new maturity date of February 1, 2021.

The Company evaluated the amendment of these convertible notes under ASC 470-50, "Debt Modification and Extinguishment", and concluded that the original and modified debt instruments are not considered substantially different as the difference between the present value of the remaining cash flows under the original and the modified terms is less than 10%. Because the original and new debt instruments are not considered substantially different, debt extinguishment accounting does not apply. Specifically, the maturity date extension did not result in significant and consequential changes to the economic substance of the debt. As a result, this transaction is considered a modification of debt.

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FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

The terms of the master note and the subsequent convertible note financings were as follows at October 31, 2020:

Issuance Date of Convertible Notes		August 1, 2020 - September 29, 2020
Term of Convertible Notes		6 months
Maturity Dates		February 1, 2021 - March 29, 2021
Face amount of convertible notes		$788,020 (includes $197,730 of accrued interest converted)
Gross Proceeds		$126,729 (includes proceeds since May 1, 2020)
Interest Rate		8%
Default Interest Rate		24%
Collateral		Unsecured
Conversion Discount		Fixed at $0.0003 (subject to down round protection)*
Conversion Restriction		Ownership can not exceed 4.99%
Prepayment Penalty (Principal and Interest)		130%
Default Penalty at Option of Lender (Principal and Interest)		150%
Common Share Reserve		Three (3) times amount of possible shares needed upon conversion

* Upon creating the master note and for all subsequent debt issuances thereunder, each debt instrument contains a down round provision allowing debt holders to adjust the exercise price (currently fixed at $0.0003) to a new lower effective exercise price should a new offering of common stock or common stock equivalents occur with a lower exercise price.

In October 2020, the Company executed an equity-based offering of Series B, Redeemable Preferred Stock (See Note 6) with a calculated conversion price in excess of the $0.0003 fixed conversion price noted above. As a result, due to this equity-based issuance and in accordance with the guidance under ASU 2017-11, the down round feature was not triggered and no adjustment to exercise price was required during the six months ended October 31, 2020.

Additionally, the issuance of these convertible notes required an evaluation for the existence of a beneficial conversion feature or derivative liability. Management has concluded that no such features existed at the time of each convertible note issuance or at the time of any Series B, Redeemable Preferred Stock issuance.

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OCTOBER 31, 2020

Fiscal Year Ended April 30, 2020

Effective May 1, 2019, the lender amended the conversion price for all outstanding notes to a fixed price of $0.0003. As a result of this amendment, the Company determined that the present value of the cash flows of the outstanding debt were similar (less than 10%) to the present value of the cash flows of the new debt and therefore this amendment was accounted for as a debt modification, which had no effect for financial reporting purposes.

Additionally, on May 1, 2019, the lender amended all of their 8% convertible promissory notes previously outstanding as well as those issued after May 1, 2019 to suspend the default provision, which would allow for a default penalty of 150% on the outstanding principal and accrued interest at the time of default. The lender has provided for similar relief to its 5%, non-convertible note, issued on October 11, 2019 (See below). The lender has reserved the right to reinstate the default provision at their discretion.

See above for creation of the master note on August 1, 2020.

Lenders

RDW Capital, LLC (“RDW”) - Convertible Notes (6 Notes)

See above for consolidation into master note.

Term of Convertible Notes		Approximately 6 months
Maturity Dates		September 10, 2016 – October 31, 2018, then February 1, 2021
Interest Rate		8%
Default Interest Rate		24%
Collateral		Unsecured
Conversion Discount		Fixed at $0.0003
Conversion Restriction		Ownership cannot exceed 4.99%
Prepayment Penalty (P&I)		130%
Default Penalty (P&I)		150%
Common Share Reserve		Three (3) times the possible shares needed upon conversion

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OCTOBER 31, 2020

Red Diamond Partners, LLC (“Red”) – Convertible Notes (12 Notes)

See above for consolidation into master note.

Issuance Date of Convertible Notes		October 11, 2019 – October 23, 2020
Term of Convertible Notes		Approximately 6 months
Maturity Dates		April 11, 2020 – January 23, 2021, then February 1, 2021
Gross Proceeds		$788,020
Interest Rate		8%
Default Interest Rate		24%
Collateral		Unsecured
Conversion Feature		Fixed at $0.0003
Conversion Restriction		Ownership cannot exceed 4.99%
Prepayment Penalty (P&I)		130%
Default Penalty (P&I)		150%
Common Share Reserve		Three (3) times the possible shares needed upon conversion

Red Diamond Partners, LLC – Term Note (1 Note)

Issuance Date of Note		October 11, 2019
Term of Note		Approximately 6 months
Maturity Date		April 11, 2020
Gross Proceeds		$27,500
Interest Rate		5%
Default Interest Rate		None
Collateral		5,000,000 shares, Series A, Redeemable Preferred Stock – all held by the Company’s CEO
Conversion Feature		None
Conversion Restriction		N/A
Prepayment Penalty (P&I)		130%
Default Penalty (P&I)		N/A
Common Share Reserve		N/A

As of October 31, 2020, the note payable of $27,500 along with accrued interest of $1,455 was in default.

In connection with the default, the lender has not called this debt and is not seeking to foreclose on the collateral and obtain the 5,000,000 shares of Series A, Redeemable, Preferred Stock (See Note 5).

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020

The following is a summary of the Company’s convertible notes and related accrued interest (included as a component of accounts payable and accrued expenses) at October 31, 2020:

	Convertible Notes Payable
	Amounts			In-Default
Balance - April 30, 2019	$	439,465		$	439,465
Proceeds		175,756
Repayments		(132,460	)
Gain on Debt Settlements - Net		(19,200	)
Balance - April 30, 2020		463,561			420,661
Reclassification of accrued interest to convertible note payable		197,730
Proceeds		126,729
Balance - October 31, 2020	$	788,020		$	-

	Accrued Interest Payable
	Amounts			In-Default
Balance - April 30, 2019		149,636			149,636
Interest Expense - Net		65,367
Repayments		(2,040	)
Gain on Debt Settlements - Net		(41,857	)
Balance - April 30, 2020		171,106			168,174
Reclassification of accrued interest to convertible note payable		(197,730	)
Interest Expense		41,613
Balance - October 31, 2020	$	14,989		$	-

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OCTOBER 31, 2020

The following is a summary of the Company’s note payable and related accrued interest (included as a component of accounts payable and accrued expenses) at October 31, 2020:

	Note Payable
	Amounts		In-Default
Balance - April 30, 2019	$	-	$	-
Proceeds		27,500
Balance - April 30, 2020		27,500		27,500
No activity		-
Balance - October 31, 2020	$	27,500	$	27,500

	Accrued Interest Payable
	Amounts		In-Default
Balance - April 30, 2019		-		-
Interest Expense		761
Balance - April 30, 2020		761		761
Interest Expense		694
Balance - October 31, 2020	$	1,455	$	1,455

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.

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OCTOBER 31, 2020

Note 5 – Series A, Redeemable Preferred Stock – Related Party

As of October 31, 2020, and April 30, 2020, respectively, there were 5,000,000 shares of $0.0001 par value, Series A, Redeemable Preferred Stock outstanding held by the Company’s Chief Executive Officer (“CEO”).

The Preferred Stock pays no dividends and has no conversion rights into common stock. Each share of Preferred Stock is entitled to 200 votes per share and is redeemable in whole, but not in part, at the option of the holder for $0.0001 per share. Due to the redemption feature being at the option of the holder, the Company classifies the purchase price in the temporary equity section of the balance sheet.

See Note 3 regarding these 5,000,000 shares serving as collateral for a debt issuance to Red Diamond Partners, LLC (“Red”) on October 11, 2019 for $27,500.

Note 6 – Series B, Redeemable Preferred Stock

In October 2020, the Company issued 10,500 shares of Series B, Redeemable Preferred Stock, having a fair value of $1,050,000 ($100/share). The holder of these shares is Red Diamond Partners, LLC, who also holds all of the Company’s outstanding convertible notes and accrued interest (See Note 3).

The following are the terms and conditions of the Series B, Redeemable Preferred Stock:

·	Authorized shares – 34,729.
·	Dividends – 5% after year 1. Increased to 15% with a triggering event (qualified financing of $5,000,000).
·	Stated Value - $100/share.
·	Non-voting
·	Liquidation preference – pro-rata on an as converted basis with commons stock.
·	Conversion Price (prior to a qualified financing of $5,000,000). Determined by dividing $15,000,000 by all fully diluted securities.
·	Conversion Price (after a qualified financing of $5,000,000). Requires automatic conversion into common stock based on the lesser of (i) 80% of the lowest share price of common stock in a qualified financing of $5,000,000 and (ii) the conversion price determined prior to a qualified financing of $5,000,000 (see above).
·	Redeemable in cash at 125% by the holder after a qualified financing of $5,000,000.

A preferred share is redeemable if there is any feature in the preferred share that will either (1) automatically (unconditionally or mandatorily) or contingently (conditionally) require the issuer to redeem the share or (2) permit the holder to compel the issuer to redeem (i.e., put) the share at any time or on the occurrence of a contingent event. The balance sheet classification of the preferred share (i.e., equity, temporary equity, or a liability) is not considered when evaluating if the preferred share is considered redeemable.

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OCTOBER 31, 2020

The Series B shares automatically convert into common stock upon a qualified financing ($5,000,000). Also, the holder may compel a cash redemption of 125% after a qualified financing ($5,000,000). These are conditional obligations; therefore, redemption is outside the control of the Company, thus creating a financial instrument to be classified as temporary equity on the balance sheet.

Additionally, the issuance of these Series B shares required an evaluation for the existence of a beneficial conversion feature or derivative liability. Management has concluded that no such features existed at the time of each issuance.

See Note 3 pertaining to the down round provision, which as of October 31, 2020 has not yet been triggered by the issuance of any Series B shares.

Note 7 – Revenues

All of the Company’s revenues are derived from business in North America. The following tables disaggregate our revenue by major product line, types of customers, and timing of revenue recognition for the six months ended October 31, 2020 and 2019, respectively:

	October 31, 2020					October 31, 2019

Major Product Lines	Revenue		% of Revenues			Revenue		% of Revenues

Cameras	$	11,575		83	%	$	23,112		66	%
Accessories		2,422		17	%		11,931		34	%
Total Net Revenue	$	13,997		100	%	$	35,043		100	%

Types of Customers	Revenue		% of Revenues			Revenue		% of Revenues

Federal	$	560		4	%	$	3,154		9	%
State and Local		13,157		94	%		30,838		88	%
Non-government		280		2	%		1,051		3	%
	$	13,997		100	%	$	35,043		100	%

Timing of Revenue Recognition	Revenue		% of Revenues			Revenue		% of Revenues

Transferred at a point in time	$	13,997		100	%	$	35,043		100	%
	$	13,997		100	%	$	35,043		100	%

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OCTOBER 31, 2020

Note 8 - Stockholder’s Deficit

October 31, 2020

During the six months ended October 31, 2020, there were no equity transactions.

October 31, 2019

During the six months ended October 31, 2019, the Company’s CEO forgave accrued payroll of $18,523. Since the forgiveness occurred with a related party, accordingly there was no gain or loss, this resulted in a contribution to equity.

Note 9 – Related Party Transactions

Shareholder advances (repayments)

From time to time, the Company receives advances from and repays such advances to the Company’s CEO for working capital purposes and to repay indebtedness. The advances are non-interest bearing, unsecured and due on demand.

During the six months ended October 31, 2020, the Company repaid $4,100, resulting in an outstanding balance of $8,050.

During the six months ended October 31, 2019, the Company repaid $2,500, resulting in an outstanding balance of $12,150.

Note 10 – Share Exchange Agreement

On September 30, 2020, the Company and Paul Feldman, its sole officer, director and the sole holder of the Company’s Series A, Preferred Stock entered into a Share Exchange Agreement (the “Agreement”) with SRAX to acquire SRAX, Inc.’s wholly owned subsidiary, BIG Token, Inc. (“BIGtoken”). At closing, the Company will receive 100% of the outstanding equity shares of BIGtoken in exchange for the Company’s issuance of such number of shares of its common stock to SRAX which shall equal 88.9% of issued and outstanding shares of common stock post-closing. In addition, Paul Feldman has agreed to transfer his 5,000,000 shares of Series A, Preferred Stock to SRAX. The transaction will result in a change of control of the Company and the appointment of a new board of directors and officers. The closing is subject to certain condition precedents. There are no underwriting discounts or commissions to be paid. This transaction has not yet closed.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our April 30, 2020 Annual Report on Form 10-K.

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

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

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

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

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ITEM 1: BUSINESS

Overview

The Company is in the business of selling video and audio capture devices initially targeted to law enforcement agencies. With over 30 years of marketing to law enforcement, the Company’s CEO, Paul Feldman is able to leverage his extensive knowledge and base of contacts to produce sales. The Company has established a web site at www.forceprovideo.com whereby customers can view the Company’s products and place orders. We believe that given recent current events between law enforcement agencies and the public, which has been widely reported by the media, there is a significant market opportunity for the Company’s products. In the first quarter of fiscal 2016, the Company received multiple orders for the LE10 camera System. The LE10 is a small bodied, high definition (HD) camera which is half the size and half the price of most law enforcement cameras currently available. The LE10 and more recent addition the LE50 are rich with features that make them ideal for on-demand video and audio capture. The LE10 and LE50 do not require special software or expensive storage contracts. The video files can quickly be downloaded into a standard law enforcement case file and the micro-SD cards are sealed in the provided static evidence bags and then securely stored in the department’s evidence locker. The Company’s Video LE10 and LE50 cameras are a rugged design which incorporates Ambarella (NASDAQ “AMBA”) made chips that allow the cameras to record high-definition video.

Product Development and Sales

Our on-body mini-camera was developed by Paul Feldman, our Chief Executive Officer, President and Director who has significant experience in the development and commercialization of security and surveillance related products. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc., a manufacturer of surveillance products and audio intelligent devices which were sold to the U.S. military and law enforcement. Patent technologies previously developed by Mr. Feldman include U.S. Patent Number 7,631,601 Surveillance Projectile and U.S. Patent Number 2006/0283,345 Surveillance Projectile.

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

Our primary products consist of video and audio recording devices as follows:

LE10 Law Enforcement Video Recorder. Retail price: $195. The LE10 on-body camera is designed for use by law enforcement and can be mounted on helmets, tactical vest, and riot shields. The LE10 provides high quality video and a sensor that allows the device to shoot in full HD at 30 fps, and 8 MP photos with shutter speed of 8fps in burst mode. In photo mode, the user can take pictures with a delayed timer. The device has three (3) resolutions and slow-motion capability allowing its user to create highly quality video while engaged in a variety of physical activity. The LE10 has built-in Wi-Fi, providing connectivity with a smartphone or tablet to enable remote control and content viewing functionality. Video taken by the LE10 is stored on a micro-HD SD card which can be transferred to a computer for use as evidence. Downloading the video into evidence requires no special software or expensive cloud storage contracts. The LE10 is equipped with a high-definition microphone to capture and record audio. The LE10 can also be used only as a standalone audio recorder to record witness statements or conduct interviews.

LE50 HD Body Cam. Retail price: $495. The LE50 includes many of the LE10 features in an on-body camera designed for use by law enforcement which can be mounted on helmets, tactical vest, and riot shields. The LE50 provides up to 10 hours of high-quality video with a built-in audio announcement feature, 50 hours of standby time, sound and vibration operation indication, 2″ TFT-LCD High Resolution Color Display, 32 GB of internal tamper proof storage, supports up to 128GB of memory, 140-degree field of view, white led illumination, waterproof level of IP65, metal clip with 360 degrees rotation, one button tag of important file feature and GPS recording.

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SC1 Sunglass Camera. Retail price: $199.95. The SC1 Sunglass Camera is made from TR90 high impact resistant and flexible material and features a 150° wide-angle full HD 1080p video camera, with one-hour record time, built between the eyes with the controls and battery built into the glasses’ ultra slim frame. A full range of polarized and clear lenses are available and easily interchangeable.

Surveillance Cameras. Retail price: $100-$1,800. The Surveillance cameras now offered are state of the art, disguised cameras sold exclusively to law enforcement. Due to the sensitive nature of these products no further information may be disclosed.

Our manufacturer provides a one (1) year warranty for our products, and customers can purchase another year.

Our customers include the federal government and more than twenty-five thousand (25,000) state and local law enforcement agencies.

Distribution

Customers purchase products from our website, printed catalogs and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges for orders less than $200.

Manufacturing

We purchase our finished products on an as needed basis from several manufacturers in Shenzhen China, Taiwan, and the USA. Our manufacturers provide production, labeling, and packaging of our finished product according to our specifications which is confirmed with each order placed. We are not subject to any supplier agreements which means we are not obligated to purchase a minimum amount of product or place orders in the future. We pay for all products we order at the time the order is placed. Upon placing an order, our manufacturer creates a purchase order reflecting: (i) the product ordered, (ii) price per item (iii) total cost for the order, (iv) total cost to ship product ordered from our manufacturer to our facility, (iv) that immediate payment in required at the time of the order, and (v) the delivery date and delivery address. All material used to manufacture our products is located, purchased and paid for by our manufacturers who invoices us only for our finished product. All products offered by Force Protection Video have a twelve (12) month warranty.

Marketing

Currently, our sales and marketing efforts include printed marketing brochures catalogs featuring our products which we distribute to state and local law enforcement agencies. We create and deliver brochures to state and local law enforcement, every four (4) weeks, using U.S. Mail. Our data base contains over 25,000 law enforcement agencies nationwide.

We believe that a marketing strategy focused on print marketing to law enforcement will provide our target customers with the opportunity to view our specific information about our products and their features, which is an optimal strategy to increase sales.

Product Development

We expense all product development costs as incurred. Product development costs have been negligible for the past few years but are incurred as needed to support new product ideas and launches.

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Product Warranty

We accept returns of products two (2) weeks after purchase. Additionally, our manufacturer provides a twelve (12) month warranty on all products manufactured and the Company offers an extended warranty for year two. The occurrence of any material defects or product recalls could make us liable for damages and warranty claims. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor, and customer demand, and adversely affect our operating results and financial condition. Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.

Competition

The market for on-body cameras is highly competitive. Further, we expect competition to increase in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets. We compete against established, well-known camera manufacturers such as Axon- Taser, WatchGuard, and Provision. Many of our current competitors have substantial market share, diversified product lines, well- established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.

In addition, many of our existing and potential competitors have substantial competitive advantages, such as:

·	longer operating histories;
·	the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;
·	broader distribution and established relationships with channel partners;
·	access to larger established customer bases;
·	greater financial resources;
·	large intellectual property portfolios; and
·	the ability to bundle competitive offerings with other products and services

Moreover, smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc. and Samsung, may design them for use in a range of conditions, including challenging physical environments, or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products. Further, we are aware that certain companies have developed cameras designed and labeled to appear similar to our products, which may confuse consumers or distract consumers from purchasing our products.

Increased competition may result in pricing pressures and reduced profit margins and may impede our ability to continue to increase the sales of our products or cause us to lose market share, any of which could substantially harm our business and results of operations

Seasonality

Our business, as well as the industry in which we operate, is not seasonal.

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Intellectual Property

We currently have a patent pending on a new product.

Other than the aforementioned pending patent, we have no registered or patented intellectual property. Trademarks and trade names distinguish the various companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.

Employees

As of the date of this report, we have one full time employee, Paul Feldman, who is our Director, Chief Executive Officer and Chief Financial Officer. Mr. Feldman spends approximately sixty (60) hours per week on our business. We have one full time employees who provide clerical and administrative services and one full time salesperson.

None of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppages. We maintain good relationships with our employees.

Results of Operations

As of October 31, 2020, we had total assets of $1,050,383 and total liabilities of $894,945. Since our inception to October 31, 2020, we have an accumulated a deficit of $4,764,243. We anticipate that we will continue to incur losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through the sale of equity or debt securities.

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Three Months Ended October 31, 2020, compared to the Three Months Ended October 31, 2019

	For the Three Months Ended October 31,
	2020			2019			$ Change			% Change

Revenues	$	9,389		$	9,895		$	(506	)		-5	%	1
Gross profit	$	5,502		$	7,386		$	(1,884	)		-26	%	2
General and administrative expenses	$	95,855		$	6,913		$	88,942			1287	%	3
Total other income (expense) - net	$	(15,682	)	$	(24,129	)	$	8,447			-35	%	4

_____________

1	Revenues decreased due to lack of expected sales and a reduction in marketing and advertising.

2	The gross profit in 2020 and 2019 was related to cost of revenues in the ordinary course of business. Overall, however, in 2020, there was a decrease in the volume of higher margin products as compared to 2019. The Company does not have sufficient cash resources to keep inventory on hand, which prevents the Company from making potential sales. The Company anticipates fluctuations in the mix of its product sales and expects its gross margin to fluctuate due to changes in product mix.

3	General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance, and other office related costs. The increase is primarily due to professional fees. Additionally, sales and marketing costs include costs to promote and sell our products. Sales and marketing costs during the three months ended October 31, 2020 and 2019 were $749 and $804, respectively. The decrease of $55 coincides with the Company s lack of available cash resources to maintain sufficient spending in this area.

4	Other income and expense during 2020 consisted of interest expense on the Company's debt. Interest expense for 2020 and 2019 was $15,682 and $25,103, respectively. During the three months ended October 31, 2019, the Company recognized a gain on debt settlement of $974.

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Six Months Ended October 31, 2020, compared to the Six Months Ended October 31, 2019

	For the Six Months Ended October 31,
	2020			2019			$ Change			% Change

Revenues	$	13,997		$	35,043		$	(21,046	)		-60	%	1
Gross profit	$	7,383		$	19,114		$	(11,731	)		-61	%	2
General and administrative expenses	$	121,343		$	18,845		$	102,498			544	%	3
Total other income (expense) - net	$	(44,779	)	$	(37,072	)	$	(7,707	)		21	%	4

_____________

1	Revenues decreased due to lack of expected sales and a reduction in marketing and advertising.

2	The gross profit in 2020 and 2019 was related to cost of revenues in the ordinary course of business. Overall, however, in 2020, there was a decrease in the volume of higher margin products as compared to 2019. The Company does not have sufficient cash resources to keep inventory on hand, which prevents the Company from making potential sales. The Company anticipates fluctuations in the mix of its product sales and expects its gross margin to fluctuate due to changes in product mix.

3	General and administrative costs include costs related to personnel, professional fees, travel and entertainment, public company costs, product development, insurance, and other office related costs. The increase is primarily due to professional fees. Additionally, sales and marketing costs include costs to promote and sell our products. Sales and marketing costs during the six months ended October 31, 2020 and 2019 were $857 and $3,776, respectively. The decrease of $2,919 coincides with the Company’s lack of available cash resources to maintain sufficient spending in this area.

4	Other income and expense during 2020 consisted of interest expense on the Company's debt. Interest expense for 2020 and 2019 was $44,779 and $32,375, respectively. During the six months ended October 31, 2019, the Company recognized a gain on ROU lease liability termination of $603 and a related impairment charge of $6,274 for the property and equipment that was no longer being used for operations. The Company also recognized a gain on debt settlement of $974.

Liquidity and Working Capital

Our principal source of liquidity is cash in the bank. As of October 31, 2020, our current assets totaled $1,050,383, of which $1,049,557 was cash on hand. The Company also has accounts receivable of $826. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will try to raise additional funds through private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

For the six months ended October 31, 2020, net cash used in operating activities was $125,576, compared to net cash used in operating activities of $29,151 for the six months ended October 31, 2019.

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For the six months ended October 31, 2020, net cash flows used in investing activities was $0, compared to $0 for the six months ended October 31, 2019.

For the six months ended October 31, 2020, net cash flows provided by financing activities of $1,172,629 related to proceeds of $1,050,000 from the sale of Series B, Redeemable Preferred Stock, and proceeds from the issuance of convertible promissory notes of $126,729 offset by the repayment of related party advances of $4,100. Comparatively, for the six months ended October 31, 2019, net cash flows provided by financing activities were $31,920, primarily related to proceeds from the issuance of convertible promissory notes of $132,856 offset by the repayments of convertible promissory notes of $98,710. Additionally, the Company received proceeds from the issuance of a note for $27,500, offset by loan repayments of $27,226 and related party advances of $2,500. To date, we have financed our operations primarily through the issuance of convertible notes and term loans.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our condensed consolidated results of operations and financial position.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, which is the potential loss arising from adverse changes in market prices and rates. We have not entered, and do not intend to enter, into derivative financial instruments for hedging or speculative purposes.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of October 31, 2020, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended. Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.

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

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

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

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

(3) Lack of formal documentation. We maintain very informal controls over the billing and invoicing procedures. As a result, invoicing delays have occurred. This is a significant material weakness in the billing cycle because this will cause inaccuracies in the ultimate completion of the sale, which is the collection of cash. Also, sales cut-off complications could arise due to these delays in billing. Bills should be sent to customers as soon as possible to expedite payment and otherwise keep the accounting system current.

Changes in internal controls

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

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PART II- OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company, threatened against or affecting our Company or our Common Stock, in which an adverse decision could have a material adverse effect.

ITEM 1A: RISK FACTORS

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1 of our Annual Report on Form 10-K for the year ended April 30, 2020. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

There have been no material changes to the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended April 30, 2020 other than the following:

We face risks related to Novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations, sales, and financial results.

Our business has been adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments has caused disruption to our operations and sales activities. Our third-party manufacturers, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines, and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions which could adversely affect our business, operations, and customer relationships. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.

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Publicly Reporting Company Considerations

We will face several material challenges of operating as a publicly reporting company and we expect to incur significant costs and expenses applicable to us as a public company. We anticipate that our ongoing costs and expenses of complying with our public reporting company obligations will be approximately $50,000 annually, which we expect to pay for out of proceeds from our financing efforts during the next twelve months from the date of this report. Subsequent to the next twelve-month reporting and compliance period, we expect to pay for our publicly reporting company compliance and reporting costs from our gross profits, although there is no assurance that sufficient revenues will be generated to cover said costs. We must structure, establish, maintain, and operate our Company under corporate policies designed to ensure compliance with all required public company laws, rules, and regulations, including, without limitation, the Securities Act of 1933, the Securities Act of 1934, the Sarbanes- Oxley Act of 2002, the Foreign Corrupt Practices Act and the respective rules and regulations promulgated thereunder. Some of our more significant challenges of being a publicly reporting company will include the following:

We will have to carefully prepare and file, in the format mandated by the SEC, all periodic filings as required by the Securities Exchange Act of 1934 (Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and interim reports of material significant events on Form 8-K), as well as insider reporting compliance for all officers and director under Section 16 of the Securities Exchange Act of 1934 on Forms 3, 4 and 5;

	·	We will have to assure that our corporate governance principles and Board minutes are properly drafted and maintained;

	·	We will have to carefully analyze and assess all disclosures in all forms of public communications, including periodic SEC filings, press releases, website postings, and investor conferences to assure legal compliance;

	·	We will have assured corporate and SEC legal compliance with respect to proxy statements and information statements circulated for our annual shareholder meetings, shareholder solicitations and other shareholder information events;

	·	We will have to assure securities law compliance for all equity-based employee benefit plans, including registration statements and prospectus distribution procedures;

	·	We will have to continuously analyze the specific impact on our Company of all significant SEC initiatives, policies, proposals, and developments, as well as assess the rules of the Public Company Accounting Oversight Committee on governance procedures of the Company and our audit committee;

	·	We will have to comply with the specific listing requirements of a stock exchange if we qualify and apply for such listing;

	·	Being a public company increases our director and officer liability insurance costs;

	·	We will have to interface with our Transfer Agent regarding issuance and trading of our common stock, which may include Rule 144 stock transfer compliance matters; and

	·	We will incur additional costs for legal services as a function of our needs to seek guidance on securities law disclosure questions and evolving compliance standards.

We have assigned a high priority to corporate compliance and our public company reporting obligations, however, there can be no assurance that we will have sufficient cash resources available to satisfy our public company reporting and compliance obligations. If we are unable to cover the cost of proper administration of our public company compliance and reporting obligations, we could become subject to sanctions, fines and penalties, our stock could be barred from trading in public capital markets and we may have to cease operations.

Our actual results may differ from our projections if there are material changes in any of the factors or assumptions upon which we have based our projections. Such factors and assumptions include, without limitation, the development of our proprietary technology platform and our products, the timing of such development, market acceptance of our products, protection of our intellectual property, our success in implementing our strategic, operating and personnel initiatives and our ability to commercialize our products, any of which could impact sales, costs, and expenses and/or planned strategies and timing. As a result, it is possible that we may require significantly more capital resources to meet our capital needs.

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

There were no unregistered sales of the Company's equity securities during the six months ended October 31, 2020 that were not previously reported in a Current Report on Form 8-K except as listed below. Except where noted, all of the securities discussed in this Part II, Item 2 were all issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

During the six months ended October 31, 2020, the Company raised $126,729 in 8%, convertible notes.

During the six months ended October 31, 2020, the Company issued no shares of common stock.

During the six months ended October 31, 2020, the Company raised $1,050,000 of Series B, Redeemable Preferred Stock.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

At October 31, 2020, the Company was in default on a note payable for $27,500 and related accrued interest of $1,455. The note is secured by all 5,000,000 shares of Series A, Redeemable Preferred Stock. The holder has not foreclosed on the collateral.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

On September 30, 2020, the Company and Paul Feldman, our sole officer, director, and the sole holder of the Company’s Series A Preferred Stock (“Series A Preferred Stock”) entered into a Share Exchange Agreement (the “Agreement”) with SRAX, Inc. (“SRAX”) to acquire SRAX, Inc.’s wholly owned subsidiary, BIG Token, Inc. (“BIGtoken”). At closing, the Company will receive 100% of the outstanding equity shares of BIGtoken in exchange for the Company’s issuance of such number of shares of its common stock (“Common Stock”) to SRAX which shall equal 88.9% of issued and outstanding shares of Common Stock post-closing. In addition, Paul Feldman has agreed to transfer his 5,000,000 shares of Series A Preferred Stock to SRAX. The transaction will result in a change of control of the Company and the appointment of a new board of directors and officers and is subject to certain condition precedents of the Company.

The foregoing transaction was reported in the Company’s 8-K which was filed by the Company on October 5, 2020, which is incorporated herein by reference.

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ITEM 6. EXHIBITS

Exhibit Index

Exhibit No.		Description of Exhibit
3.1		Articles of Incorporation dated March 11, 2011 ⁽¹⁾
3.2		Amendment to Articles of Incorporation dated March 28, 2011 ⁽¹⁾
3.3		Amendment to Articles of Incorporation dated September 25, 2013 ⁽¹⁾
3.4		Amendment to Articles of Incorporation dated January 30, 2015 ⁽¹⁾
3.5		Amendment to Articles of Incorporation dated December 1, 2015 ⁽¹⁾
3.6		Amendment to Articles of Incorporation filed on January 19, 2016 to increase the authorized common stock outstanding from 50,000,000 to 250,000,000; par value $0.0001 and to create a series of preferred stock consisting of 1,000,000 shares designated as Series A Preferred stock; par value $0.0001 ⁽¹²⁾
3.7		Amendment to Articles of Incorporation effective September 8, 2016 to increase the authorized common stock outstanding to 750,000,000; par value $0.0001 and increase Series A Preferred stock to 5,000,000; par value $0.0001 ⁽⁷⁾
3.8		Bylaws ⁽¹⁾
3.9		Amendment to Articles of Incorporation filed on March 31, 2017 to reduce the number of common shares outstanding in a 1:250 reverse stock split ⁽⁸⁾
3.10		Amendment to Articles of Incorporation effective December 8, 2017 to increase the authorized common stock outstanding to 2,000,000,000 and increase Series A Preferred stock to 15,000,000 ⁽¹²⁾
10.1		Securities Purchase Agreement dated November 12, 2015 with RDW Capital, LLC ⁽¹⁾
10.2		First Amended Securities Purchase Agreement dated November 12, 2015 with RDW Capital LLC ⁽¹⁾
10.3		Second Amended Securities Purchase Agreement dated November 12, 2015 with RDW Capital, LLC ⁽¹⁾
10.4		Registration Rights Agreement dated November 12, 2015 with RDW Capital, LLC ⁽¹⁾
10.5		Convertible Promissory Note dated November 12, 2015 held by RDW Capital, LLC ⁽¹⁾
10.6		Convertible Promissory Note dated December 31, 2015 held by RDW Capital, LLC ⁽²⁾
10.7		Convertible Promissory Note dated March 10, 2016 held by RDW Capital, LLC ⁽⁵⁾
10.8		Third Amended Securities Purchase Agreement dated February 17, 2016 with RDW Capital, LLC ⁽¹⁾
10.9		Fourth Amended Securities Purchase Agreement dated February 17, 2016 with RDW Capital, LLC ⁽³⁾
10.10		Securities Purchase Agreement dated May 9, 2016 with RDW Capital, LLC ⁽⁴⁾
10.11		Convertible Promissory Note dated May 13, 2016 held by RDW Capital, LLC ⁽⁴⁾
10.12		Convertible Promissory Note dated May 20, 2016 held by RDW Capital, LLC ⁽⁵⁾
10.13		Registration Rights Agreement dated May 9, 2016 with RDW Capital, LLC ⁽⁴⁾
10.14		Securities Purchase Agreement dated August 22, 2016 with RDW Capital, LLC ⁽⁶⁾
10.15		Convertible Promissory Note dated August 22, 2016 held by RDW Capital, LLC ⁽⁶⁾
10.16		Securities Purchase Agreement dated September 1, 2016 with RDW Capital, LLC ⁽⁷⁾
10.17		Convertible Promissory Note dated September 1, 2016 held by RDW Capital, LLC ⁽⁷⁾
10.18		Registration Rights Agreement dated September 1, 2016 with RDW Capital, LLC ⁽⁷⁾
10.19		Convertible Promissory Note dated February 6, 2017 held by RDW Capital, LLC ⁽⁹⁾
10.20		Securities Purchase Agreement dated March 31, 2017 with RDW Capital, LLC ⁽⁸⁾
10.21		Convertible Promissory Note dated March 30, 2017 held by RDW Capital, LLC ⁽⁸⁾
10.22		Convertible Promissory Note dated April 26, 2017 held by RDW Capital, LLC ⁽⁹⁾
10.23		Convertible Promissory Note dated May 30, 2017 held by RDW Capital, LLC ⁽⁹⁾
10.24		Securities Purchase Agreement dated August 8, 2017 with RDW Capital, LLC ⁽¹⁰⁾
10.25		Convertible Promissory Note dated August 7, 2017 held by RDW Capital, LLC ⁽¹⁰⁾
10.26		Securities Purchase Agreement dated October 20, 2017 with Power Up Lending Group, Ltd. ⁽¹¹⁾
10.27		Convertible Promissory Note dated October 20, 2017 with Power Up Lending Group, Ltd. ⁽¹¹⁾
10.29		Employment Agreement Paul Feldman ⁽¹⁾
10.30		Shenzen AE Technology Purchase Order ⁽¹⁾
10.31		Agreement with Carter, Terry & Company ⁽¹⁾
10.32		Convertible Promissory Note dated November 16, 2017 with Power Up Lending Group, Ltd. ⁽¹³⁾
10.33		Convertible Promissory Note dated January 5, 2018 with Power Up Lending Group, Ltd. ⁽¹³⁾
10.34		Form of Adar Securities purchase Agreement dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.35		Form of Convertible Promissory Note dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.36		Form of Back end Note 1 dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.37		Form of Back end Note 2 dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.38		Form of Collateralized Secured Promissory Note 1 dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.39		Form of Collateralized Secured Promissory Note 2 dated March 5, 2018 with Adar bays, LLC ⁽¹⁴⁾
10.40		Securities Purchase Agreement dated March 5, 2018 with Power Up Lending Group, Ltd. ⁽¹⁵⁾
10.41		Convertible Promissory Note dated October 20, 2017 with Power Up Lending Group, Ltd. ⁽¹⁵⁾

Table of Contents

10.42*		ACH Total Receipts Agreement dated June 8, 2018 with Reliant Funding
10.43*		Loan Agreement dated September 25, 2018 with Strategic Funding Source, Inc.
10.44	XX	Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC
10.45	XX	Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC
10.46	XX	Promissory Note dated October 11, 2019 with Red Diamond Partners, LLC
10.47	XX	Promissory Note dated October 24, 2019 with Red Diamond Partners, LLC
10.48	XX	Promissory Note dated November 19, 2019 with Red Diamond Partners, LLC
10.49	XX	Promissory Note dated November 26, 2019 with Red Diamond Partners, LLC
10.50	XX	Promissory Note dated December 24, 2019 with Red Diamond Partners, LLC
10.51	XX	Promissory Note dated January 14, 2020 with Red Diamond Partners, LLC
10.52	XX	Promissory Note dated June 18, 2020 with Red Diamond Partners, LLC
10.53	XX	Promissory Note dated July 13, 2020 with Red Diamond Partners, LLC
10.54	XX	Promissory Note dated July 16, 2020 with Red Diamond Partners, LLC
10.55	XX	Promissory Note dated July 23, 2020 with Red Diamond Partners, LLC
10.56	XX	Promissory Note dated August 1, 2020 with Red Diamond Partners, LLC
10.57	XX	Promissory Note dated August 21, 2020 with Red Diamond Partners, LLC
10.58	XX	Promissory Note dated September 15, 2020 with Red Diamond Partners, LLC
10.59	XX	Promissory Note dated September 18, 2020 with Red Diamond Partners, LLC
10.60	XX	Promissory Note dated September 29, 2020 with Red Diamond Partners, LLC
31.1 *		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 *		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension - Schema Document**
101.CAL		XBRL Taxonomy Extension - Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Extension - Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension - Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension - Presentation Linkbase Document**

__________

* Filed herewith

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

⁽¹⁾	Incorporated by reference to Form S-1 filed on February 22, 2016.
⁽²⁾	Incorporated by reference to Form 8-K filed on January 4, 2016.
⁽³⁾	Incorporated by reference to Form S-1/A filed on March 7, 2016
⁽⁴⁾	Incorporated by reference to Form 8-K filed on May 18, 2016.
⁽⁵⁾	Incorporated by reference to Form 10-K filed on June 27, 2016.
⁽⁶⁾	Incorporated by reference to Form 8-K filed on August 24, 2016.
⁽⁷⁾	Incorporated by reference to Form S-1 filed on October 11, 2016.
⁽⁸⁾	Incorporated by reference to Form 8-K filed on March 31, 2017.
⁽⁹⁾	Incorporated by reference to Form 10-K filed on July 27, 2017.
⁽¹⁰⁾	Incorporated by reference to Form 8-K filed on August 10, 2017.
⁽¹¹⁾	Incorporated by reference to Form 8-K filed on October 25, 2017.
⁽¹²⁾	Incorporated by reference to Form 10-Q filed on December 14, 2017.
⁽¹³⁾	Incorporated by reference to Form 10-Q filed on February 28, 2018.
⁽¹⁴⁾	Incorporated by reference to Form 8-K filed on March 5, 2018.
⁽¹⁵⁾	Incorporated by reference to Form 8-K filed on March 8, 2018.
XX	Incorporated by reference, as filed during fiscal years ended April 30, 2021 and 2020, respectively, on Forms 10-Q or 8-K.

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Signatures

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

	Force Protection Video Equipment Corp.
	(Registrant)

December 10, 2020	By: /s/ Paul Feldman
	Paul Feldman Chief Executive Officer, Chief Financial Officer and Director

FPVD

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