The accompanying condensed notes are an integral part of these consolidated financial statements
The accompanying condensed notes are an integral part of these consolidated financial statements
The accompanying condensed notes are an integral part of these consolidated financial statements
The accompanying condensed notes are an integral part of these consolidated financial statements
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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
|
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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).
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
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
|
|
|
$
|
-
|
|
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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
|
%
|
FORCE PROTECTION VIDEO EQUIPMENT CORP. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.