The accompanying notes are an integral part
of these condensed unaudited financial statements.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 1 – Organization
Reviv3 Procare Company (the “Company”)
was incorporated in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC which was organized on July
31, 2013. The Company is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care
products throughout the United States, Canada, Europe and Asia.
Note 2 – Basis of Presentation and
Summary of Significant Accounting Policies
Basis of Presentation
The unaudited financial statements for the
three months ended August 31, 2020 and 2019 have been prepared by us pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the management, all adjustments necessary to present fairly our financial position, results
of operations, and cash flows as of August 31, 2020 and 2019, and for the periods then ended, have been made. Those adjustments
consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual financial
statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited financial statements
should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on
Form 10-K for the year ended May 31, 2020. The results of operations for the three months ended August 31, 2020 are not necessarily
indicative of the results to be expected for the full year.
Risk and Uncertainty Concerning COVID-19
Pandemic
In March 2020, the World Health Organization
declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and
the World. We are currently monitoring the outbreak of COVID-19 and the
related business and travel restrictions and changes to behavior intended to reduce its spread. All of our Chinese facilities were
temporarily closed for a period of time. Most of these facilities have been reopened since July 2020. Depending on the progression
of the outbreak, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted
globally. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress,
it could have a material negative impact on our results of operations and cash flow, in addition to the impact on its employees.
We have concluded that while it is reasonably possible that the virus could have a negative impact on the results of operations,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. accompanying financial statements. Management is focused
on growing the Company’s existing products offering, as well as its customer base, to increase its revenues. The Company
cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances
for its planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than
recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot assure that it
will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that the
Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying
financial statements.
Going Concern
These financials have been prepared on a going
concern basis which contemplates the realization of assets and settlement of liabilities in the normal course of business. As reflected
in the accompanying financial statements, the Company has a net loss of $69,269 for the three months ended August 31, 2020, and
has an accumulated deficit of $4,880,178 at August 31, 2020. These factors raise substantial doubt about the Company’s ability
to continue as a going concern for a period of 12 months from the issuance date of this report. The ability of the Company to continue
as a going concern is dependent on the Company’s ability to implement its business plan, raise capital, and generate sufficient
revenue; however, the Company’s cash position may not be sufficient to support its daily operations. Management intends to
raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to further
implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances
to that effect. The financial statements do not include any adjustments related to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Use of estimates
The preparation of the financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial
statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates
made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations, the useful
life of property and equipment, the valuation of lease liabilities and related right-of-use assets, the valuation of deferred tax
assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 2 – Basis of Presentation and
Summary of Significant Accounting Policies (continued)
Cash and cash equivalents
The Company considers all highly liquid debt
instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The
Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance
Corporation.
Accounts receivable and allowance for
doubtful accounts
The Company has a policy of providing an allowance
for doubtful accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The
Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past
due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances
deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote.
Prepaid expenses and other current assets
Prepaid expenses and other current assets of $10,691 and $13,708 at August 31, 2020 and
May 31, 2020, respectively, consist primarily of costs paid for future services which will occur within a year and cash prepayment
to vendors.
Inventory
The Company values inventory, consisting of
finished goods and raw materials, at the lower of cost and net realizable value. Cost is determined using an average cost method.
The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting
marketability, equal to the difference between the cost of the inventory and its net realizable value. The Company evaluates its
current level of inventory considering historical sales and other factors and, based on this evaluation, classifies inventory markdowns
in the statement of operations as a component of cost of goods sold. These markdowns are estimates, which could vary significantly
from actual requirements if future economic conditions, customer demand or competition differ from expectations.
Property and Equipment
Property and equipment are carried at cost
less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives
of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When
assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included
in the statement of operations.
Revenue recognition
Effective June 1, 2018, the Company adopted
Accounting Standards Codification (“ASC”) 606, “Revenue From Contracts With Customers”, which is
effective for public business entities with annual reporting periods beginning after December 15, 2017. This new revenue
recognition standard (new guidance) has a five-step process: a) Determine whether a contract exists; b) Identify the performance
obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance
obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its
financial statements and disclosures and there was no cumulative effect of the adoption of ASC 606.
The Company sells a variety of hair and skin
care products. The Company recognizes revenue for the agreed upon sales price when a purchase order is received from the customer
and subsequently the product is shipped to the customer, which satisfies the performance obligation. Consideration paid to the
customer to promote and sell the Company’s products is typically recorded as a reduction in revenues. See Note 12 for revenue
disaggregation disclosures.
Cost of Sales
The primary components of cost of sales include the cost of the product
and freight-in costs.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 2 – Basis of Presentation and Summary of Significant
Accounting Policies (continued)
Shipping and Handling Costs
The Company accounts for shipping and handling
fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related
costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in
marketing and selling expense were $12,621 and $10,292 for the three months ended August 31, 2020 and 2019, respectively.
Marketing, selling and advertising
Marketing, selling and advertising costs are
expensed as incurred.
Customer Deposits
Customer deposits consisted of prepayments
from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of products in compliance with
its revenue recognition policy.
Fair value measurements and fair value of financial instruments
The Company adopted ASC 820, “Fair
Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring
basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles
that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about
such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or
operating results, but did expand certain disclosures. ASC 820 defines fair value 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. Additionally,
ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs. These inputs are prioritized below:
|
Level 1:
|
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
|
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data
|
|
Level 3:
|
Unobservable inputs for which there
is little or no market data, which require the use of the reporting entity’s
own assumptions.
|
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on
the lowest level of input that is significant to the fair value measurement.
The estimated fair value of certain financial
instruments, including prepaid expenses, deposits, accounts payable and accrued expenses are carried at historical cost basis,
which approximates their fair values because of the short-term nature of these instruments.
Income Taxes
The Company accounts for income taxes pursuant
to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among
other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax
assets for which management believes it is more likely than not that the net deferred asset will not be realized.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 2 – Basis of Presentation and
Summary of Significant Accounting Policies (continued)
The Company follows the provision of ASC 740-10
related to “Accounting for Uncertain Income Tax Positions”. When tax returns are filed, there may be uncertainty
about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance
of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all
available evidence, management believes it is more likely than not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more likely than
not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed
the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance
sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company
believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a
liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition
of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled
upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The
federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally
for three years after they are filed.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected
undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference
between the asset’s estimated fair value and its book value. The Company recorded impairment loss of $474 as an operating
expense in the accompanying financial statements for the three months ended August 31, 2019.
Stock-based compensation
Stock-based compensation is accounted for
based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation”
(“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services
received in exchange for an award of equity instruments over the period the employee or director is required to perform the services
in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director
services received in exchange for an award based on the grant-date fair value of the award.
In June 2018, the FASB issued Accounting Standards
Update (“ASU”) - ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies
several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation
guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07
is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early
adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company
adopted ASU No. 2018-07 on June 1, 2019 and there was no cumulative effect of adoption.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 2 – Basis of Presentation and
Summary of Significant Accounting Policies (continued)
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU
2016-02), which requires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with
most lease agreements classified as operating leases under the prior guidance (ASC Topic 840). Under the new guidance, codified
as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments, subject to
certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial
direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance
leases. For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For finance
leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to
use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2019.
Net loss per share of common stock
Basic net loss per share is computed by dividing
the net loss by the weighted average number of common shares during the period. Diluted net loss per share is computed using the
weighted average number of common shares and potentially dilutive securities outstanding during the period. At August 31, 2020
and 2019, the Company had no potentially dilutive securities outstanding.
Recently Issued Accounting Pronouncements
In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock
Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-based Consideration
Payable to a Customer (“ASU 2019-08”). ASU 2019-08 requires that an entity apply the guidance in ASC 718 to
measure and classify share-based payment awards granted to a customer. Under ASC 718, among other things, share-based awards to
non-employees must generally be measured at the grant-date fair value of the equity instrument. For entities that have adopted
the provisions of ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee
Share-based Payment Accounting, this amendment is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. As discussed above, the Company has adopted the provisions of ASU 2018-07 on June 1, 2019 and
adopted ASU 2019-08 on June 1, 2020 and it did not have a material impact on the Company’s financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income
Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other
things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing
operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income
taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires than an entity recognize
a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount
incurred as a non-income-based tax, and (d) requires than an entity reflect the effect of an enacted change in tax laws or rates
in the annual effective tax rate computation for the interim period that includes the enactment date. For public companies, these
amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early
adoption is permitted but must involve the adoption of all amendments contained in ASU 2019-12 concurrently. The Company has not
adopted ASU 2019-12 and is evaluating the potential impact of adoption on its financial statements.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are
unrelated to its financial condition, results of operations, cash flows or disclosures.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 3 – Accounts Receivable
Accounts receivable, consisted of the following:
|
|
|
August 31, 2020
|
|
May 31, 2020
|
|
Accounts Receivable
|
|
$
|
71,188
|
|
|
$
|
184,019
|
|
|
Less: Allowance for doubtful accounts
|
|
|
(2,392
|
)
|
|
|
(1,818
|
)
|
|
Total
|
|
$
|
68,796
|
|
|
$
|
182,201
|
|
The Company recorded bad debt expense of $574
and a bad debts recovery of $2,342 during the three months ended August 31, 2020 and 2019, respectively.
Note 4 – Inventory
Inventory consisted of the following:
|
|
|
August 31, 2020
|
|
May 31, 2020
|
|
Finished Goods
|
|
$
|
28,215
|
|
|
$
|
29,839
|
|
|
Raw Materials
|
|
|
477,535
|
|
|
|
258,285
|
|
|
Total
|
|
$
|
505,750
|
|
|
$
|
288,124
|
|
At August 31, 2020 and May 31, 2020, inventory
held at third party locations amounted to $556 and $556, respectively. At August 31 and May 31, 2020, inventory in- transit amounted
to $0.
Note 5 – Property and Equipment
Property and equipment, stated at cost, consisted
of the following:
|
|
|
Estimated Life
|
|
August 31, 2020
|
|
May 31, 2020
|
|
Furniture and Fixtures
|
|
5 years
|
|
$
|
5,759
|
|
|
$
|
5,759
|
|
|
Computer Equipment
|
|
3 years
|
|
|
17,392
|
|
|
|
17,392
|
|
|
Plant Equipment
|
|
5-10 years
|
|
|
42,704
|
|
|
|
29,720
|
|
|
Less: Accumulated Depreciation
|
|
|
|
|
(23,858
|
)
|
|
|
(21,294
|
)
|
|
Total
|
|
|
|
$
|
41,997
|
|
|
$
|
31,577
|
|
Depreciation expense amounted to $2,564 and
$2,770 for the three months ended August 31, 2020 and 2019, respectively.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 6 – Accounts Payable and Accrued
Expenses
Accounts payable and accrued expenses comprised
of the following:
|
|
|
August 31, 2020
|
|
May 31, 2020
|
|
Trade Payables
|
|
$
|
299,263
|
|
|
$
|
98,608
|
|
|
Credit Cards
|
|
|
14,418
|
|
|
|
10,378
|
|
|
Accrued Compensation for Services
|
|
|
18,313
|
|
|
|
18,313
|
|
|
Other
|
|
|
1,402
|
|
|
|
1,552
|
|
|
Total
|
|
$
|
333,396
|
|
|
$
|
128,851
|
|
Note 7 – Equipment Financing Payable
During the year ended May 31, 2019, the Company purchased a forklift under an installment purchase
plan. The loan amount is $16,500 payable in 60 monthly installment payments of $317 comprising of principal payment of $275 and
interest payment of $42. As of August 31, 2020, and May 31, 2020, the balance outstanding on the loan was $11,275 and $12,100.
$3,300 of the loan is payable within one year and the balance $7,975, is payable after one year from August 31, 2020. The Company
recorded an interest expense of $125 and $117, respectively on the loan in the accompanying unaudited financial statements for
the three months ended August 31, 2020 and 2019, respectively.
The amounts of loan payments due in the next
five years ended August 31, are as follows:
|
|
2021
|
|
$
|
3,300
|
|
|
|
2022
|
|
|
3,300
|
|
|
|
2023
|
|
|
3,300
|
|
|
|
2024
|
|
|
1,375
|
|
|
|
Total
|
|
$
|
11,275
|
|
Note 8 - Loans Payable
On May 8, 2020, a
commercial bank granted to the Company a loan (the “Loan”) in the amount of $12,900, which is administered under the authority
and regulations of the U.S. Small Business Administration pursuant to the Paycheck Protection Program (the “PPP”) of
the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated
May 8, 2020, bears interest at an annual rate of 1.0% and matures on May 8, 2022. The Note may be prepaid without penalty,
at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be
used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively,
“qualifying expenses”). The Company intends to use the loan proceeds for qualifying expenses. The Company’s borrowings
under the Loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,”
as defined in the CARES Act, except that the amount of loan forgiveness is limited to the amount of qualifying expenses incurred
during the 8-week period or optional 24-week period, commencing on the loan effective date. In addition, the amount of any loan
forgiveness may be reduced if there is a decrease in the average number of full-time equivalent employees of the Company during
the covered period, compared to the comparable period in the prior calendar year. The Company’s indebtedness, after any such
loan forgiveness, is payable in 18 equal monthly installments commencing on November 8, 2020, with all amounts due and payable
by the maturity.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 8 - Loans Payable
(Continued)
During
the year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $150,000,
which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury
Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”). The Loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is
payable installments of $731 per month, beginning May 18, 2021 until May 13, 2050. The Company has to maintain a hazard insurance
policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable
value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health
care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company
intends to use the loan proceeds for qualifying expenses. The Company’s borrowings under the loan may be eligible for up
to $10,000 of loan forgiveness.
|
Loans Payable
|
|
August 31, 2020
|
|
May 31, 2020
|
|
Paycheck Protection Program (PPP)
|
|
$
|
12,900
|
|
|
$
|
12,900
|
|
|
Economic Injury Disaster Loan Program (EIDL)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
|
|
162,900
|
|
|
|
162,900
|
|
|
Less: Current portion
|
|
|
(7,382
|
)
|
|
|
(5,002
|
)
|
|
Loans Payable, Non-current portion
|
|
$
|
155,518
|
|
|
$
|
157,898
|
|
The amounts of loan payments due in the next
five years ended August 31, are as follows:
|
|
2021
|
|
$
|
7,382
|
|
|
|
2022
|
|
|
9,546
|
|
|
|
2023
|
|
|
3,155
|
|
|
|
2024
|
|
|
3,276
|
|
|
|
2025
|
|
|
3,401
|
|
|
|
Thereafter
|
|
|
136,140
|
|
|
|
Total
|
|
$
|
162,900
|
|
Note 9 – Stockholders’ Equity
Shares Authorized
The authorized capital of the Company consists
of 100,000,000 shares of common stock, par value $0.0001 per share and 20,000,000 shares of preferred stock, par value $0.0001
per share.
Preferred Stock
The preferred stock may be issued from time
to time in one or more series. The Board of Directors of the Company is expressly authorized to provide for the issuance of all
or any of the shares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter, for
each such series, such voting powers, full or limited, or no voting powers and such designations, preferences, and relative, participating,
optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed until
the resolution adopted by the Board of Directors providing the issuance of such shares. The Board of Directors is also expressly
authorized to increase or decrease the number of shares of any series subsequent to the issue of shares of that series. In case
the number of shares of any such series shall be so decreased, the decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such series.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 9 – Stockholders’ Equity
(continued)
Common Stock
As of August 31, 2020, 41,485,881 shares of
common stock were issued and outstanding.
On July 20, 2020, the Company granted 200,000 shares of common stock to a consultant
for past services. The shares were valued at fair market value of $16,000 on the date of issuance based on the closing price of
the Company’s common share of $0.08 on the grant date.
No shares of common stock were issued during
the three months ended August 31, 2019.
Note 10 – Commitments and Contingencies
Leases
As discussed in Note 2 above, the Company adopted
ASU No. 2016-02, Leases on June 1, 2019, which require lessees to report on their balance
sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under
the prior guidance. The Company has a lease agreement in connection with its office and warehouse facility in California under
an operating lease which expired in October 2019. On December 1, 2019, the Company signed an extension of the lease for 3 years.
The rent will be $7,567 per month for the first year and increase by a certain amount each year.
The Company treats a contract as a lease when
the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company
directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use
(“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent
the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s
obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the
lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of
the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable
for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments.
The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis
over a similar lease term to obtain an asset of similar value.
The Company reviews the impairment of ROU assets
consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of
long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.
The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the
expected undiscounted future pre-tax cash flows of the related operations.
Lease expense is recognized on a straight-line
basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances
occurring after the commencement date, other than the passage of time, and do not result in a remeasurement of lease liabilities.
The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.
Pursuant to the new standard, the Company recorded an initial lease liability of $235,748 and
an initial right of use asset in the same amount. During the three months ended August 31, 2020, the Company recorded a lease expense
in the amount of $23,559. As of August 31, 2020, the lease liability balance was $186,939 and the right of use asset balance was
$184,370. A lease term of three years and a discount rate of 12% was used.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 10 – Commitments and Contingencies
(continued)
Supplemental balance sheet information related
to leases was as follows:
|
|
|
August 31, 2020
|
|
Assets
|
|
|
|
Right of use assets
|
|
$
|
235,748
|
|
|
Accumulated reduction
|
|
|
(51,378
|
)
|
|
Operating lease assets, net
|
|
$
|
184,370
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Lease liability
|
|
$
|
235,748
|
|
|
Accumulated reduction
|
|
|
(48,809
|
)
|
|
Total lease liability, net
|
|
|
186,939
|
|
|
Current portion
|
|
|
(74,939
|
)
|
|
Non-current portion
|
|
$
|
112,000
|
|
Maturities of operating lease liabilities were
as follows as of August 31, 2020:
|
Operating Lease
|
|
|
|
Year 1
|
|
$
|
93,378
|
|
|
Year 2
|
|
|
96,805
|
|
|
Year 3
|
|
|
24,415
|
|
|
Total
|
|
|
214,598
|
|
|
Less: Imputed interest
|
|
|
(27,659
|
)
|
|
Present value of lease liabilities
|
|
|
186,939
|
|
|
Less: current portion
|
|
|
(74,939
|
)
|
|
Non- current portion
|
|
$
|
112,000
|
|
Rent expense, prior to the signing of the new
lease agreement, amounted to $0 and $23,666 for the three months ended August 31, 2020 and 2019, respectively.
Note 11 – Related Party Transactions
The Company’s Chief Executive Officer,
from time to time, provided advances to the Company for working capital purposes. At August 31, 2020 and May 31, 2020, the Company
had a payable to the officer of $11,961 and $2,396, respectively. These advances are due on demand and non-interest bearing.
REVIV3 PROCARE COMPANY
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 2020 AND 2019
Note 12 – Concentrations and Revenue
Disaggregation
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist primarily of
trade accounts receivable and cash deposits, investments and cash equivalents instruments. The Company maintains its cash in bank
deposits accounts. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250,000. At August 31, 2020 the Company held cash of approximately $161,797, in excess of federally insured limits. The
Company has not experienced any losses in such accounts through August 31, 2020.
Concentration of Revenue, Product Line,
Accounts Receivable and Supplier
During the three months ended August 31, 2020
sales to three customers, which each represented over 10% of our total sales, aggregated to approximately 63% of the Company’s
net sales at 11%, 12%, and 40%. During the three months ended August 31, 2019 sales to four customers, which each represented over
10% of our total sales, aggregated to approximately 54% of the Company’s net sales at 15%, 15%, 13% and 11%.
During the three months ended August 31, 2020,
sales to customers outside the United States represented approximately 26% which consisted of sales in Canada. During the three
months ended August 31, 2019 sales to customers outside the United States represented approximately 51% which consisted of 30%
from Canada, 15% from Italy and 6% from UK.
During the three months ended August 31, 2020,
sales by product lines which each represented over 10% of sales consisted of approximately 22% from sale of introductory kit (shampoo,
conditioner and treatment spray), 12% from prep cleanser and shampoo and 39% from sale of fragrance shampoo and conditioner. During
the three months ended August 31, 2019, sales by product lines which each represented over 10% of sales consisted of approximately
29% from sales of prep cleanser and shampoo, 16% from sale of moisturizer and conditioner and 30% from sale of introductory kit
(shampoo, conditioner and treatment spray).
During the three months ended August 31, 2020
and 2019, sales by product line comprised of the following:
|
|
|
For the Three Months ended
|
|
Hair Care Products
|
|
August 31, 2020
|
|
August 31, 2019
|
|
Shampoos and Conditioners
|
|
|
86
|
%
|
|
|
80
|
%
|
|
Ancillary Products
|
|
|
14
|
%
|
|
|
20
|
%
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
As of August 31, 2020, accounts receivable
from four customers represented approximately 95% at 14%, 19%, 27%, and 35% and at May 31, 2020, accounts receivable from one customer
represented approximately 69%, respectively.
The Company purchased inventories and products
from one vendor totaling approximately $250,514 (86% of the purchases) and two vendors totaling approximately $116,698 (85% of
the purchases at 70% and 15%) during the three months ended August 31, 2020 and 2019, respectively.