|
|
|
|
|
|
Force Protection Video Equipment Corporation
|
|
|
|
Statements of Cash Flows (Unaudited)
|
|
|
|
For the Six Months Ended October 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
|
Net (Loss)
|
$
(839,138)
|
|
$
(202,389)
|
|
Adjustments to reconcile net loss to net cash provided (used in) operating activities:
|
|
|
|
|
|
Depreciation and Amortization
|
2,224
|
|
1,739
|
|
|
Accretion of debt discount
|
422,894
|
|
43,328
|
|
|
Share based compensation expense
|
-
|
|
14,500
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
(3,564)
|
|
(7,163)
|
|
|
(Increase) decrease in deferred financing costs
|
-
|
|
(7,761)
|
|
|
(Increase) decrease in inventory
|
(77,569)
|
|
(26,347)
|
|
|
(Increase) decrease in other assets
|
35,509
|
|
(12,739)
|
|
|
Increase (decrease) in accounts payable and accrued expenses
|
20,066
|
|
(1,049)
|
|
|
Increase (decrease) in other liabilities
|
(112)
|
|
-
|
|
|
Net cash (used) by operating activities
|
(439,690)
|
|
(197,881)
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of equipment and vehicles
|
(16,480)
|
|
(671)
|
|
Net cash (used) by investing activities
|
(16,480)
|
|
(671)
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from sale of common stock
|
-
|
|
45,000
|
|
Proceeds from convertible promissory notes
|
387,500
|
|
288,004
|
|
Net cash provided by financing activities
|
387,500
|
|
333,004
|
Increase (decrease) in cash
|
(68,670)
|
|
134,452
|
Cash and cash equivalents at beginning of period
|
227,273
|
|
35,226
|
Cash and cash equivalents at end of period
|
$
158,603
|
|
$
169,678
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
Cash paid for interest
|
$
-
|
|
$
-
|
|
Cash paid for income taxes
|
$
-
|
|
$
-
|
Non-cash operating activities:
|
|
|
|
|
Common stock issued for conversion of notes payable
|
$
310,352
|
|
$
-
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these financial statements)
|
{00837603.DOC;2 }
F-4
FORCE PROTECTION VIDEO EQUIPMENT CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2016 AND 2015
NOTE 1 ORGANIZATION AND GOING CONCERN
Organization
Force Protection Video Equipment Corp., (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida as M Street Gallery, Inc. On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services. On February 2, 2015 the Company changed its name to Force Protection Video Corp. to focus on the sale of mini body video cameras and accessories to consumers and law enforcement.
Going Concern
The Companys financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
During the six months ended October 31, 2016, the Company recognized revenue of $33,176 and a net operating loss of $402,112. As of October 31, 2016, the Company had net working capital of $11,014 and an accumulated deficit of $2,314,263.
In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited financial statements of Force Protection Video Equipment Corp. (the Company) as of October 31, 2016, and for the three and six months ended October 31, 2016 and 2015, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited financial statements and notes thereto for the year ended April 30, 2016, as filed with the Securities and Exchange Commission as part of the Companys Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.
{00837603.DOC;2 }
F-5
Estimates
The preparation of the Companys financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by managements application of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Inventory
Our inventory is comprised of finished goods, cameras and recording equipment. The Companys inventory is stated at the lower of cost or market. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory.
Accounts Receivable
Accounts receivable are reported at the customers' outstanding balances. The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.
Property and Equipment
Fixed assets are carried at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. Depreciation for financial statement purposes is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
|
|
|
|
|
Estimated
|
|
|
Useful Lives
|
Vehicles
|
|
5 years
|
Office Equipment
|
|
3 - 5 years
|
Furniture & equipment
|
|
5 - 7 years
|
{00837603.DOC;2 }
F-6
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.
Revenue Recognition
The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.
Marketing and Advertising Costs
Marketing and advertising costs are anticipated to be expensed as incurred. The Company recognized $22,513 and $68,874 in marketing and advertising costs during the three and six months ended October 31, 2016, respectively. The Company recognized $3,929 and $18,226 in marketing and advertising costs during the three and six months ended October 31, 2015, respectively.
Stock Based Compensation
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
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. The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
{00837603.DOC;2 }
F-7
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
As of October 31, 2016 and April 30, 2016, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Companys financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.
Net Income (Loss) Per Share
The computation of basic earnings per share (EPS) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).
Following is the computation of basic and diluted net loss per share for the three and six months ended October 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
October 31,
|
|
October 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
(349,926)
|
|
$
(149,347)
|
|
$
(839,138)
|
|
$
(202,389)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
160,873,532
|
|
18,746,707
|
|
110,129,348
|
|
18,633,109
|
Basic and diluted EPS
|
|
$
(0.00)
|
|
$
(0.01)
|
|
$
(0.01)
|
|
$
(0.01)
|
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
|
|
|
|
|
|
Convertible promissory notes
|
|
50,491,376
|
|
497,772
|
|
50,491,376
|
|
497,772
|
{00837603.DOC;2 }
F-8
Concentrations of risk
During the three months ended October 31, 2016, three customers accounted for 50.2% (19.8%, 17.2% and 13.2%) of sales. During the three months ended October 31, 2015, two customers accounted for 26.1% (16.0% and 10.1%) of sales.
During the six months ended October 31, 2016, one customer accounted for 10.4% of sales. During the six months ended October 31, 2015, no customer accounted for more than 10% of sales.
The Company relies on third parties for
the supply and manufacture of its capture devices, some of which are sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. During the three months ended October 31, 2016, one supplier accounted for 62.5% of our inventory purchases. During the six months ended October 31, 2016, two suppliers accounted for 88.0% (76.2% and 11.8%) of our inventory purchases. During the three months ended October 31, 2015, one supplier accounted for 96.4% of our inventory purchases. During the six months ended October 31, 2015, one supplier accounted for 95.0% of our inventory purchases.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on our balance sheets. Presentation of leases within the statements of operations and statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company does not expect this accounting update to have a material effect on its financial statements.
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). This ASU eliminates the requirement for retrospective application of measurement period adjustments relating to provisional amounts recorded in a business combination as of the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments will be effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this accounting update to have a material effect on its financial statements in future periods, although that could change.
In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.
{00837603.DOC;2 }
F-9
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years. We expect the adoption of this guidance will not have a material impact on our financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. In March 2016, the FASB issued ASU 2016-08 to further clarify the implementation guidance on principal versus agent considerations. The guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company does not expect this accounting update to have a material effect on its financial statements.
We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.
NOTE 3 - FIXED ASSETS
Fixed assets consisted of the following:
|
|
|
|
|
|
|
|
|
October 31,
|
|
April 30,
|
|
|
|
2016
|
|
2016
|
|
Vehicles
|
|
$
15,376
|
|
$
-
|
|
Furniture and fixtures
|
|
6,212
|
|
6,212
|
|
Computers and office equipment
|
|
2,480
|
|
1,376
|
|
Total fixed assets
|
|
24,068
|
|
7,588
|
|
Accumulated depreciation
|
|
(2,701)
|
|
(476)
|
|
Total fixed assets
|
|
$
21,367
|
|
$
7,112
|
During the three months ended October 31, 2016 and 2015, the Company recognized $1,288 and $0, respectively, in depreciation expense. During the six months ended October 31, 2016 and 2015, the Company recognized $2,224 and $0, respectively, in depreciation expense.
{00837603.DOC;2 }
F-10
NOTE 4 CONVERTIBLE PROMISSORY NOTES
Following is a summary of our outstanding convertible promissory notes as of October 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Balances
|
Lender
|
|
Issue Date
|
|
Maturity
|
|
Principle
|
|
Interest
|
|
Total
|
RDW Capital, LLC Note 2
|
|
12/31/2015
|
|
6/30/16
|
|
$
-
|
|
$
13,405
|
|
$
13,405
|
RDW Capital, LLC Note 3
|
|
3/10/2016
|
|
9/10/16
|
|
792
|
|
-
|
|
792
|
RDW Capital, LLC Note 4
|
|
5/13/2016
|
|
11/13/16
|
|
92,680
|
|
3,790
|
|
96,470
|
RDW Capital, LLC Note 5
|
|
5/20/2016
|
|
11/20/16
|
|
52,500
|
|
1,968
|
|
54,468
|
RDW Capital, LLC Note 6
|
|
8/22/2016
|
|
2/22/17
|
|
157,500
|
|
2,469
|
|
159,969
|
RDW Capital, LLC Note 7
|
|
9/1/2016
|
|
3/1/17
|
|
157,500
|
|
2,113
|
|
159,613
|
Totals
|
|
|
|
|
|
$
460,972
|
|
$
23,745
|
|
$
484,717
|
Debt discount balance
|
|
|
|
|
|
(181,824)
|
|
|
|
|
Balance sheet balances
|
|
|
|
|
|
$
279,148
|
|
|
|
|
Following is a summary of our outstanding convertible promissory notes as of April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Balances
|
Lender
|
|
Issue Date
|
|
Maturity
|
|
Principle
|
|
Interest
|
|
Total
|
LG Capital Funding, LLC
|
|
4/20/2016
|
|
9/11/2016
|
|
$
13,000
|
|
$
34
|
|
$
13,034
|
Black Forest Capital, LLC
|
|
10/8/2015
|
|
10/8/2016
|
|
19,500
|
|
3,001
|
|
22,501
|
RDW Capital, LLC Note 1
|
|
11/10/2015
|
|
5/10/16
|
|
157,500
|
|
6,136
|
|
163,636
|
RDW Capital, LLC Note 2
|
|
1/0/1900
|
|
6/30/16
|
|
105,000
|
|
2,861
|
|
107,861
|
RDW Capital, LLC Note 3
|
|
3/10/2016
|
|
9/10/16
|
|
792
|
|
614
|
|
1,406
|
Totals
|
|
|
|
|
|
$
295,792
|
|
$
12,646
|
|
$
308,438
|
Debt discount balance
|
|
|
|
|
|
(204,718)
|
|
|
|
|
Balance sheet balances
|
|
|
|
|
|
$
91,074
|
|
|
|
|
{00837603.DOC;2 }
F-11
The company determined that each convertible promissory notes conversion feature is indexed to the Companys stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20
Debt with Conversion and Other Options
is appropriate.
LG Capital Funding, LLC
On September 11, 2015 the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG") for the sale of an 8% convertible note in the principal amount of $81,000 and proceeds of $75,000 net of legal expenses (the LG Note).
The LG Note was convertible into common stock at a price equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion.
The LG Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $68,000. The resulting $74,000 discount was fully accreted through July 31, 2016 due to full repayment of the LG Note on May 2, 2016.
During the six months ended October 31, 2016, the Company recognized no interest expense and debt discount accretion of $7,741. On May 2, 2016, LG converted the remaining $13,034 of principal and interest into 775,844 shares of common stock.
Black Forest Capital, LLC
On October 8, 2015 the Company sold and Black Forest Capital, LLC (Black Forest) purchased a 10% convertible note in the principal amount of $53,000 (the Black Forest Note) of which the Company received $50,000 after payment of legal fees. The Black Forest Note matured in 12 months on October 8, 2016.
The Black Forest Note was convertible into common stock, at Black Forests option anytime following the issuance date, at a price for each share of common stock equal to 40% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion.
The Black Forrest Note principle was discounted for the value of legal fees of $3,000 and the intrinsic value of the beneficial conversion feature of $50,000. The calculated intrinsic value was $127,199. As this amount resulted in a total debt discount that exceeded the Black Forest Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Black Forest Note. The resulting $53,000 discount was accreted through July 31, 2016 due to repayment of the Black Forest Note.
During the six months ended October 31, 2016, the Company recognized no interest expense and debt discount accretion of $9,992. During the six months ended October 31, 2016, Black Forrest converted the remaining $22,499 of principal and interest into 11,076,775 shares of common stock.
{00837603.DOC;2 }
F-12
RDW Capital, LLC
On November 12, 2015, the Company entered into a Securities Purchase Agreement (RDW SPA 1) with RDW Capital, LLC (RDW), a Florida limited liability company. On November 12, 2015, the Company and RDW entered into the First Amended Securities Purchase Agreement. On November 12, 2015, the Company and RDW entered into the Second Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Third Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Fourth Amended Securities Purchase Agreement. On May 9, 2016, the Company and RDW entered into a Securities Purchase Agreement (RDW SPA 2). On August 22, 2016, the Company and RDW entered into a Securities Purchase Agreement (RDW SPA 3). On September 1, 2016, the Company and RDW entered into a Securities Purchase Agreement (RDW SPA 4). RDW SPA 1, amendments thereto, RDW SPA 2, RDW SPA 3 and RDW SPA 4 may hereinafter be referred to collectively as, the
RDW SPAs
.
RDW Note 1
- In connection with RDW SPA 1 and amendments thereto, on November 12, 2016, the Company issued to RDW a convertible note (RWD Note 1) due on April 10, 2016 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 original issue discount (
OID
) and legal and due diligence fees totaling $20,000.
RDW Note 1 principle was discounted for the value of the OID, due diligence fees and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $121,406. As this amount resulted in a total debt discount that was less than RDW Note 1 principal, the full $121,406 discount was recognized. The resulting $148,906 discount was accreted over the 5 month term of RDW Note 1 through April 10, 2016.
RDW Note 2
- In connection with RDW SPA 1 and amendments thereto, on December 31, 2015, the Company issued to RDW a convertible note (RDW Note 2) due on June 30, 2016 in the principal amount of $105,000 of which the Company received proceeds of $90,000 after payment of a $5,000 OID and due diligence fees totaling $10,000.
RDW Note 2 principle was discounted for the value of the OID, due diligence fees and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $98,086. As this amount resulted in a total debt discount that exceeds RDW Note 2 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 2. The resulting $105,000 discount was accreted over the 5 month term of RDW Note 2 through June 30, 2016.
RDW Note1 and RDW Note 2
- During the three and six months ended October 31, 2016, the Company recognized the following transactions related to RDW Note 1 and RDW Note 2:
·
Recorded $651 and $4,407 of interest expense, respectively,
·
Recorded $35,192 and $35,192 of debt discount accretion, respectively,
·
Issued 80,281,822 shares of common stock upon the conversion of $115,293 of note principle during the three months ended October 31, 2016 and issued 115,939,107 shares of common stock upon the conversion of $262,500 of note principle during the six months ended October 31, 2016.
RDW Note 3
- In connection with RDW SPA 1 and amendments thereto, on March 10, 2016, the Company issued to RDW a convertible note (RDW Note 3) due on September 10, 2016 in the principal amount of $210,000 of which the Company received proceeds of $180,000 after payment of a $10,000 OID and due diligence fees totaling $20,000.
{00837603.DOC;2 }
F-13
RDW Note 3 principal was discounted for the OID, due diligence fees, stock issued to an advisor in connection with RDW Note 3 totaling $18,000, and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $227,391. As this amount resulted in a total debt discount that exceeded RDW Note 3 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 3. The resulting $210,000 discount was accreted through April 30, 2016, the date RDW Note 3 was paid down to a principal and interest balance of $1,405.
During the three and six months ended October 31, 2016, the Company recognized -$613 of interest expense and $151,793 of debt discount accretion related to RDW Note 3.
RDW Note 4
- In connection with RDW SPA 2, on May 13, 2016, the Company issued to RDW a convertible note (RDW Note 4) due on November 13, 2016 in the principal amount of $105,000 of which the Company received proceeds of $82,500 after payment of a $5,000 OID, $7,500 of legal fees and $10,000 of due diligence fees.
RDW Note 4 principle was discounted for the value of the OID, legal fees due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $70,000. As this amount resulted in a total debt discount that was less than RDW Note 4 principal, the full $70,000 discount was recognized. The resulting $92,500 discount is being accreted over the 6 month term of RDW Note 4 through November 13, 2016.
During the three and six months ended October 31, 2016, the Company recognized the following transactions related to RDW Note 4:
·
Recorded $1,971 and $3,789 of interest expense, respectively,
·
Recorded $46,250 and $85,965 of debt discount accretion, respectively,
·
Issued 8,800,000 shares of common stock upon the conversion of $12,320 of note principle during the three and six months ended October 31, 2016.
RDW Note 5
- In connection with RDW SPA 2, on May 20, 2016, the Company issued to RDW a convertible note (RDW Note 5) due on November 20, 2016 in the principal amount of $52,500 of which the Company received proceeds of $45,000 after payment of a $2,500 OID and $5,000 of due diligence fees.
RDW Note 5 principle was discounted for the value of the OID, due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $35,000. As this amount resulted in a total debt discount that was less than RDW Note 5 principal, the full $35,000 discount was recognized. The resulting $42,500 discount is being accreted over the 6 month term of RDW Note 5 through November 20, 2016.
During the three and six months ended October 31, 2016, the Company recognized the following transactions related to RDW Note 5:
·
Recorded $1,059 and $1,968 of interest expense, respectively,
·
Recorded $21,250 and $37,880 of debt discount accretion, respectively,
RDW Note 6
- In connection with RDW SPA 3, on August 22, 2016, the Company issued to RDW a convertible note (RDW Note 6) due on February 22, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID and legal and due diligence fees totaling $20,000.
RDW Note 6 principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $105,000. As this amount resulted in a total debt discount that was less than RDW Note 6 principal, the full $105,000 discount was recognized. The resulting $132,500 discount is being accreted over the 6 month term of RDW Note 6 through February 22, 2017.
{00837603.DOC;2 }
F-14
During the three months ended October 31, 2016, the Company recognized $2,469 of interest expense and $50,408 of debt discount accretion related to RDW Note 6.
RDW Note 7
In connection with RDW SPA 4 under which RDW agreed to purchase an aggregate of up to $367,500 in principal amount of notes, on September 1, 2016, the Company issued to RDW a convertible note (RDW Note 7) due on March 1, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID and legal and due diligence fees totaling $20,000. The second tranche for $210,000 will occur on the date that is two trading days from the date a registration statement is declared effective by the SEC.
RDW Note 7 principle was discounted for the value of the OID, legal and due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $105,000. As this amount resulted in a total debt discount that was less than RDW Note 7 principal, the full $105,000 discount was recognized. The resulting $132,500 discount is being accreted over the 6 month term of RDW Note 7 through March 1, 2017.
During the three months ended October 31, 2016, the Company recognized $2,114 of interest expense and $43,923 of debt discount accretion related to RDW Note 7.
RDW Note 1, RDW Note 2, RDW Note 3, RDW Note 4, RDW Note 5, RDW Note 6 and RDW Note 7 may hereinafter be referred to collectively as, the
RDW Notes
.
The RDW Notes have the following terms and conditions:
·
The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.
·
Interest is due and payable on each conversion date and on the Maturity Date.
·
At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the
“
Conversion Price
”
).
· T
he
RDW Notes are unsecured obligations.
·
We may prepay the RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%). RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.
·
Default interest of twenty-four percent (24%) per annum.
·
Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.
·
Upon an event of default, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration (
“
Acceleration
”
).
·
Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages.
·
In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.
·
We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion.
{00837603.DOC;2 }
F-15
·
Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.
In total, during the three and six months ended October 31, 2016, the Company recognized $7,651 and $14,134, respectively, of interest expense and $161,831 and $405,161, respectively, of debt discount accretion related to the RDW Notes.
In total, during the three months ended October 31, 2016, RDW converted $127,613 of RDW Note principal into 89,081,822 shares of common stock. In total, during the six months ended October 31, 2016, RDW converted $274,820 of RDW Note principal into 124,739,107 shares of common stock.
NOTE 5 COMMITMENTS AND CONTINGENCIES
Product Warranties
Our products are sold with a one (1) year manufacturers warranty. The Company has no obligation to provide warranty service or replacement. The Company does offer an extended warranty for a fee. The extended warranty expires one year from the day the manufacturer warranty expires. Warranty costs during the second year of an extended warranty are born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.
Operating Lease
On March 21, 2015, the Company entered into a lease of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. The lease expires on March 31, 2018. The Company has no other noncancelable operating leases. Future minimum lease payments under this operating lease with an initial term in excess of one year as of October 31, 2016 are as follows:
Fiscal Year
2017
$7,314
2018
$14,920
2019
$10,144
Thereafter
$0
During the three months ended October 31, 2016 and 2015, rent expense for office space totaled $3,882 and $3,000, respectively. During the six months ended October 31, 2016 and 2015, rent expense for office space totaled $7,576 and $5,250, respectively.
Supplier Purchase Commitments
The Company periodically makes contractual, advance inventory purchases in the ordinary course of business. As of October 31, 2016, the Company was obligated to purchase $11,000 of inventory under a non-exclusive distribution agreement.
NOTE 6 STOCKHOLDER'S EQUITY
As of October 31, 2016 and April 30, 2016, there were 177,117,321 and 40,525,595 shares of common stock outstanding, respectively and there were 1,000,000 and 1,000,000 shares of Series A Preferred Stock outstanding, respectively.
{00837603.DOC;2 }
F-16
On January 19, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorized the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200,000 (i.e., 200:1) votes per share and with no right of conversion into shares of common stock.
On August 4, 2016, we approved an amendment to our Articles of Incorporation to increase our authorized common stock from 250,000,000 shares to 750,000,000 shares and authorized Series A preferred stock from 1,000,000 shares to 5,000,000 shares. The amendment became effective September 8, 2016.
During the six months ended
October
31, 2016, the company issued 136,591,726 shares of common stock upon the conversion of convertible promissory note principal and interest totaling $310,352.
During the year ended
April 30, 2016
, the Company issued preferred stock and common stock as follows:
·
10,095 shares of common stock were issued in exchange for services valued at the close price of our stock resulting in stock compensation expense of $14,500.
·
31,912 shares of common stock were issued in connection with RDW Note 3 and valued at $18,000 as stated in the related agreements.
·
450,000 shares of common stock were issued for cash of $0.10 per share resulting in the Company receiving $45,000.
·
1,000,000 shares of non-convertible Series A Preferred Stock to Paul Feldman, CEO, which entitle him to 200,000 votes per share or an aggregate of 200,000,000 votes on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.
·
21,738,588 shares of common stock were issued upon the conversion of $618,708 of convertible note principal and interest.
NOTE 7 SUBSEQUENT EVENTS
Management has reviewed material events subsequent of the quarterly period ended October 31, 2016 and prior to the filing of financial statements in accordance with FASB ASC 855 Subsequent Events.
RDW converted $54,090 of convertible note principal into 18,030,000 shares of common stock.
{00837603.DOC;2 }
F-17
Baum & Company, P.A.
Certified Public Accountants
1688 Meridian Avenue, Suite 504
Miami Beach, Florida 33139
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Force Protection Video Equipment Corp.
We have audited the accompanying balance sheet of Force Protection Video Equipment Corp. ("the Company") as of April 30, 2016 and 2015, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Force Protection Video Equipment Corp. as of April 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated positive net income since inception, has an accumulated deficit, and does not have positive cash flows from operating activities. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Miami Beach, Florida
June 16, 2016
/s/ Baum & Company, P.A.
{00837603.DOC;2 }
F-18
|
|
|
|
|
|
|
Force Protection Video Equipment Corporation
|
|
|
|
|
Balance Sheets
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
227,273
|
|
$
35,226
|
|
Inventory
|
|
70,361
|
|
-
|
|
Prepaid inventory
|
|
59,509
|
|
25,350
|
|
Accounts receivable
|
|
3,157
|
|
-
|
|
|
Total current assets
|
|
360,300
|
|
60,576
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $476
|
|
7,112
|
|
-
|
|
Deposits
|
|
1,945
|
|
-
|
|
|
Total assets
|
|
$
369,357
|
|
$
60,576
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
30,059
|
|
$
17,017
|
|
Convertible promissory notes net of discount of $204,718
|
|
91,074
|
|
-
|
|
|
Total current liabilities
|
|
121,133
|
|
17,017
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
983
|
|
-
|
Total liabilities
|
|
122,116
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
Preferred stock, $0.0001 par value 1,000,000 shares authorized; issued and outstanding 1,000,000 and 0 at April 30, 2016 and 2015.
|
100
|
|
-
|
|
Common stock, $0.0001 par value 250,000,000 shares authorized; issued and outstanding 40,525,595 and 18,295,000 at April 30, 2016 and 2015, respectively.
|
4,052
|
|
1,829
|
|
Additional paid-in capital
|
|
1,718,214
|
|
254,854
|
|
Accumulated deficit
|
|
(1,475,125)
|
|
(213,124)
|
|
|
Total stockholders' equity (deficit)
|
|
247,241
|
|
43,559
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
369,357
|
|
$
60,576
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
{00837603.DOC;2 }
F-19
|
|
|
|
|
|
|
Force Protection Video Equipment Corporation
|
|
|
|
|
Statements of Operations
|
|
|
|
|
For the Years Ended April 30, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended April 30,
|
|
|
|
|
2016
|
|
2015
|
Income
|
|
|
|
|
|
Net revenue
|
|
$ 67,964
|
|
$ 5,000
|
|
Cost of goods sold
|
|
39,565
|
|
-
|
|
|
Gross profit
|
|
28,399
|
|
5,000
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
General and administrative
|
|
485,186
|
|
67,136
|
|
Sales and marketing
|
|
58,326
|
|
863
|
|
Product development
|
|
25,989
|
|
-
|
|
|
Total operating expenses
|
|
569,501
|
|
67,999
|
|
|
Loss from operations
|
|
(541,102)
|
|
(62,999)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
Interest expense
|
|
(26,711)
|
|
- -
|
|
Accretion of debt discount
|
|
(694,188)
|
|
-
|
|
|
Total other income (expense)
|
|
(720,899)
|
|
-
|
Loss before taxes
|
|
(1,262,001)
|
|
(62,999)
|
Provision for income taxes
|
|
-
|
|
-
|
Net loss
|
|
$ (1,262,001)
|
|
$ (62,999)
|
|
|
|
|
|
|
|
Net (loss) per common share basic and diluted
|
|
$ (0.06)
|
|
$ (0.00)
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic and diluted
|
|
20,631,092
|
|
18,148,846
|
The accompanying notes are an integral part of these financial statements
{00837603.DOC;2 }
F-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Force Protection Video Equipment Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended April 30, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Total
|
|
|
Preferred Stock
|
|
Common Stock
|
|
paid-in
|
|
Accumulated
|
|
Stockholders'
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Equity
|
Balance, April 30, 2014
|
-
|
|
$
-
|
|
18,145,000
|
|
$
1,814
|
|
$
199,870
|
|
$
(150,125)
|
|
$
51,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
-
|
|
-
|
|
150,000
|
|
15
|
|
54,984
|
|
-
|
|
54,999
|
|
Net loss
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(62,999)
|
|
(62,999)
|
Balance, April 30, 2015
|
-
|
|
-
|
|
18,295,000
|
|
1,829
|
|
254,854
|
|
(213,124)
|
|
43,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issued for cash
|
1,000,000
|
|
100
|
|
-
|
|
-
|
|
900
|
|
-
|
|
1,000
|
|
Common stock issued for cash
|
-
|
|
-
|
|
450,000
|
|
45
|
|
44,955
|
|
-
|
|
45,000
|
|
Common stock issued in exchange for services
|
-
|
|
-
|
|
10,095
|
|
1
|
|
14,499
|
|
-
|
|
14,500
|
|
Discount on convertible promissory note due to common stock issued
|
-
|
|
-
|
|
31,912
|
|
3
|
|
17,997
|
|
-
|
|
18,000
|
|
Common stock issued upon conversion of convertible promissory notes
|
-
|
|
-
|
|
21,738,588
|
|
2,174
|
|
630,599
|
|
-
|
|
632,773
|
|
Discount on convertible promissory note due to beneficial conversion feature
|
-
|
|
-
|
|
-
|
|
-
|
|
754,410
|
|
-
|
|
754,410
|
|
Net loss
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(694,188)
|
|
(694,188)
|
Balance, April 30, 2016
|
1,000,000
|
|
$
100
|
|
40,525,595
|
|
$
4,052
|
|
$
1,718,214
|
|
$
(907,312)
|
|
$
815,054
|
The accompanying notes are an integral part of these financial statements
{00837603.DOC;2 }
F-21
|
|
|
|
|
|
Statements of Cash Flows
|
|
|
|
For the Years Ended April 30, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended April 30,
|
|
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
|
Net (Loss)
|
$
(1,262,001)
|
|
$
(62,999)
|
|
Adjustments to reconcile net loss to net cash provided (used in) operating activities:
|
|
|
|
|
|
Depreciation and Amortization
|
476
|
|
-
|
|
|
Accretion of debt discount
|
694,188
|
|
-
|
|
|
Share based compensation expense
|
14,500
|
|
-
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
(3,157)
|
|
-
|
|
|
(Increase) decrease in inventory
|
(70,361)
|
|
-
|
|
|
(Increase) decrease in other assets
|
(36,104)
|
|
(25,350)
|
|
|
Increase (decrease) in accounts payable and accrued expenses
|
27,107
|
|
14,825
|
|
|
Increase (decrease) in other liabilities
|
983
|
|
-
|
|
|
Net cash (used) by operating activities
|
(634,369)
|
|
(73,524)
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of equipment
|
(7,588)
|
|
-
|
|
Net cash (used) by investing activities
|
(7,588)
|
|
-
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from sale of common stock
|
45,000
|
|
54,999
|
|
Proceeds from sale of preferred stock
|
1,000
|
|
-
|
|
Proceeds from convertible promissory notes
|
788,004
|
|
-
|
|
Net cash provided by financing activities
|
834,004
|
|
54,999
|
|
|
|
|
|
|
Increase (decrease) in cash
|
192,047
|
|
(18,525)
|
Cash and cash equivalents at beginning of period
|
35,226
|
|
53,751
|
Cash and cash equivalents at end of period
|
$
227,273
|
|
$
35,226
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
Cash paid for interest
|
$
-
|
|
$
-
|
|
Cash paid for income taxes
|
$
-
|
|
$
-
|
|
|
|
|
|
|
Non-cash operating activities:
|
|
|
|
|
Value of common stock issued in exchange for services
|
$
14,500
|
|
$
-
|
{00837603.DOC;2 }
F-22
FORCE PROTECTION VIDEO EQUIPMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2016 AND 2015
NOTE 1 ORGANIZATION AND GOING CONCERN
Organization
Force Protection Video Equipment Corp., (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida as M Street Gallery, Inc. On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services. On February 2, 2015 the Company changed its name to Force Protection Video Corp. to focus on the sale of mini body video cameras and accessories to consumers and law enforcement.
Going Concern
The Companys financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
During the year ended April 30, 2016, the Company recognized revenue of $67,964 and a net operating loss of $541,102. As of April 30, 2016, the Company had working capital of $239,167 and an accumulated deficit of $1,475,125.
In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of the Companys financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by managements application of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Inventory
Our inventory is comprised of finished goods, cameras and recording equipment. The Companys inventory is stated at the lower of cost or market. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory.
{00837603.DOC;2 }
F-23
Accounts Receivable
Accounts receivable are reported at the customers' outstanding balances. The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.
Property and Equipment
Fixed assets are carried at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. Depreciation for financial statement purposes is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
|
|
|
|
|
Estimated
|
|
|
Useful Lives
|
|
|
|
Office Equipment
|
|
3 - 5 years
|
Furniture & equipment
|
|
5 - 7 years
|
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.
Revenue Recognition
The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.
Advertising costs
Advertising costs are anticipated to be expensed as incurred. The Company recognized $21,683 and $0 in advertising costs during the years ended April 30, 2016 and 2015, respectively.
Stock Based Compensation
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
{00837603.DOC;2 }
F-24
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. The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
As of April 30, 2016 and 2015 the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Companys financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.
Net Income (Loss) Per Share
The computation of basic earnings per share (EPS) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).
{00837603.DOC;2 }
F-25
Following is the computation of basic and diluted net loss per share for the years ended April 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
April 30,
|
|
|
|
|
|
2016
|
|
2015
|
Basic and Diluted EPS Computation
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
(1,262,001)
|
|
$
(62,999)
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
20,631,092
|
|
18,148,846
|
|
|
|
|
|
|
Basic and diluted EPS
|
|
$
(0.06)
|
|
$
(0.00)
|
|
|
|
|
|
|
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
17,760,424
|
|
-
|
Concentrations of risk
During the year ended April 30, 2016, no customer accounted for more than 5% of sales. During the year ended April 30, 2015, one customer accounted for 100% of sales.
The Company relies on third parties for
the supply and manufacture of its capture devices, some of which are sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. During the year ended April 30 2016, two suppliers accounted for 97% (84% and 13%) of our inventory purchases.
Recent Accounting Pronouncements
In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805). This ASU eliminates the requirement for retrospective application of measurement period adjustments relating to provisional amounts recorded in a business combination as of the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments will be effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.
In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.
{00837603.DOC;2 }
F-26
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years. We expect the adoption of this guidance will not have a material impact on our financial statements.
In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP relating to whether or not to consolidate certain legal entities. Early adoption is permitted. The Companys effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.
In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates the concept from U.S. GAAP the concept of an extraordinary item. Under the ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. Early adoption is permitted. The Companys effective date for adoption is May 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205 40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern, which is intended to define managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on our financial statements and disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). On July 9, 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year. Based on the Board's decision, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. We are currently evaluating the impact of the pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.
We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.
{00837603.DOC;2 }
F-27
NOTE 3 - FIXED ASSETS
Fixed assets consisted of the following:
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
|
|
2016
|
|
2015
|
|
Furniture and fixtures
|
|
6,212
|
|
-
|
|
Computers and office equipment
|
|
1,376
|
|
-
|
|
Total fixed assets
|
|
7,588
|
|
-
|
|
Accumulated depreciation
|
|
(476)
|
|
-
|
|
Total fixed assets
|
|
$
7,112
|
|
$
-
|
During the years ended April 30, 2016 and 2015, the Company recognized $476 and $0, respectively, in depreciation expense.
NOTE 4 CONVERTIBLE PROMISSORY NOTES
Following is a summary of our outstanding convertible promissory notes as of April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Balances
|
|
|
Lender
|
|
Issue Date
|
Maturity
|
|
Principle
|
|
Interest
|
|
Total
|
LG Capital Funding, LLC
|
4/20/2016
|
|
9/11/2016
|
|
$
13,000
|
|
$
34
|
|
$
13,034
|
Black Forest Capital, LLC
|
10/8/2015
|
|
10/8/2016
|
|
19,500
|
|
3,001
|
|
22,501
|
RDW Capital, LLC Note 1
|
11/10/2015
|
|
5/10/16
|
|
157,500
|
|
6,136
|
|
163,636
|
RDW Capital, LLC Note 2
|
1/0/1900
|
|
6/30/16
|
|
105,000
|
|
2,861
|
|
107,861
|
RDW Capital, LLC Note 3
|
3/10/2016
|
|
9/10/16
|
|
792
|
|
614
|
|
1,406
|
Totals
|
|
|
|
|
|
$
295,792
|
|
$
12,646
|
|
$
308,438
|
Debt discount balance
|
|
|
|
|
|
(204,718)
|
|
|
|
|
Balance sheet balances
|
|
|
|
|
|
$
91,074
|
|
|
|
|
The company determined that each convertible promissory notes conversion feature is indexed to the Companys stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20
Debt with Conversion and Other Options
is appropriate.
EMA Financial, LLC
On August 25, 2015 the Company entered into a Securities Purchase Agreement with EMA Financial, LLC (EMA), for the sale of an 8% convertible note in the principal amount of $105,000 (the EMA Note) of which the Company received $80,504 after payment of legal and due diligence fees of $5,000, finder's fee of $9,500 and original issue discount (OID) of $9,996. The EMA Note matured in twelve (12) months on August 25, 2016.
The EMA Note was convertible into common stock, at EMAs option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event was EMA effect a conversion if such conversion results in EMA beneficially owning in excess of 4.9% of the outstanding common stock of the Company.
{00837603.DOC;2 }
F-28
The EMA Note principle was discounted for the value of the OID, legal fees and finders fee totaling $24,496, and the intrinsic value of the beneficial conversion feature of $80,504 which was computed as the difference between the fair value of the common stock issuable upon conversion of the EMA Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $145,000. As this amount resulted in a total debt discount that exceeds the EMA Note proceeds, the discount recorded for the beneficial conversion feature was limited to the principal amount of the EMA Note. The resulting $105,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.
During the year ended April 30, 2016, the Company recognized interest expense of $5,444 and debt discount accretion of $105,000. During the year ended April 30, 2016, EMA converted $110,444 of principal and interest into 3,857,115 shares of common stock. The EMA Note has been paid in full as of April 30, 2016
Adar Bays, LLC
On September 11, 2015 the Company entered into a Securities Purchase Agreement with Adar Bays, LLC ("Adar") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes Adar legal expenses in the amount of $6,000) (the Adar Note) of which Adar funded $27,000 upon closing, $27,000 on March 30, 2016 and $27,000 on April 13, 2016.
The Adar Note bore interest at 8% with all interest and principal due on September 11, 2016. The Adar Note was convertible into common stock anytime after 6 months, at Adars option, at a price for each share of common stock equal to 60% (the Conversion Factor) of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion.
Adar agreed to restrict its ability to convert the Adar Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock.
The Adar Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $75,000 computed as the difference between the fair value of the common stock issuable upon conversion of the Adar Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $109,000. As this amount resulted in a total debt discount that exceeds the Adar Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Adar Note. The resulting $81,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.
During the year ended April 30, 2016, the Company recognized interest expense of $1,144 and debt discount accretion of $75,000 During the year ended April 30, 2016, Adar converted $82,144 of principal and interest into 3,194,887 shares of common stock. The Adar Note has been paid in full as of April 30, 2016.
Auctus Fund, LLC
On September 30, 2015 the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (Auctus), for the sale of an 8% convertible note in the principal amount of $66,000 (the Auctus Note) of which the Company received $57,500 after payment of legal and due diligence fees. The Auctus Note matured in 9 months on June 30, 2016.
The Auctus Note was convertible into common stock, at Auctuss option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event was Auctus to effect a conversion if such conversion resulted in Auctus beneficially owning in excess of 4.99% of the outstanding common stock of the Company.
{00837603.DOC;2 }
F-29
The Actus Note principle was discounted for the value of the legal and due diligence fees of $8,500 and the intrinsic value of the beneficial conversion feature of $57,500 computed as the difference between the fair value of the common stock issuable upon conversion of the Auctus Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $62,625. As this amount resulted in a total debt discount that exceeded the Auctus Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Auctus Note. The resulting $66,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.
During the year ended April 30, 2016, the Company recognized interest expense of $2,749 and debt discount accretion of $66,000. During the year ended April 30, 2016, Actus converted $68,749 of principal and interest into 2,716,689 shares of common stock. The Actus Note has been paid in full as of April 30, 2016.
JSJ Investments, Inc.
On October 6, 2015 the Company sold and JSJ Investments, Inc. (JSJ) purchased a 12% convertible note in the principal amount of $56,000 (the JSJ Note) of which the Company received $51,000 after payment of a $5,000 original issue discount. The JSJ Note matured in 6 months on April 6, 2016.
The JSJ Note was convertible into common stock, at JSJ s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event was JSJ to effect a conversion if such conversion resulted in JSJ beneficially owning in excess of 4.99% of the outstanding common stock of the Company.
The JSJ Note principle was discounted for the value of the OID of $5,000 and the intrinsic value of the beneficial conversion feature of $51,000 computed as the difference between the fair value of the common stock issuable upon conversion of the JSJ Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $57,866. As this amount resulted in a total debt discount that exceeds the JSJ Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the JSJ Note. The resulting $56,000 discount was accreted through April 26, 2016, the date the note balance was paid in full.
During the year ended April 30, 2016, the Company recognized interest expense of $3,536 and debt discount accretion of $56,000. During the year ended April 30, 2016, JSJ converted $59,536 of principal and interest into 3,543,799 shares of common stock. The JSJ Note has been paid in full as of April 30, 2016.
LG Capital Funding, LLC
On September 11, 2015 the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes LG legal expenses in the amount of $6,000) (the LG Note) of which LG funded $27,000 upon closing, $27,000 on March 30, 2016 and $27,000 on April 20, 2016.
The LG Note bears interest of 8%. All interest and principal must be repaid on September 11, 2016. The LG Note is convertible into common stock anytime after 6 months, at LGs option, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In the event the Company elects to prepay all or any portion of the LG Note during the first 180 days, the Company is required to pay to LG an amount in cash equal to 150% multiplied by the sum of all principal and interest. The note may not be prepaid after the 180th day.
LG agreed to restrict its ability to convert the LG Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock. The LG Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.
{00837603.DOC;2 }
F-30
The LG Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $68,000 computed as the difference between the fair value of the common stock issuable upon conversion of the LG Note and the total price to convert based on the effective conversion price on the date of issuance. The resulting $74,000 discount is being accreted over the 12 month term of the LG Note.
During the year ended April 30, 2016, the Company recognized interest expense of $1,227 and debt discount accretion of $66,259. During the year LG converted $69,193 of principal and interest into 3,035,913 shares of common stock leaving a principal balance due of $13,000 as of April 30, 2016.
Black Forest Capital, LLC
On October 8, 2015 the Company sold and Black Forest Capital, LLC (Black Forest) purchased a 10% convertible note in the principal amount of $53,000 (the Black Forest Note) of which the Company received $50,000 after payment of legal fees. The Black Forest Note matures in 12 months on October 8, 2016.
The Black Forest Note is convertible into common stock, at Black Forests option anytime following the issuance date, at a price for each share of common stock equal to 40% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event shall Black Forest effect a conversion if such conversion results in Black Forest beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Black Forest Note and accrued interest may be prepaid within the 180 day period following the issuance date at an amount equal to 135% of the outstanding principle and unpaid interest. After expiration of the 180 days, the Black Forest Note may not be prepaid. Upon the occurrence of an event of default the balance of principle and interest shall increase to 140%.
The Black Forrest Note principle was discounted for the value of legal fees of $3,000 and the intrinsic value of the beneficial conversion feature of $50,000 computed as the difference between the fair value of the common stock issuable upon conversion of the Black Forest Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $127,199. As this amount resulted in a total debt discount that exceeds the Black Forest Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Black Forest Note. The resulting $53,000 discount is being accreted over the 12 month term of the Black Forest Note.
During the year ended April 30, 2016, the Company recognized interest expense of $3,001 and debt discount accretion of $43,008. During the year Black Forrest converted $33,500 of principal and interest into 2,991,074 shares of common stock leaving a principal balance due of $19,500 as of April 30, 2016.
RDW Capital, LLC
RDW Securities Purchase Agreement #1
On November 10, 2015, we entered into a Securities Purchase Agreement (RDW SPA 1) with RDW Capital, LLC (RDW), a Florida limited liability company wherein RDW committed to lend us up to $1,150,000 in convertible notes. On closing, we issued to RDW, an eight percent (8%) convertible note (RWD Note 1) in the principal amount of $157,500 of which the Company received $130,000 after payment of legal and due diligence fees totaling $27,500.
On December 31, 2015, in connection with the RDW SPA 1, we issued to RDW a second convertible note in the principal amount of $105,000 (RDW Note 2) of which the Company received $90,000 after payment of legal and due diligence fees totaling $15,000.
On February 17, 2016, we entered into Amendment No. 3 to the RDW SPA 1 which increased the amount RDW will invest to an aggregate of $2,362,500 of convertible notes payable in six (6) tranches with the first tranche of $157,500 (RDW Note 1); second tranche of $105,000 (RDW Note 2); and third tranche of $525,000 ($210,000 (RDW Note 3) as described below was funded) (collectively the RDW Notes), having already been paid; the fourth tranche of $525,000 due within five (5) days after the effective date of a registration statement covering the fourth tranche; the fifth tranche of $525,000 within five (5) business days after the effective date of a registration statement covering the fifth tranche; and the sixth tranche of 525,000 within five (5) business days after the effective date of a registration statement covering the sixth tranche
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F-31
On March 10, 2016, in connection with the RDW SPA 1, we issued to RDW a third convertible note in the principal amount of $210,000 (RDW Note 3) of which the Company received $180,000 after payment of legal and due diligence fees totaling $30,000
The RDW Notes have the following terms and conditions:
·
The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.
·
Interest is due and payable on each conversion date and on the Maturity Date.
·
Mature 5-6 months, after issuance.
·
At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the Conversion Price).
· T
he
RDW Notes are unsecured obligations.
·
We may prepay the RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%). RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.
·
Default interest of twenty-four percent (24%) per annum.
·
Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.
·
Upon an event of default, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration (
“
Acceleration
”
).
·
Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages.
·
In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.
·
We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion.
·
Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.
RDW Note 1 principle was discounted for the value of the legal and finders fees totaling $27,500 and the intrinsic value of the beneficial conversion feature of $121,406 which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 1 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $121,406. As this amount resulted in a total debt discount that was less than RDW Note 1 principal, the full $121,406 discount was recognized. The resulting $148,906 discount was accreted over the 5 month term of RDW Note 1 through April 10, 2016.
RDW Note 2 principle was discounted for the value of the legal fees totaling $15,000 and the intrinsic value of the beneficial conversion feature which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 2 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $98,086. As this amount resulted in a total debt discount that exceeds RDW Note 2 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 2. The resulting $105,000 discount is being accreted over the 5 month term of RDW Note 2 through June 30, 2016.
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F-32
RDW Note 3 principle was discounted for the value of fees totaling $30,000, stock issued to an advisor in connection with RDW Note 3 totaling $18,000, and the intrinsic value of the beneficial conversion feature which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 3 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $227,391. As this amount resulted in a total debt discount that exceeded RDW Note 3 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 3. The resulting $210,000 discount was accreted through April 30, 2016, the date RDW Note 3 was paid in full.
Related to the RDW Notes, during the year ended April 30, 2016, the Company recognized interest expense of $9,611 and debt discount accretion of $276,921.
During the year RDW converted $209,208 of RDW Note 3 principal and interest into 2,415,000 shares of common stock leaving a principal balance due on RDW Note 3 of $792 as of April 30, 2016.
RDW Securities Purchase Agreement #2
On May 9, 2016, we entered into a Securities Purchase Agreement (RDW SPA 2) with RDW wherein RDW committed to lend us up to $367,500 in convertible notes in four tranches with proceeds totaling $350,000 as follows: (i) $100,000 which it invested on May 13, 2016, (ii) $50,000 which it invested on May 20, 2016, (iii) $100,000 on June 13, 2016, and (iv) $100,000 on July 13, 2016.
In connection with the RDW SPA 2, on May 13, 2016, we issued to RDW, an eight percent (8%) convertible note in the principal amount of $105,000, in exchange for RDWs investment of $100,000 (RDW Note 4). Out of the proceeds from RDW Note 4, we paid the sum of $7,500 to RDWs legal counsel, $10,000 to our placement agent, Carter, Terry & Company (CTC), a broker-dealer registered with the Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) and $5,000 towards an original issue discount. Pursuant to the terms of the RDW Purchase Agreement and our agreement with CTC, we received net proceeds of $82,500 from RDW Note 4.
In connection with the RDW SPA 2, on May 20, 2016, we issued a second convertible note to RDW with the principal amount of $52,500 (RDW Note 5) in exchange for RDWs investment of $50,000. Out of the proceeds from RDW Note 5, we paid the sum of $5,000 to CTC, as the placement agent pursuant to the terms of our agreement with CTC and $2,500 towards an original issue discount. After payment of this amount, we received net proceeds of $45,000 from RDW Note 5.
NOTE 5 COMMITMENTS AND CONTINGENCIES
Product Warranties
Our products are sold with a one (1) year manufacturers warranty. The Company has no obligation to provide warranty service or replacement. The Company does offer an extended warranty for a fee. The extended warranty expires one year from the day the manufacturer warranty expires. Warranty costs during the second year of an extended warranty are born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.
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F-33
Operating Lease
On March 21, 2015, the Company entered into a lease of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. The lease expires on March 31, 2018. The Company has no other noncancelable operating leases. Future minimum lease payments under this operating lease with an initial term in excess of one year as of April 30, 2016 are as follows:
Fiscal Year
2017
$14,776
2018
$14,776
2019
$9,851
Thereafter
$0
Rent expense for office space totaled $10,295 and $0 during the years ended April 30, 2016 and 2015, respectively.
Supplier Purchase Commitments
The Company periodically makes contractual, advance inventory purchases in the ordinary course of business. As of April 30, 2016, the Company was obligated to purchase $35,000 of inventory under a non-exclusive distribution agreement.
NOTE 6 STOCKHOLDER'S EQUITY
As of April 30, 2016 and 2015, there were 40,525,595 and 18,295,000 shares of common stock outstanding, respectively. As of April 30, 2016 and 2015 there were 1,000,000 and 0 shares of Series A Preferred Stock outstanding, respectively.
On January 19, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorized the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200,000 (i.e., 200:1) votes per share and with no right of conversion into shares of common stock.
During the year ended
April 30, 2016
, the Company issued preferred stock and common stock as follows:
·
10,095 shares of common stock were issued in exchange for services valued at the close price of our stock resulting in stock compensation expense of $14,500.
·
31,912 shares of common stock were issued in connection with RDW Note 3 and valued at $18,000 as stated in the related agreements.
·
450,000 shares of common stock were issued for cash of $0.10 per share resulting in the Company receiving $45,000.
·
1,000,000 shares of non-convertible Series A Preferred Stock to Paul Feldman, CEO, which entitle him to 200,000 votes per share or an aggregate of 200,000,000 votes on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.
·
21,738,588 shares of common stock were issued upon the conversion of $618,708 of convertible note principal and interest.
During the year ended
April 30, 2015
, the Company issued common stock as follows:
·
100,000 shares were issued for cash of $0.50 per share resulting in the Company receiving $50,000.
·
50,000 shares for cash of $0.10 per share and received $5,000.
·
On February 2, 2015, Paul Feldman, CEO, purchased 10,000,000 shares of our common stock for $.0001 per share or an aggregate of $1,000 from our former president.
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F-34
NOTE 7 INCOME TAXES
No provision for income taxes was recorded in the periods presented due to tax losses incurred in each period. As of April 30, 2016 and 2015, the Company had net operating loss carry forwards of approximately $668,383 and $116,874, respectively, for income tax reporting purposes.
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforwards
|
$
668,383
|
|
$
116,874
|
|
$
58,864
|
|
Statutory tax rate
|
34%
|
|
34%
|
|
34%
|
Gross deferred tax assets
|
227,250
|
|
39,737
|
|
20,014
|
Valuation allowance
|
(227,250)
|
|
(39,737)
|
|
(20,014)
|
Net deferred tax asset
|
$
-
|
|
$
-
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
1,125,659
|
|
1,318,629
|
|
|
|
Stock comp
|
9,075
|
|
635,000
|
|
|
|
Accretion
|
273,403
|
|
24,759
|
|
|
|
meals and ent
|
6,358
|
|
3,157
|
|
|
A reconciliation between the amount of income tax benefit determined by applying the applicable U.S. statutory income tax rate to pre-tax loss for the years ended April 30, 2016 and 2015 is as follows:
|
|
|
|
|
April 30,
|
|
|
|
2016
|
|
2015
|
Federal Statutory Rate
|
$
(429,080)
|
|
$
(21,420)
|
Nondeductible expenses
|
241,567
|
|
-
|
Change in allowance on deferred tax assets
|
(187,513)
|
|
(21,420)
|
|
$
-
|
|
$
-
|
The valuation allowance for deferred tax assets as of April 30, 2016 and 2015 was $227,250 and $39,737, respectively. The net change in the total valuation allowance for the year ended January 31, 2016 was an increase of $187,513. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Due to the uncertainty of realizing the deferred tax asset, management has recorded a valuation allowance against the entire deferred tax asset.
The Company's U.S. federal net operating loss carry forward ("NOL") will expire in years 2033 through 2035; $15,616 of which will expire April 30, 2032, $38,259 on April 30, 2033, $62,999 on April 30, 2034 and $551,509 on April 30, 2035. Utilization of the NOL is subject to annual limitations under Internal Revenue Code Sections 382 and 383, respectively, as a result of significant changes in ownership, private placements and debt conversions. Subsequent significant equity changes, could further limit the utilization of the NOL. The annual limitations have not yet been determined; however, when the annual limitations are determined, the gross deferred tax assets for the NOL will be reduced with a reduction in the valuation allowance of a like amount.
The Company has adopted the accounting guidance related to uncertain tax positions, and has evaluated its tax positions and believes that all of the positions taken by the Company in its federal and state tax returns are more likely than not to be sustained upon examination. The Company returns are subject to examination by federal and state taxing authorities generally for three years after they are filed.
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F-35
As of January 31, 2016 and 2015, there were no unrecognized tax benefits. Accordingly, a tabular reconciliation from beginning to ending periods is not provided. The Company will classify any future interest and penalties as a component of income tax expense if incurred. To date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits.
The Company does not anticipate that the total amount of unrecognized tax benefits will change significantly in the next twelve months.
In September 2013, the Companys sole shareholder and former President sold all of his common stock, which represented 94.5% of the Companys issued and outstanding stock, to the Companys new president. Pursuant to Internal Revenue Service (IRS) Code Section 382, an ownership change of greater than 50% triggers certain limits to the corporations right to use its net operating loss (NOL) carryovers each year thereafter to an annual percentage of the fair market value of the corporation at the time of the ownership change. The Company determined that the ownership change will limit the Company to utilize $15,616 of the $41,828 of NOLs it incurred prior to the ownership change.
The Companys tax returns are subject to examination by the federal and state tax authorities for years ended April 30, 2013 through 2016.
NOTE 9 SUBSEQUENT EVENTS
Management has reviewed material events subsequent of the quarterly period ended April 30, 2016 and prior to the filing of financial statements in accordance with FASB ASC 855 Subsequent Events.
On May 9, 2016, we entered into RDW SPA 2 with RDW wherein RDW committed to lend us up to $367,500 in convertible notes in four tranches with proceeds totaling $350,000 (net of $27,500 of OID) as follows: (i) $100,000 (net of $5,000 of OID) which it invested on May 13, 2016, (ii) $50,000 (net of $2,500 of OID) which it invested on May 20, 2016, (iii) $100,000 on June 13, 2016, which has yet to be received, and (iv) $100,000 on July 13, 2016.
In connection with the RDW Purchase Agreement, on May 13, 2016, we issued to RDW, an eight percent (8%) convertible note in the principal amount of $105,000, in exchange for RDWs investment of $100,000 (RDW Note 4) (net of $5,000 of OID). Out of the proceeds from RDW Note 4, we paid the sum of $7,500 to RDWs legal counsel, and paid $10,000 to CTC. Pursuant to the terms of the RDW SPA 2and our agreement with CTC, we received net proceeds of $82,500 from RDW Note 4.
In connection with the RDW SPA 2, on May 20, 2016, we issued a second convertible note to RDW with the principal amount of $52,500 (RDW Note 5) in exchange for RDWs investment of $50,000 (net of $2,500 of OID). Out of the proceeds from RDW Note 5, we paid the sum of $5,000 to CTC, as the placement agent pursuant to the terms of our agreement with CTC. After payment of this amount, we received net proceeds of $45,000 from RDW Note 5.
RDW converted $10,624 of convertible note principal into 13,863,185 shares of common stock. With this conversion, RDW Note 1 and RDW Note 2 principal were reduced to $151,876.
LG converted $13,034 of convertible note principal and interest into 775,844 shares of common stock. With this conversion, the LG Note has been paid in full.
Black Forrest converted $14,200 of convertible note principal into 3,392,858 shares of common stock. With this conversion, the Black Forrest Note principle balance was reduced to $5,300.
On May 17, 2016, the Company received a refund of $26,530 against a previous payment classified as prepaid inventory.
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F-36
70,000,000 Shares of Common Stock
FORCE PROTECTION VIDEO EQUIPMENT CORP.
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until
, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
The Date of This Prospectus is
2017
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