10-Q 1 rviv-20180831_10q.htm FORM 10-Q FOR PERIOD ENDED AUGUST 31, 2018

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended August 31, 2018

 

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

For the transition period from _____________ to _____________

 

Commission File Number: 333-220846

 

Reviv3 Procare Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   47-4125218
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
     
9480 Telstar Avenue., Unit 5, El Monte, CA   90211
(Address of Principal Executive Office)   (Zip Code)

 

(888) 638-8883

(Registrant’s Telephone Number, Including Area Code)

 

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒ 

 

As of October 11, 2018, there were 40,505,047 shares of the registrant’s common stock, $0.0001 par value, outstanding.

 

 

 

 

 

REVIV3 PROCARE COMPANY

INDEX

 

    Page
     
PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 5
     
Item 4. Controls and Procedures 5
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 6
     
Item 1A. Risk Factors 6
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 6
     
Item 3. Defaults Upon Senior Securities 6
     
Item 4. Mine Safety Disclosures 6
     
Item 5. Other Information 6
     
Item 6. Exhibits 7
     
Signatures 8

 

 i 

 

 

FORWARD-LOOKING STATEMENTS

 

Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’ “intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:

 

  the success or failure of management’s efforts to implement our business plan;
     
  our ability to fund our operating expenses;
     
  our ability to compete with other companies that have a similar business plan;
     
  the effect of changing economic conditions impacting our plan of operation; and
     
  our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”).

 

Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.

 

When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.

 

 ii 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

REVIV3 PROCARE COMPANY

INDEX TO FINANCIAL STATEMENTS

AUGUST 31, 2018

UNAUDITED

 
CONTENTS

 

Balance Sheets - As of August 31, 2018 (Unaudited) and May 31, 2018 F-1
   
Statement of Operations for the three months ended August 31, 2018 and 2017 (Unaudited) F-2
   
Statement of Cash Flows for the three months ended August 31, 2018 and 2017 (Unaudited) F-3
   
Condensed Notes to Unaudited Financial Statements F-4

  

 1 

 

REVIV3 PROCARE COMPANY

BALANCE SHEETS

 

   August 31,  May 31,
   2018  2018
   (Unaudited)   
       
ASSETS      
CURRENT ASSETS:      
 Cash  $141,236   $227,870 
 Accounts receivable, net   27,495    29,991 
 Inventory   357,601    321,537 
 Advance to suppliers   26,483    3,413 
 Prepaid expenses and other current assets   7,801    3,505 
           
 Total Current Assets   560,616    586,316 
           
 OTHER ASSETS:          
 Property and equipment, net   7,437    8,349 
 Deposits   14,849    14,849 
           
 Total Other Assets   22,286    23,198 
           
 TOTAL ASSETS  $582,902   $609,514 
           
 LIABILITIES AND STOCKHOLDERS' EQUITY          
           
 CURRENT LIABILITIES:          
 Accounts payable and accrued expenses  $100,255   $79,759 
 Customer deposits   62,396    16,200 
 Due to related party   210    210 
           
 Total Current Liabilities   162,861    96,169 
           
 Total Liabilities   162,861    96,169 
           
 Commitments and contingencies (see Note 8)          
           
 STOCKHOLDERS' EQUITY:          
Preferred stock, $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding   —      —   
Common stock, $0.0001 par value: 100,000,000 shares authorized; 40,505,047 shares issued and outstanding as of August 31, 2018 and May 31, 2018   4,051    4,051 
Additional paid-in capital   4,997,461    4,997,461 
Accumulated deficit   (4,581,471)   (4,488,167)
           
 Total Stockholders' Equity   420,041    513,345 
           
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $582,902   $609,514 

 

See accompanying condensed notes to unaudited financial statements.

 

 F-1 

REVIV3 PROCARE COMPANY

STATEMENTS OF OPERATIONS

(Unaudited)

  

   For the Three Month Periods Ended
   August 31,
   2018  2017
       
 Sales  $141,180   $111,245 
           
 Cost of sales   63,776    44,505 
           
 Gross profit   77,404    66,740 
           
 OPERATING EXPENSES:          
 Marketing and selling expenses   9,203    12,607 
 Compensation and related taxes   7,669    5,606 
 Professional and consulting expenses   49,486    118,710 
 General and administrative   104,099    55,512 
           
 Total Operating Expenses   170,457    192,435 
           
 LOSS FROM OPERATIONS   (93,053)   (125,695)
           
OTHER INCOME (EXPENSE):          
 Interest income   21    30 
 Interest expense and other finance charges   (272)   (1,064)
           
Other Income (Expense), Net   (251)   (1,034)
           
 LOSS BEFORE PROVISION FOR INCOME TAXES   (93,304)   (126,729)
           
 Provision for income taxes   —      —   
           
 NET LOSS  $(93,304)  $(126,729)
           
 NET LOSS PER COMMON SHARE - Basic and diluted  $(0.00)  $(0.00)
           
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:          
 Basic and diluted   40,505,047    30,752,308 

 

See accompanying condensed notes to unaudited financial statements.

 

 F-2 

REVIV3 PROCARE COMPANY

STATEMENTS OF CASH FLOWS

(Unaudited)

  

   For the Three Month Periods Ended
   August 31,
   2018  2017
       
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(93,304)  $(126,729)
Adjustments to reconcile net loss to net cash used in operating activities:          
     Depreciation   913    596 
     Bad debts   —      1,540 
     Inventory obsolescence   636    —   
     Stock based compensation   —      27,396 
Change in operating assets and liabilities:          
 Accounts receivable   2,496    (6,666)
 Inventory   (36,700)   (74,333)
 Advance to suppliers   (23,070)   (30,212)
 Prepaid expenses and other current assets   (4,296)   (7,039)
     Accounts payable and accrued expenses   20,495    21,420 
     Customer deposits   46,196    (4,098)
           
NET CASH USED IN OPERATING ACTIVITIES   (86,634)   (198,125)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of property and equipment   —      (468)
           
 NET CASH USED IN INVESTING ACTIVITIES   —      (468)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Advances from a related party   —      150 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   —      150 
           
NET DECREASE IN CASH   (86,634)   (198,443)
           
CASH - Beginning of year   227,870    416,873 
           
CASH - End of year  $141,236   $218,430 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid during the period for:          
Interest  $—     $—   
Income taxes  $—     $—   
           
 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Issuance of common stock for prepaid services  $—     $20,000 

 

See accompanying condensed notes to unaudited financial statements.

 

 F-3 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 1 – Organization

 

Reviv3 Procare Company (the “Company”) was incorporated in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC which was organized on July 31, 2013. The Company is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care products throughout the United States, Canada, Europe and Asia.

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited financial statements for the three months ended August 31, 2018 and 2017 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of August 31, 2018 and 2017, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2018. The results of operations for the three months ended August 31, 2018 are not necessarily indicative of the results to be expected for the full year.

 

Going Concern

 

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $93,304 and $86,634, respectively, for three months period ended August 31, 2018.  Additionally the Company has an accumulated deficit of $4,581,471 at August 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to implement its business plan, raise capital, and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Use of estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations, the useful life of property and equipment, the valuation of deferred tax assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances. 

 

Cash and cash equivalents

 

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.  The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation.

 

 F-4 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

 

Accounts receivable and allowance for doubtful accounts

 

The Company has a policy of providing on allowance for doubtful accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.  The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt.  Account balances deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

 

Prepaid expenses and other current assets

 

Prepaid expenses and other current assets of $7,801 and $3,505 at August 31, 2018 and May 31, 2018, respectively, consist primarily of costs paid for future services which will occur within a year. Prepaid expenses at August 31, 2018 primarily included prepaid rent and May 31, 2018 primarily included cash prepayments to vendors.   

 

Advances to suppliers

 

Advances to suppliers represent the cash paid in advance for installment payments for the purchase of inventory. The advances to a supplier are interest free and unsecured. As of August 31, 2018 and May 31, 2018, advances to the Company’s major supplier amounted to $26,483 and $3,413, respectively. Upon shipment, by the vendor, of the purchase inventory, the Company reclassifies such advances to supplier into inventory. 

 

Inventory

 

The Company values inventory, consisting of finished goods and raw materials, at the lower of cost and net realizable value. Cost is determined using an average cost method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its net realizable value. The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classifies inventory markdowns in the statement of operations as a component of cost of goods sold. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

  

Property and Equipment

 

Property and equipment are carried at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included in the statement of operations.

 

Revenue recognition

 

Effective June 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers, which is effective for public business entities with annual reporting periods beginning after December 15, 2017.  This new revenue recognition standard (new guidance) has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures.

 

 F-5 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

 

The Company sells a variety of hair and skin care products. The Company recognizes revenue for the agreed upon sales price when a purchase order is received from the customer and subsequently the product is shipped to the customer, which satisfies the performance obligation. Consideration paid to the customer to promote and sell the Company’s products is typically recorded as a reduction of revenues. See Note 10 for revenue disaggregation disclosures.

 

Cost of Sales

 

The primary components of cost of sales include the cost of the product and shipping fees.

 

Shipping and Handling Costs

 

The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in marketing and selling expense were $9,203 and $12,607 for the three months period ended August 31, 2018 and 2017, respectively.

 

Marketing, selling and advertising

 

Marketing, selling and advertising costs are expensed as incurred.

 

Customer Deposits

 

Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of products in compliance with its revenue recognition policy.

 

Fair value measurements and fair value of financial instruments

 

The Company adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: 

 

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 F-6 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

 

The estimated fair value of certain financial instruments, including prepaid expenses, deposits, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

Income Taxes

 

The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

  

The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

 

Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.  The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

  

Impairment of long-lived assets  

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

 

Stock-based compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

 F-7 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

 

Effective June 1, 2018, the Company adopted the proposed update to ASC 718 whereby, the accounting for share-based payments to nonemployees and employees is substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Consistent with the accounting requirement for employee sharebased payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that the Company is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The adoption of the standard did not have a material impact on the financial statements of the Company.

 

Net loss per share of common stock

 

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares during the period. Diluted net loss per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. At August 31, 2018 and 2017, the Company had no potentially dilutive securities.

 

Recently Issued Accounting Pronouncements

 

In February 2016, FASB issued ASU 2016-02, “Leases” (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods and is applied retrospectively. Early adoption is permitted. The Company does not believe the guidance will have a material impact on its financial statements.

 

In January 2017, the FASB issued ASU No. 2017-4, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. When an indication of impairment was identified after performing the first step of the goodwill impairment test, Step 2 required that an entity determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) using the same procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the amendments in ASU No. 2017-4, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value. An entity would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. In addition, an entity must consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. A public business entity that is a SEC filer should adopt the amendments in ASU No. 2017-4 for its annual, or any interim, goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company does not believe the guidance will have a material impact on its financial statements.

 

 F-8 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

 

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value. as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption to have any significant impact on its Financial Statements. The Company is currently in the process of evaluating the impact of the adoption of this standard on its financial statements. 

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

Note 3 – Accounts Receivable

 

Accounts receivable, consisted of the following:

 

   August 31,
2018
  May 31,
2018
       
Accounts receivable  $30,237   $32,733 
Less: Allowance for bad debts   (2,742)   (2,742)
   $27,495   $29,991 

 

The Company recorded bad debt expense of $0 and $1,540 during the three month periods ended August 31, 2018 and 2017, respectively.

 

Note 4 – Inventory

 

Inventory consisted of the following:

 

   August 31,
2018
  May 31,
2018
       
Finished goods  $81,587   $113,134 
Raw materials   276,014    208,403 
   $357,601   $321,537 

 

At August 31, 2018 and May 31, 2018, inventory held at third party locations amounted to $35,850 and $64,485, respectively.

 

During the three months period ended August 31, 2018 and 2017, the Company wrote down inventory for obsolescence of $636 and $0 which is included in cost of sales.

 

 F-9 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 5 – Property and Equipment

 

Property and equipment, stated at cost, consisted of the following: 

   Estimated life  August 31,
2018
  May 31,
2018
Furniture and fixtures  5 years  $5,759   $5,759 
Computer equipment  3 years   7,495    7,495 
Less: Accumulated depreciation      (5,817)   (4,905)
      $7,437   $8,349 

 

Depreciation expense amounted to $913 and $596 for the three month periods ended August 31, 2018 and 2017, respectively. 

 

Note 6 – Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses comprised of the following:

   August 31,
2018
  May 31,
2018
Trade Payables  $60,490   $41,320 
Accrued Freight   22,532    22,532 
Credit Cards   17,077    15,521 
Other   156    386 
   $100,255   $79,759 

 

Note 7 – Stockholders’ Equity

 

Shares Authorized

 

The authorized capital of the Company consists of 100,000,000 shares of common stock, par value $0.0001 per share and 20,000,000 shares of preferred stock, par value $0.0001 per share.

 

Preferred Stock

 

The preferred stock may be issued from time to time in one or more series. The Board of Directors of the Company is expressly authorized to provide for the issuance of all or any of the shares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter, for each such series, such voting powers, full or limited, or no voting powers and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed until the resolution adopted by the Board of Directors providing the issuance of such shares. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

 

Common Stock

 

In June 2017, the Company issued an aggregate of 80,000 shares of the Company’s common stock to various consultants pursuant to consulting agreements related to marketing and business advisory services. The term of the consulting agreements ranges from 2 months to 6 months. The Company valued these common shares at the fair value of $20,000 based on the sale of common stock in the recent private placements at $0.25 per common share. In connection with the issuance of these common shares, the Company recorded stock based compensation of $20,000.

 

No stock was issued during the three months period ended August 31, 2018.

 

 F-10 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 8 – Commitments and Contingencies

 

In September 2016, the Company executed a lease agreement in connection with its office and warehouse facility in California under operating leases for a period of 37 months commencing in October 2016 and expiring in October 2019. The Company shall pay a monthly base rent starting at $6,782 plus a pro rata share of operating expenses. The base rent is subject to an annual increase beginning in October 2017 as defined in the lease agreement. Rent expense amounted to $25,066 and $21,631 for the three month periods ended August 31, 2018 and 2017, respectively. Future minimum rental payments required under this operating lease are as follows:

 

    Total   1 Year   2-3 Year   Thereafter
Operating lease   $ 100,945     $ 86,311     $ 14,635     $ —    
Total   $ 100,945     $ 86,311     $ 14,635     $ —    

 

The Company entered into an agreement with a consultant, during the quarter ended August 31, 2018, for services for a term of one year commencing from September 1, 2018. The consultant shall be entitled to receive 10% of the gross revenues generated as a direct result of their activities, a monthly fee of $1,000 and 12,500 shares of common stock of the Company on a quarterly basis.

 

Note 9 – Related Party Transactions

 

The Company’s Chief Executive Officer, from time to time, provided advances to the Company for working capital purposes. At August 31, 2018 and May 31, 2018, the Company had a payable to the officer of $210 and $210, respectively. These advances were short-term in nature and non-interest bearing.   

 

During the three month period ended August 31, 2018, the Company paid $280 to an affiliated company for advisory services rendered. The affiliated company is managed by the Company’s Chief Executive Officer.

 

 F-11 

REVIV3 PROCARE COMPANY

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

AUGUST 31, 2018

 

Note 10 – Concentrations

 

Concentration of Revenue, Product Line, and Supplier

 

During the three month period ended August 31, 2018 sales to three customers represented approximately 59% of the Company’s net sales at 25%, 18% and 16%. During the three month period ended August 31, 2017, sales to two customers represented approximately 47% of the Company’s net sales at 20% and 27%.

 

During the three month period ended August 31, 2018 sales to customers outside the United States represented approximately 33% which consisted of 27% from Canada and 6% from Hong Kong and for the three month period ended August 31, 2017, sales to customers outside the United States represented approximately 41% from Canada.

 

During the three month period ended August 31, 2018, sales by product line which each represented over 10% of sales consisted of approximately 22% from sales of hair shampoo, 16% from sales of hair shampoo and conditioner, 20% from sale of hair treatment spray and repair products and 22% from sale of introductory kit (shampoo, conditioner and treatment spray). During the three months ended August 31, 2017, sales by product line which each represented greater than 10% of sales consisted of approximately 21% from sales of hair shampoo, 14% from sales of hair shampoo and conditioner, 13% from sale of hair treatment spray and 33% from sale of introductory kit (shampoo, conditioner, and treatment spray).

 

As of August 31, 2018, accounts receivable from four customers represented approximately 87% at 33%, 30%, 12% and 12% and at May 31, 2018, accounts receivable from three customers represented approximately 60% at 34%, 14% and 12% of the accounts receivable, respectively.

 

The Company purchased inventories and products from four vendors totaling approximately $86,500 (87% of the purchases) and three vendors totaling approximately $65,000 (87% of the purchases) during the three month periods ended August 31, 2018 and 2017, respectively.

 

Note 11 – Subsequent events

 

Subsequent to the three month period ended August 31, 2018, the Company entered into a stock subscription agreement to issue 250,000 shares of its Common Stock at $0.40 per share, in exchange for proceeds of $100,000.

 

 F-12 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this prospectus.

 

Our Management's Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking.  Forward-looking statements are, by their very nature, uncertain and risky.  Forward-looking statements are often identified by words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions, or words that, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filing with the Securities and Exchange Commission. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.

 

Although the forward-looking statements in this Registration Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in herein and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Our financial statements are stated in United States Dollars (USD or US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.

 

Overview

 

Reviv3 Procare Company is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care products under various trademarks and brands and has adopted and used the trademarks products for distribution throughout the United States, Canada, Europe, and Asia pursuant to the terms of 11 exclusive distribution agreements with various parties throughout our targeted market. Majority of our ingredients are derived from natural sources. Our manufacturing operations are outsourced and fulfilled by through our co-packers and manufacturing partners. Currently, we produce 7 products with 13 separate sku’s and look to expand our product lines over the next 12 months.

 

Since our inception, we have engaged in significant operational activities as described in "Business," above.

 

 -2- 

We are an "emerging growth company" ("EGC") that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act ("the JOBS Act"), that eases restrictions on the sale of securities; and increases the number of shareholders a company must have before becoming subject to the U.S. Securities and Exchange Commission's (SEC's) reporting and disclosure rules (See "Emerging Growth Companies" section above). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Results of Operations

 

For the Three Months Ended August 31, 2018

 

Our results of operations for the three months ended August 31, 2018 and 2017 are summarized below.

 

   

Three Months Ended

August 31,
2018

    Three Months Ended
August 31,
2017
 
Revenues   $ 141,180     $ 111,245  
Cost of Sales   $ 63,776     $ 44,505  
Total operating expenses   $ 170,457     $ 192,435  
Loss from operations   $ (93,053 )   $ (125,695 )
Net loss   $ (93,304 )   $ (126,729 )

 

For the three months ended August 31, 2018 revenues increased by approximately $29,935, or 26.9%, as compared to the three months ended August 31, 2017.

 

Cost of sales includes the cost of product and shipping fees for products received. For the three months ended August 31, 2018, cost of sales increased by approximately $19,271 or 43.3%, as compared to the three months ended August 31, 2018.

 

For the three months ended August 31, 2018, gross profit amounted to $77,404 as compared to $66,740 in the three months ended August 31, 2017, amounting to an increase of $10,664, or 15.9%. For the three months ended August 31, 2018 and 2017, gross profit margins were at 54.8% and 60%, respectively. This decrease in gross margin is due to normal business fluctuations, which are within expectations based from prior performance.

 

For the three months ended August 31, 2018 and 2017, we incurred operating expenses of $170,457 and $192,435, respectively, and a net loss of $(93,304) and $(126,729), respectively. The operating expenses are costs related to marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses decreased by approximately $21,978 or 11.4% as compared to the last three months ended August 31, 2018.

 

During the three months ended August 31, 2018, other expense decreased by $783 or 75.7%.

 

 -3- 

Liquidity and Capital Resources

  

For the Three Months Ended August 31, 2018 and 2017

 

The following table provides detailed information about our net cash flows:

 

  

For the
Three Months

Ended
August 31,
2018

  For the
Three Months Ended
August 31,
2017
Cash Flows      
Net cash used in operating activities  $(86,634)  $(198,125)
Net cash used in investing activities   —      (468)
Net cash provided by financing activities   —      150 
Net change in cash  $(86,634)  $(198,443)

 

We are an emerging growth company and currently engaged in our initial product sales and development. We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during fiscal year 2018. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Operating Activities

 

For the Three Months Ended August 31, 2018 and 2017

 

Cash used in operating activities for the three months ended August 31, 2018 consisted of net loss as well as the effect of changes in operating assets and liabilities as well as adjustments to reconcile net to loss to net cash used in operating activities. Cash used in operating activities of $(86,634) consisted of a net loss of $(93,304). The net loss was partially offset by reconciliation of depreciation of $913, inventory obsolescence of $636, offset by net changes in operating assets and liabilities of $5,121 primarily from an increase in inventory, advances to suppliers and increase in accounts payable and accrued expenses and customer deposits.

 

Cash used in operating activities for the three months ended August 31, 2017 consisted of net loss as well as the effect of changes in operating assets and liabilities as well as adjustments to reconcile net to loss to net cash used in operating activities. Cash used in operating activities of $(198,125) consisted of a net loss of $(126,729). The net loss was partially offset by reconciliation of depreciation of $596, bad debts of $1,540, stock based compensation of $27,396 offset by the net changes in operating assets and liabilities of $100,928 primarily due to a decrease in inventory, decrease in accounts payable and accrued expenses and customer deposits.

 

Investing Activities

 

For the Three Months Ended August 31, 2018 and 2017

 

For the Three Months Ended August 31, 2018 and 2017 we derived cash flow from investing activities of $0 and $(468), respectively.

 

 -4- 

Financing Activities 

 

For the Three Months Ended August 31, 2018 and 2017

 

For the three months ended August 31, 2018 net cash provided by financing activities was $0.

 

We currently have no external sources of liquidity, such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.

 

We are dependent on our product sales to fund our operations and may require the sale of additional common stock to maintain operations. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees.

 

If we are unable to raise the funds required to fund our operations, we will seek alternative financing through other means, such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures as of August 31, 2018. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2018, the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the fiscal quarter ended August 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 -5- 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company we are not required to provide risk factors. Please refer to our registration statement under Form S-1 for more information regarding risks related to the securities of the Company.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

(a) Not applicable.

 

(b) During the quarter ended August 31, 2018, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.



 -6- 

ITEM 6. EXHIBITS

 

            Incorporated by reference
Exhibit       Filed        Period       Filing
Number   Exhibit Description   herewith   Form   Ending   Exhibit   date
3.1   Articles of Incorporation filed with the state of Delaware on May 21, 2015       S-1   05/31/2017    3.1   10/6/2017
3.2   Bylaws       S-1   05/31/2017   3.2   10/6/2017
3.3   Certificate of Amendment filed in the state of Delaware on June 9, 2015       S-1   05/31/2017   4.2   10/6/2017
10.1   Contribution Agreement between Reviv3 Procare, LLC and Reviv3 Procare Company, dated June 1, 2015       S-1   05/31/2017    10.1   10/6/2017
10.2   Lease Agreement between Riviv3 Procare Company and the Realty Association Fund VIII, L.P. dated September 28, 2016       S-1/A   5/31/2017   10.2   11/17/2017
31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   X       08/31/2018        
31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   X       08/31/2018        
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   X       08/31/2018        
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    X         08/31/2018        
101.INS   XBRL Instance   X       08/31/2018        
101.SCH   XBRL Taxonomy Extension Schema   X       08/31/2018        
101.CAL   XBRL Taxonomy Extension Calculation   X       08/31/2018        
101.DEF   XBRL Taxonomy Extension Definition   X       08/31/2018        
101.LAB   XBRL Taxonomy Extension Labels   X       08/31/2018        
101.PRE   XBRL Taxonomy Extension Presentation   X       08/31/2018        

 

 -7- 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Reviv3 Procare Company
     
Date: October 11, 2018 By: /s/ Jeff Toghraie
    Jeff Toghraie
    Chief Executive Officer and
Chief Financial Officer
(principal executive officer,
principal accounting officer and
principal financial officer)

 

 -8-