UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
FOR
THE FISCAL YEAR ENDED
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code)
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:
YES ☐
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.
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 (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | 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 Act). YES ☐
As
of November 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the
aggregate market value of the voting and non-voting common equity held by non-affiliates was $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Shares Outstanding | ||||
| Title of Class | May 31, 2021 | |||
| Common Stock | ||||
Documents incorporated by reference: None
Table of Contents
Cautionary Note Regarding Forward-Looking Information
This Report on Form 10-K, in particular Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; and the economy in general or the future of the beauty and hair care industry, all of which were subject to various risks and uncertainties.
There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: the duration of the COVID-19 pandemic and its effect on our business operations, financial results and financial position and on the industries in which we operate and the global economy generally; other downturns in the business cycle or the economy; our ability to achieve all anticipated benefits from our restructuring, simplification and modernization initiatives; risks related to our operations and international markets, such as fluctuations in currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; our ability to protect and defend our intellectual property; continuity and security of information technology infrastructure; competition; our ability to retain our management and employees; demands on management resources; availability and cost of the raw materials we use to manufacture our products; additional tax expenses or exposures; product liability claims; integrating acquisitions and achieving the expected savings and synergies; global or regional catastrophic events; demand for and market acceptance of our products; business divestitures; labor relations; and implementation of environmental remediation matters.
When used in this Report on Form 10- K and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, presentations to securities analysts or investors, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Report on Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors.
We do not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in this annual report. In this Form 10-K, Reviv3 Procare Company (“Reviv3 Procare”) has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
Reviv3 Procare 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 trademark products for distribution throughout the United States, Canada, Europe and Asia pursuant to the terms of 12 exclusive distribution agreements with various parties throughout our targeted markets. Our manufacturing operations are outsourced and fulfilled through our co-packers and manufacturing partners. Currently, we produce 7 products with 16 separate stock keeping units (“SKUs”) and plan to expand our product lines over the next 12 months.
The personal care product industry boasts roughly 750 companies that generate a combined annual revenue of more than $40 billion. The 50 largest companies comprise almost 70% of the entire revenue. Still, we believe the market will bear competition from small companies able to offer specialized products or cater to particular niche markets.
Makeup, deodorant and nail products comprise 33% of health and beauty care industry revenue. Hair care products generate 25% of personal care product revenue, while creams and lotions comprise 21%. Perfumes, mouthwashes, shaving preparations and other products make up the remaining revenue for beauty skin care product revenues.
Reviv3 Procare stands for skin health and benefits of healthy scalp and hair follicles. Currently, we sell our hair and skincare products under the Reviv3 Procare brand which includes 7 distinct products. Our Reviv3 System is a series of products which are meant to be used together or on a stand-alone basis. The hair care products consist of PREP shampoo, PRIME conditioner, and TREAT maintenance care. We also sell an introductory kit which includes all three Reviv3 System products. In addition, we have products dedicated to hair treatment and repair. Currently we have 3 products in our treatment and repair line. BOOST is designed to deliver nutrients and increase circulation to the scalp, MEND Deep Hair Repair Mask for added moisture and PROTECT, a heat protectant product to prevent damage from irons and dryers. We also have a stand-alone Thickening Spray for giving hair more volume and body.
Recent additions to our product lines are our series of baby care products. We’ve recently created a baby shampoo, lotion and body wash which will be sold directly to consumers under the brand LANU. We plan to initiate the marketing of the LANU line in the current fiscal year.
Competition
Hair care and cosmetics markets are highly competitive and there are many companies offering similar products in the market today. We believe we are able to compete directly with these companies and products by offering quality products which will distinguish our performance and develop brand loyalty.
Top Brands/Market Leaders
| ● | Nioxin: https://www.nioxin.com |
| ● | PhytoWorx |
| ● | Keranique: https://keranique.com |
| ● | Ultrax Labs: https://ultraxlabs.com |
Large Names
| ● | Aveda Invati: http://www.aveda.com |
| ● | Propecia (Merck & Co.) http://www.merck.com |
| ● | Bosley: https://www.bosley.com |
| ● | Dr. Reddy’s Laboratories – Mintop: http://www.mintop.in |
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Other Competitors
| ● | Lipogaine: http://www.lipogaine.com |
| ● | Mediceutical Labs: http://www.mediceuticallabs.com |
| ● | Just Natural: http://www.justnaturalskincare.com |
| ● | Revita: https://www.dslaboratories.com |
| ● | Majestic Pure: https://majesticpure.com |
| ● | Zenagen: http://www.zenagen.com |
| ● | Kevin Murphy: http://kevinmurphy.com.au |
| ● | PURA D’OR https://www.purador.com |
| ● | Procerin FoliRevita Kroning’s Signature Neugaine Hairgenics |
Patents and Trademarks
We currently hold four trademarks properly registered in their respective jurisdiction. Specifically, we hold a trademark for “Reviv3 Procare” issued on November 1, 2016 as well as trademark for our logo that was registered on October 20, 2015. We also have our original logo trademarked for the Reviv3 Procare brand registered on March 17, 2015. In addition, we have registered the name “Reviv3 Procare” in the Russian Federation, issued on June 13, 2017. On March 26, 2019, we filed an application for trademark “LANU” for our new product line, which was registered on May 5, 2020.
We do not have any additional trademarks, but as we establish new product lines, we will immediately file for trademark protection. Our formulas are proprietary, but we have not yet taken steps to establish a patent for our processes, formulations or products.
Governmental Regulation
Currently there are no governmental regulations which affect our operations.
Customers
The beauty industry is known to be resilient during economic downturns - even faring well during the Great Recession of 2008. Though consumers tend to be more price conscious during those times, they do not stop spending. In today’s environment of rising per capita incomes, the beauty business continues to be booming.
The global hair care market size is projected to reach $111.98 billion by 2026, exhibiting a compound annual growth rate (“CAGR”) of 5.2% during the forecast period. Rising incidence of hair problems in urban areas is expected to be the central growth driver for the hair maintenance market, finds Fortune Business Insights™ in its recent report, titled “Hair Care Market Size, Share & Industry Analysis, By Products (Hair Colorants, Shampoo, Conditioner, Hair Oil, and Others), By Distribution Channel (Supermarket/ Hypermarkets, Specialty Stores, Online Stores, and Others), and Regional Forecast, 2019 – 2026”. Urban spaces are a hotbed for pollution and extreme weather changes, which has led to long-term health hazards for humans and for the environment. Compounding to this is the expanding number of people in the working age group of 15 to 60 years, which has raised the overall stress quotient in big cities. A study published in the Journal of Clinical and Diagnostic Research in 2018 revealed that 60.3% of the working-class males reported that they are suffering from a hair loss problem, while 17.1% said that have a dandruff problem. Thus, growing prevalence of hair-related issues is emerging as one of the leading hair care market trends. The report states that the value of this market stood at $75.33 billion in 2018.
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Market and Revenue Generation
Reviv3 Procare is focused on expanding its business-to-business salon sales through its network of domestic and international distributors. We are also continuing our focus on direct-to-consumer marketing programs through our own ecommerce site and various third-party online platforms. In addition, we are exploring other revenue channels such as co-branding and private-label manufacturing.
Employees
We currently have six (6) full time employees, including our officers and a director. There are no formal employment agreements in place. We have currently engaged seven (7) individuals as outside consultants for sales, marketing and design. No formal agreements are in place.
Seasonality and Cyclical Nature of our Business
We do not believe our business is subject to substantial seasonal fluctuations. We may experience lower sales in difficult economic scenarios, but we do not foresee the seasonality of our products to be a significant factor. In the future, seasonality trends could however have a material impact on our financial condition and results of operations, but we are not currently aware of the total impact that could affect our business.
Impact of COVID-19
During the year ended May 31, 2020, the effects of a new coronavirus (“COVID-19”) and related actions to attempt to control its spread began to impact our business. The impact of COVID-19 on our operating results for the year ended May 31, 2021, was limited, in all material respects, due to the government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.
The occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our future operations. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Governments around the world have mandated, and continue to introduce, orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.
Our Office
Our principal executive office is located at 9480 Telstar Avenue, El Monte, CA 91731. Our telephone number is (888) 638-8883.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 2. PROPERTIES.
We currently lease approximately 7,200 square feet of office and warehouse space at 9480 Telstar Avenue., Unit 5, El Monte, CA 91731 as our principal offices. We lease our offices pursuant to a written lease dated in September 2019. The term of our lease is from December 1, 2019 and expires on December 31, 2022. Our current monthly base rent is $7,852. We believe these facilities are in good condition and satisfy our operational requirements. We intend to seek additional leased space, which will include some warehouse facilities, as our business efforts increase.
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ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
On November 23, 2020, the Company was served a copy of a complaint filed by Jacksonfill, LLC in the Fourth Circuit Court for Duval County,
Florida. The complaint alleges breach of Agreement for non-payments for certain products against the Company. The allegations arise from
alleged discrepancies discovered by the Company in the manufacturing of certain product. The Company has retained counsel and intends
to vigorously defend the allegations.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There is no “established trading market” for shares of the Company’s common stock. As of May 31, 2021, the Company’s common stock was quoted on the OTC Link LLC operated by OTC Markets Group, Inc. under the symbol “RVIV.” No assurance can be given that any “established trading market” for the Company’s common stock will develop or be maintained. Our common stock was first quoted in the first calendar quarter of 2019. There are no outstanding options or warrants to purchase, or securities convertible into our common stock.
The range of high and low closing bid quotations for the Company’s common stock during each quarter of the calendar years ended May 31, 2021, and 2020, is shown below, as quoted by http://finance.yahoo.com. Prices are inter-dealer quotations, without retail mark-up, markdown or commissions and may not represent actual transactions.
Stock Quotations
| Quarter Ended | High | Low | ||||||
| August 31, 2019 | 0.65 | 0.65 | ||||||
| November 30, 2019 | 0.73 | 0.42 | ||||||
| February 29, 2020 | 0.59 | 0.15 | ||||||
| May 31, 2020 | 0.38 | 0.10 | ||||||
| August 31, 2020 | 0.10 | 0.10 | ||||||
| November 30, 2020 | 0.16 | 0.16 | ||||||
| February 28, 2021 | 0.60 | 0.48 | ||||||
| May 31, 2021 | 0.33 | 0.26 | ||||||
The future sale of the Company’s presently outstanding “unregistered” and “restricted” common stock by present members of management and persons who own more than five percent of the Company’s outstanding voting securities may have an adverse effect on any “established trading market” that may develop in the shares of the Company’s common stock.
Securities outstanding and holders of record
On May 31, 2021, the total common shares issued and outstanding were 41,945,881, and we had 93 shareholders of record of our common stock.
Dividend Policy
We have never paid any cash dividends on our common stock. We anticipate that we will retain funds and future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors that our Board of Directors deems relevant. There are no dividend restrictions that limit our ability to pay cash dividends on our common stock in our Articles of Incorporation or Bylaws.
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Penny stock regulations and restrictions on marketability
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws, (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price, (d) contains a toll-free telephone number for inquiries on disciplinary actions, (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks, and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock, (b) the compensation of the broker-dealer and its salesperson in the transaction, (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock, and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling their shares of our common stock.
Securities authorized for issuance under equity compensation plans
We have not adopted any equity compensation plans and accordingly, we have not authorized any shares for issuance under an equity compensation plan.
Stock Transfer Agent
West Coast Stock Transfer
721 N. Vulcan Ave. Ste. 106
Encinitas, CA 92024.
(619) 664-4780
www.westcoaststocktransfer.com
Recent Sales of Unregistered Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our financial statements and the notes thereto included in this Report beginning on page F-1. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
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Significant Accounting Policies
Our discussion and analysis of our results of operations, liquidity and capital resources are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations and classifications, the useful life of property and equipment, the valuation of lease liabilities and related right of use assets, the valuation of deferred tax assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position. We believe that the following significant accounting policies and assumptions may involve a higher degree of judgment and complexity than others.
Emerging Growth Company
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| · | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; |
| · | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); |
| · | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and |
| · | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Results of Operations
For the years ended May 31, 2021 and 2020
Our results of operations are summarized below.
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | |||||||
| Net sales | $ | 1,633,609 | $ | 1,012,711 | ||||
| Cost of sales | $ | 599,701 | $ | 480,778 | ||||
| Gross profit | $ | 1,033,908 | $ | 531,933 | ||||
| Total operating expenses | $ | 1,354,962 | $ | 703,052 | ||||
| Loss from operations | $ | (321,054 | ) | $ | (171,119 | ) | ||
| Net loss | $ | (297,755 | ) | $ | (172,767 | ) | ||
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Net sales increased by $620,898 or 61.3% for the year ended May 31, 2021, as compared to the year ended May 31, 2020, primarily due to the increase in our direct sales to consumer segment.
Cost of sales includes primarily the cost of products and freight-in costs. For the year ended May 31, 2021, the overall cost of sales increased by $118,923 or 24.7%, as compared to the comparable period in 2020. Cost of sales as a percentage of net revenues for the year ended May 31, 2021 was 36.7% as compared to 47.5% for the comparable period in 2020. The overall decrease in cost of sales, as a percentage of sales, is primarily attributable to the Company’s increased efficiencies in procurement and manufacturing systems, and reduction in product cost.
Gross profit, as a percentage of sales, for the years ended May 31, 2021 and 2020 was 63.3% and 52.5%, respectively. The increase in gross profit, as a percentage of sales, is primarily attributable to our continued increased focus on the direct sales to consumer channels, which have higher margins, during the year ended May 31, 2021 as compared to the same comparable period in 2020.
Operating expenses for the years ended May 31, 2021 and 2020 were $1,354,962 and $703,052, respectively. 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 as a percentage of net revenues for the year ended May 31, 2021 were 82.9% as compared to 69.4% for the comparable period in 2020. Operating expenses increased by $651,910 or 92.7% primarily due to an increase in advertising and marketing expenses by $542,235 for displaying our products through our advertising platforms, increased delivery charges and cost of independent marketing contractors; and an increase in professional and consulting services by $107,420 primarily due to an increase in stock-based fees in the year ended May 31, 2021 whereas there was no such cost in the year ended May 31, 2020. Other than an increase in advertising and consulting costs, which were aimed at procuring more customers, the other operating expenses were fairly consistent.
Liquidity and Capital Resources
For the Years ended May 31, 2021 and 2020
The following table provides detailed information about our net cash flows:
For the Ended | For the Ended | |||||||
| Cash Flows | ||||||||
| Net cash provided by (used in) operating activities | $ | 48,407 | $ | (89,704 | ) | |||
| Net cash used in investing activities | (15,408 | ) | (9,230 | ) | ||||
| Net cash provided by financing activities | 54,907 | 161,786 | ||||||
| Net change in cash | $ | 87,906 | $ | 62,852 | ||||
We are an emerging growth company and currently engaged in our 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 2022. 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 Years ended May 31, 2021 and 2020
Net cash provided by operating activities for the year ended May 31, 2021 was $48,407, attributable to a net loss of $297,755 offset by non-cash items such as depreciation expense of $9,969, bad debts of $1,061, inventory write-off of $19,156, stock-based compensation of $138,800, non-cash lease expense of $1,713 and increase in non-cash gain on debt settlement of $29,333. The net loss was offset by a net increase in operating assets and liabilities of $204,797 primarily due to increase in accounts payable and collection of receivables offset by an increase in inventory purchases and decrease in customer deposits.
Net cash used in operating activities for the year ended May 31, 2020 was $89,704, attributable to a net loss of $172,767 offset by depreciation expense of $10,456, bad debts recovery of $959, intangibles write-off of $474, non-cash lease expense of $1,713, and a net increase in operating assets and liabilities of $71,379 primarily due to increase in accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses, and customer deposits.
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Investing Activities
For the Years ended May 31, 2021 and 2020
Net cash used in investing activities for the year ended May 31, 2021 was $15,408 primarily due to the purchase of property and equipment of $15,408.
Net cash used in investing activities for the year ended May 31, 2020 was $9,230 primarily due to the purchase of property and equipment of $9,230.
Financing Activities
For the Years ended May 31, 2021 and 2020
Net cash provided by financing activities for the year ended May 31, 2021 was $54,907 primarily attributable to the cash proceeds of $6,300 of loans received from US Small Business Administration pursuant to the Payroll Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act”), advances received from a related party of $51,907, and repayment of equipment financing of $3,300.
Net cash provided by financing activities for the year ended May 31, 2021 was $161,786 primarily attributable to the cash proceeds of $12,900 of loans received from US Small Business Administration pursuant to the Payroll Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act”), a loan of $150,000 received from the US Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the CARES Act, advances received from a related party of $2,186, and repayment of equipment financing of $3,300.
We currently have no external sources of liquidity or credit arrangements with financial institutions 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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Please see our Financial Statements and Exhibits under Item 15 below.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosures from the inception of our Company through the date of this Form 10-K. Salberg & Company, P.A., our independent registered public accounting firm, has audited our financial statements for the fiscal years ended May 31, 2021, and 2020, respectively.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to material weaknesses in our internal controls described below.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our management assessed the effectiveness of our internal control over financial reporting as of May 31, 2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework issued in 2013. Based on our assessment, we believe that as of May 31, 2021, our internal control over financial reporting was not effective based on those criteria.
Management’s assessment identified several material weaknesses in our internal control over financial reporting. These material weaknesses include the following:
| - | Insufficient number of qualified accounting personnel governing the financial close and reporting process |
| - | Lack of independent directors |
| - | Lack of proper segregation of duties |
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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the fourth fiscal quarter ended May 31, 2021, which have effected, or are reasonably likely to effect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Officers and Directors
Our officers are elected by the board of directors to a term of one year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
The names, ages and positions of our present officers and directors are set forth below:
| NAME | AGE | POSITION | ||||
| Jeff Toghraie | 54 | Chief Executive Officer and Chairman | ||||
| Christopher Go | 48 | Interim Chief Financial Officer and Secretary | ||||
| Jeff Brown | 39 | Chief Operating Officer | ||||
| Donald Starace | 67 | President | ||||
| Nancy Hundt | 53 | Director | ||||
Background of officers and directors
Jeff Toghraie – Chairman of the Board of Directors, Chief Executive Officer
Jeff Toghraie has been the Chairman of our board since 2015 and our Chief Executive Officer since 2016. Mr. Toghraie is currently the Managing Director of Intrepid Global Advisors, one of our principal shareholders. Mr. Toghraie joined Intrepid Global Advisors in 2010 and is a principal of that firm. During the past 5 years, Mr. Toghraie has been involved with various privately held development stage companies as a director and/or in advisory positions. Mr. Toghraie was chosen as a director due to his experience with and knowledge of the Company and its operations, his background in working with development stage companies and his general business background.
Jeff Brown – Chief Operating Officer
Jeff Brown, our Chief Operating Officer, joined the Company in March of 2017. From 2015 to 2017, Mr. Brown held consulting positions at Polar Solar Inc., a company responsible for making commercial solar panels available to the residential market and Mind Fitness Lab, a technology company that developed and distributed mobile applications for mental health professionals. From 2012 to 2015, he was the President of RNA Pro, a company that distributed agricultural supplements. Mr. Brown holds an MBA from Pepperdine University and received his bachelor’s degree from University of California, Irvine.
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Christopher Go – Interim Chief Financial Officer and Secretary
Christopher Go has served as our interim Chief Financial Officer since April 9, 2019 and Corporate Secretary since 2015. From 2009-2012, Mr. Go was the Vice-President of Operations for TEN Media, a funded food safety & traceability platform involving Walmart, Safeway, Cal-Marine, Dutch Farms, USDA, FDA & Yucaipa Companies. From 1996-1998, Mr. Go was staff architect for WAT&G.
Donald Starace – President
Mr. Starace has been the President of Reviv3 since February 2015. Mr. Starace has over forty years of dedicated service in the beauty industry. Mr. Starace started his career in some of New York’s most prestigious salons, followed by ten years at Nioxin Research Labs and subsequently Proctor & Gamble in Sales and Education. Mr. Starace owned and operated various businesses through his career including roles in starting the Bank of New Jersey, which currently holds 10 locations, and has assets over $865 million. He was one of the initial investors for the bank and was very influential in raising capital. He also facilitated bringing Taiff (Brazil) professional appliances to the hair industry in the U.S. and Canada. Mr. Starace most recently was appointed as a member of the Board of Adjustments for the Borough of Fort Lee, New Jersey.
Nancy Hundt – Director
Nancy Hundt has served as a director of Reviv3 Procare since May of 2015. Ms. Hundt has a diverse background in the retail industry and has served as a representative of the American Board of Opticianry, an optical industry retail group. Ms. Hundt serves as a consultant and a retail sales expert, and has served over the last five years as Chief Operating Officer of Academy Optical, Inc. Ms. Hundt was chosen as a director due to her relevant experience in retail sales and general business background.
Conflicts of Interest
We believe that our current officers and directors will not be subject to conflicts of interest. No policy has been implemented or will be implemented to address conflicts of interest.
Involvement in Certain Legal Proceedings
We are not aware of any pending or threatened legal proceedings in which the aforementioned individuals are involved.
During the past ten years, no member of our management team or board of directors have not been the subject of the following events:
| 1) | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2) | Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3) | The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
| i) | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ii) | Engaging in any type of business practice; or |
| iii) | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4) | The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
| 5) | Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
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| 6) | Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7) | Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| i) | Any Federal or State securities or commodities law or regulation; or |
| ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or |
| iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8) | Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Corporate Governance
Our directors, Jeff Toghraie and Nancy Hundt are not “independent directors” as the term is used in Item 7(d) (3) (iv) (B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a) (15) of the NASDAQ Marketplace Rules because they are employed by the company.
We do not have any standing audit, nominating and compensation committees of the board of directors, or committees performing similar functions. We do not currently have a Code of Ethics applicable to our principal executive, financial or accounting officer. All Board actions have been taken by Written Action rather than formal meetings.
Audit Committee and Audit Committee Financial Expert
We do not have an audit committee or an audit committee financial expert (as defined in Item 407 of Regulation S-K) serving on its board of directors. All current members of the board of directors lack sufficient financial expertise for overseeing financial reporting responsibilities. We have not yet employed an audit committee financial expert due to the inability to attract such a person. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive for the Company. Further, because we are expanding our commercial operations at the present time, we believe the services of a financial expert are not warranted.
We intend to establish an audit committee of the Board of Directors, which will consist of independent directors. The audit committee’s duties will be to recommend to our board of directors the engagement of an independent registered public accounting firm to audit our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee will at all times be composed exclusively of directors who are, in our opinion, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics was filed as Exhibit 14.1 on our Form S-1 Registration Statement as filed with the Securities and Exchange Commission on October 7, 2010.
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Disclosure Committee and Charter
We do not have a disclosure committee and disclosure committee charter. We plan to establish a Disclosure Committee and will operate under a charter. The purpose of a disclosure committee would be to provide assistance to the Principal Executive Officer and the Principal Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by us for the last two fiscal years ended May 31, 2021, and 2020, to our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named executive officers.
Summary Compensation Table
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Name and Principal Position [1] | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Totals ($) | |||||||||||||||||||||||||||
| Jeff Toghraie | 2021 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| 2020 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Jeff Brown | 2021 | 58,750 | — | — | — | — | — | — | 58,750 | |||||||||||||||||||||||||||
| 2020 | 50,000 | — | — | — | — | — | — | 50,000 | ||||||||||||||||||||||||||||
| Donald Starace | 2021 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| 2020 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Christopher Go | 2021 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| 2020 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
The following table sets forth the compensation paid by us to our directors for the fiscal year ending May 31, 2021. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named director.
Director Compensation Table
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
| Name | Fees
Earned or
Paid in
Cash
($) | Stock
Awards
($) | Option
Awards
($) | Non-Equity
Incentive Plan
Compensation ($) | Change in Pension
Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total
($) | |||||||||||||||||||||
| Jeff Toghraie | — | — | — | — | — | — | — | |||||||||||||||||||||
| Nancy Hundt | — | — | — | — | — | — | — |
All compensation received by our officers and directors has been disclosed.
We have/not paid any compensation to our directors in fiscal years 2021 and 2020.
There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors.
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Director Independence
None of directors are deemed independent as a matter of law.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance at this time.
Indemnification
Our Amended and Restated Certificate of Incorporation and our Bylaws, subject to certain provisions of Delaware Law, contain provisions which require or allow us to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the ownership, as of the date of this annual report, of our common stock by each person known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock, our directors, and our executive officers as a group. The persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within sixty (60) days through the conversion or exercise of any convertible security, warrant, option or other right. More than one (1) person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within sixty (60) days, by the sum of the number of shares outstanding as of such date. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.
Title of Class |
Name/Position |
Beneficial Ownership |
Percentage Of Class |
| Executive Beneficial Owners | |||
| Common | Jeff Toghraie/Chairman and CEO (1) | 8,914,000 | 21.33% |
| Common | Jeff Brown | 9,000 | 0.02% |
| Common | Christopher Go/Interim CFO, Secretary (2) | 1,025,709 | 2.46% |
| Common | Nancy Hundt (3) | 2,600,000 | 6.22% |
| All Officers and Directors | 12,548,709 | 30.03% | |
| Non-Executive Beneficial Owners | |||
| Common | Axon Capital Management, Inc. (4) | 2,455,000 | 5.88% |
| Common | Charter Capital Partners (5) | 3,600,000 | 8.62% |
| Common | Shircoo, Inc. (6) | 13,385,000 | 32.03% |
| All Non-Executive Beneficial Owners | 19,440,000 | 46.86% | |
| All Beneficial Owners | 31,998,709 | 77.10% | |
| (1) | Jeff Toghraie, our Chairman and CEO, is the sole beneficiary of Intrepid Global Advisors, which holds 8,914,000 shares of common capital stock of the Company. |
| (2) | Christopher Go, our interim CFO and Secretary, is the Managing Partner of Titan HG, LLC, which holds 1,025,709 shares of common capital stock of the Company. |
| (3) | Nancy Hundt holds the shares personally, residing at 31569 Lindero Canyon Rd., #3, Westlake Village, CA 91361 |
| (4) | Sam Toghraie who is the brother of Jeff Toghraie, our Chairman and CEO, is a partner at Axon Capital Management, Inc. Axon Capital Management, Inc. has offices at 5490 Whister Ct., Chino Hills, CA 91709 |
| (5) | Charter Capital Partners is managed by its Managing Partner, Parvan Riazi. Charter Capital Partners maintains offices at 1964 Laurel Wood Ct., Thousand Oaks, CA 91362 |
| (6) | Shircoo, Inc. is managed by Max Toghraie, its Managing Partner who is the brother of our Chairman and CEO, Jeff Toghraie. Shircoo, Inc. maintains offices at 2350 E. Allview Terrace, Los Angeles, CA 90068 |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Company’s Chief Executive Officer, from time to time, provided advances to the Company for working capital purposes. At May 31, 2021, and 2020, the Company had a payable to the officer of $54,304 and $2,396 respectively. These advances were short-term in nature and non-interest bearing.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees
All of the services provided and fees charged by Salberg & Company, P.A. (“Salberg”), were approved by our Board who also acted as the Audit Committee. The following table shows us the fees paid to Salberg, our principal accountant for the years ended May 31, 2021 and 2020 were:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | |||||||
| Audit fees (1) | $ | 44,200 | $ | 43,200 | ||||
| Audit related fees (2) | — | — | ||||||
| Tax fees | — | — | ||||||
| All other fees | — | — | ||||||
| Total | $ | 44,200 | $ | 43,200 | ||||
| (1) | Audit fees - these fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements. |
| (2) | Audit related fees - these fees relate to consulting services for filings on Form S-1. |
Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements
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REVIV3 PROCARE COMPANY
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
May 31, 2021 and 2020
CONTENTS
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
Reviv 3 Procare Company.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Reviv3 Procare Company, Inc. (the “Company”) as of May 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended May 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss of $297,755 for the fiscal year ended May 31, 2021. The Company has an accumulated deficit of $5,108,664 at May 31, 2021. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan regarding these matters is also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2017.
Boca Raton, Florida
August 30, 2021
2295
NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7328
Phone: (561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920
www.salbergco.com ● info@salbergco.com
Member National Association of Certified Valuation Analysts ● Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality
F-2
REVIV3
PROCARE COMPANY
BALANCE SHEETS
| May 31, | May 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| OTHER ASSETS: | ||||||||
| Inventory, non-current | ||||||||
| Property and equipment, net | ||||||||
| Deposits | ||||||||
| Right of use assets, net | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Customer deposits | ||||||||
| Due to related party | ||||||||
| Equipment payable, current | ||||||||
| Loans payable, current | ||||||||
| Lease liability, current | ||||||||
| Total Current Liabilities | ||||||||
| LONG TERM LIABILITIES: | ||||||||
| Equipment payable | ||||||||
| Loans payable | ||||||||
| Lease liability, non- current | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (see Note 10) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock, issued and issuable, $ par value: shares authorized; and shares issued and outstanding as of May 31, 2021 and 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to financial statements.
F-3
REVIV3
PROCARE COMPANY
STATEMENTS OF OPERATIONS
| For the Years Ended | ||||||||
| May 31, | May 31, | |||||||
| 2021 | 2020 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| OPERATING EXPENSES: | ||||||||
| Marketing and selling expenses | ||||||||
| Compensation and related taxes | ||||||||
| Professional and consulting expenses | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Gain on debt settlement | ||||||||
| Interest income | ||||||||
| Interest expense and other finance charges | ( | ) | ( | ) | ||||
| Other Income (Expense), Net | ( | ) | ||||||
| LOSS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER COMMON SHARE - Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||
| Basic and diluted | ||||||||
See accompanying notes to financial statements.
F-4
REVIV3
PROCARE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED MAY 31, 2021 AND 2020
| Common Stock | Total | |||||||||||||||||||||||||||
| Preferred Stock | Issued and Issuable | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, May 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss for the year ended May 31, 2020 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, May 31, 2020 | ( | ) | ||||||||||||||||||||||||||
| Shares issued for consulting | — | |||||||||||||||||||||||||||
| Shares issued for legal services | — | |||||||||||||||||||||||||||
| Shares to be issued for consulting | — | |||||||||||||||||||||||||||
| Net loss for the year ended May 31, 2021 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, May 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to financial statements.
F-5
REVIV3
PROCARE COMPANY
STATEMENTS OF CASH FLOWS
| For the Years Ended | ||||||||
| May 31, | May 31, | |||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Bad debts | ( | ) | ||||||
| Inventory obsolescence | ||||||||
| Stock based compensation | ||||||||
| Gain on debt forgiveness | ( | ) | ||||||
| Intangibles written off | ||||||||
| Non cash lease expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deposits | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Customer deposits | ( | ) | ||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan payable | ||||||||
| Repayment of equipment financing | ( | ) | ( | ) | ||||
| Advances from a related party | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH - Beginning of year | ||||||||
| CASH - End of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Initial recognition of right of use assets and lease liability | $ | $ | ||||||
See accompanying notes to financial statements.
F-6
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
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 financial statements for the years ended May 31, 2021 and 2020 have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Risk and Uncertainty Concerning COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the World. We are currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. All of our Chinese vendor facilities were temporarily closed for a period of time. Most of these facilities have been reopened since July 2020. Depending on the progression of the outbreak, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted globally. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress, it could have a material negative impact on our results of operations and cash flow, in addition to the impact on its employees. We have concluded that while it is reasonably possible that the virus could have a negative impact on the results of operations, the specific impact is not readily determinable as of the date of these financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company obtained two loans under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and one loan under the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). See Note- 8 Loans payable. Management is focused on growing the Company’s existing products offering, as well as its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot assure that it will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying financial statements.
Going Concern
As
reflected in the accompanying financial statements, the Company had a net loss of $
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 and classifications, the useful life of property and equipment, the valuation of lease liabilities and related right of use assets, the valuation of deferred tax assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances.
F-7
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Cash and cash equivalents
The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation.
Accounts receivable and allowance for doubtful accounts
The Company has a policy of providing 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 $
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. The Company continuously evaluates the levels of inventory held and any inventory held above the expected level of sales in the next twelve months, is classified as non- current inventory.
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
The Company follows 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.
F-8
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
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 in revenues. See Note 12 for revenue disaggregation disclosures.
Cost of Sales
The primary components of cost of sales include the cost of the product and 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 $
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.
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.
F-9
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
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. The Company recorded impairment loss of $474 as an operating expense in the accompanying financial statements, during the year ended May 31, 2020. The Company did not record any impairment loss during the year ended May 31, 2021.
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.
Pursuant to ASC Topic 505-50, “Equity Based Payments to Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the measurement date. The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
F-10
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
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 May 31, 2021 and 2020, the Company had no potentially dilutive securities outstanding.
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02), which requires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance (ASC Topic 840). Under the new guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For finance leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2019.
The Company renewed lease for its corporate headquarters commencing December 1, 2019, under lease agreements classified as an operating lease. Please see Note 10 – ‘Commitments and Contingencies’ under “Leases” below for more information about the Company’s leases.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer must be separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal year beginning on June 1, 2024. Early adoption is permitted, subject to certain limitations. The Company is evaluating the potential impact of adoption on its financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-based Consideration Payable to a Customer (“ASU 2019-08”). ASU 2019-08 requires that an entity apply the guidance in ASC 718 to measure and classify share-based payment awards granted to a customer. Under ASC 718, among other things, share-based awards to non-employees must generally be measured at the grant-date fair value of the equity instrument. For entities that have adopted the provisions of ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-based Payment Accounting, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As discussed above, the Company has adopted the provisions of ASU 2018-07. The Company adopted ASU 2019-08 but, the adoption had no impact on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires than an entity recognize a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, and (d) requires than an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation for the interim period that includes the enactment date. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company will adopt ASU 2019-12 effective June 1, 2021 and based on its preliminary evaluation it does not believe adoption will have a material impact on its financial statements.
F-11
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements about fair value measurements under ASC Topic No. 820, Fair Value Measurement, as amended (“ASC 820”). For public companies, ASU 2018-13 removes the prior requirement to disclose: (a) the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC 820, (b) the policy for timing of transfers between levels, and (c) the valuation processes used for level 3 fair value measurements. For public companies, ASU 2018-13 also adds, among other things, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The Company adopted the provisions of ASU 2018-13 effective March 1, 2020 and such adoption did not have a material impact 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:
| May 31, 2021 | May 31, 2020 | |||||||
| Accounts Receivable | $ | $ | ||||||
| Less: Allowance for doubtful debts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The
Company recorded bad debt expense of $
Note 4 – Inventory
Inventory consisted of the following:
| May 31, 2021 | May 31, 2020 | |||||||
| Finished Goods | $ | $ | ||||||
| Raw Materials | $ | $ | ||||||
| $ | $ | |||||||
| Less: Inventory, non-current | $ | ( | ) | $ | ||||
| Current Inventory | $ | $ | ||||||
At
May 31, 2021 and 2020, inventory held at third party locations amounted to $
During
the year ended May 31, 2021, the Company wrote off inventory amounting to $4,558 and created an allowance of $
Note 5 – Property and Equipment
Property and equipment, stated at cost, consisted of the following:
| Estimated Life | May 31, 2021 | May 31, 2020 | ||||||||
| Furniture and Fixtures | 5 years | $ | $ | |||||||
| Computer Equipment | 3 years | |||||||||
| Plant Equipment | 5-10 years | |||||||||
| Less:Accumulated Depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Depreciation
expense amounted to $
F-12
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 6 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses comprised of the following:
| May 31, 2021 | May 31, 2020 | |||||||
| Trade Payables | $ | $ | ||||||
| Credit Cards | ||||||||
| Shares to be issued | ||||||||
| Other | ||||||||
| $ | $ | |||||||
During the year ended May 31, 2020, the Company recorded $18,313 as expense and liability for fair market value of shares to be issued to a consultant as remuneration, in the accompanying financials. During the year ended May 31, 2021, the Company entered into a settlement agreement with the consultant and paid him $2,000 as full and final settlement. The gain of $16,313 was recorded in gain on debt settlement, in the accompanying financial statements.
Note 7 – Equipment Payable
During
the year ended May 31, 2019, the Company purchased a forklift under an installment purchase plan. The loan amount is $16,500 payable
in 60 monthly installment payments of $317 comprising of principal payment of $275 and interest payment of $42. As at May 31, 2021
and 2020, the balance outstanding on the loan was $
The amounts of loan payments due in the next five years ended May 31, are as follows:
| Total | ||||
| 2022 | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
| $ | ||||
Note 8 – Loans Payable
During the year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $12,900, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan was evidenced by a note dated May 8, 2020, bore interest at an annual rate of 1.0% and matured on May 8, 2022. The Note may be prepaid without penalty, at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company intends to use the loan proceeds for qualifying expenses. The Company’s borrowings under the Loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,” as defined in the CARES Act, except that the amount of loan forgiveness is limited to the amount of qualifying expenses incurred during the 8-week period commencing on the loan effective date. In addition, the amount of any loan forgiveness may be reduced if there is a decrease in the average number of full-time equivalent employees of the Company during the covered period, compared to the comparable period in the prior calendar year. The Company’s indebtedness, after any such loan forgiveness, is payable in 18 equal monthly installments commencing on November 8, 2020, with all amounts due and payable by the maturity. The Company did not pay any installment of the loan and recorded an accrued interest of $120 on the loan during the year ended May 31, 2021. On March 19, 2021 the loan was forgiven by the US Small Business Administration and the Company recorded a gain on debt forgiveness of $13,020 in the accompanying financials for the forgiveness of principal amount of $12,900 and accrued interest of $120.
F-13
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 8 – Loans Payable (continued)
During the year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $150,000, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is payable installments of $731 per month, beginning May 18, 2021 until May 13, 2050. The Company has to maintain a hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company intends to use the loan proceeds for qualifying expenses. The Company’s borrowings under the loan may be eligible for up to $10,000 of loan forgiveness. The Company recorded an accrued interest of $5,723 and $200, as of May 31, 2021 and 2020, respectively. The Company has not paid any installment of the loan as of May 31, 2021.
On February 7, 2021, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $6,300, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Second Draw Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated February 7, 2021, bears interest at an annual rate of 1.0% and matures on February 6, 2026. The Note may be prepaid without penalty, at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company intends to use the loan proceeds for qualifying expenses. The Company’s borrowings under the Loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,” as defined in the CARES Act. The Company’s indebtedness, after any such loan forgiveness, is payable in 54 equal monthly installments commencing on September 7, 2021, with all amounts due and payable by the maturity.
| Loans Payable as of May 31, 2021 and 2020 | ||||||||
| 2021 | 2020 | |||||||
| Paycheck Protection Program (PPP) | $ | $ | ||||||
| Second Draw Paycheck Protection Program (PPP- 2) | ||||||||
| Economic Injury Disaster Loan Program (EIDL) | ||||||||
| Total | $ | $ | ||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
The amounts of loan payments due in the next five years ended May 31, are as follows:
| Total | ||||
| 2022 | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| Thereafter | $ | |||
| $ | ||||
Note 9 – Stockholders’ Equity
Shares Authorized
The authorized capital of the Company consists of shares of common stock, par value $ per share and shares of preferred stock, par value $ per share.
F-14
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 9 – Stockholders’ Equity (continued)
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
As of May 31, 2021, shares of common stock were issued and outstanding.
During the year ended May 31, 2021, in July 2020, the Company issued 200,000 shares to a consultant for past services. The shares were valued at the fair market value of $16,000, based on the quoted trading price on grant date of $0.08 per share, which expense was recognized immediately.
During the year ended May 31, 2021, the Company issued 240,000 shares to a consultant for investor relation services under an initial three months agreement. The shares were valued at the fair market value of $50,400, based on the quoted trading price on grant date of $0.21 per share, which expense was recognized over the term of the three months period. The agreement automatically renews on a month-to-month basis. The Company also recorded shares to be issued of $47,200 for the fair value of 160,000 shares to be issued to the same consultant for investor relation services performed through May 31, 2021, based on the quoted trading price on each grant date of $0.29 and $0.30 per share.
During the year ended May 31, 2021, the Company recorded $25,200 for 60,000 shares issued to an attorney for past services. The shares were valued at the fair market value, based on the quoted trading price on grant date of $0.42 per share, which expense was recognized immediately.
No stock was issued during the year ended May 31, 2020.
Note 10 – Commitments and Contingencies
Leases
As
discussed in Note 2 above, the Company adopted ASU No. 2016-02, Leases on June 1, 2019, which require lessees to report
on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating
leases under the prior guidance.
The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.
F-15
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 10 – Commitments and Contingencies (continued)
The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a remeasurement of lease liabilities. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.
Pursuant to the new standard, the Company recorded an initial lease liability of $235,748 and an initial right of use asset in the same amount. During the years ended May 31, 2021 and 2020, the Company recorded a lease expense in the amount of $94,235 and $87,748, respectively. As of May 31, 2021, the lease liability balance was $131,801 and the right of use asset balance was $128,375. A lease term of three years and a discount rate of 12% was used.
Supplemental balance sheet information related to leases was as follows:
| Assets | May 31, 2021 | |||
| Right of use assets | $ | |||
| Accumulated reduction | ( | ) | ||
| Operating lease assets, net | $ | |||
| Liabilities | ||||
| Lease liability | $ | |||
| Accumulated reduction | ( | ) | ||
| Total lease liability, net | ||||
| Current portion | ( | ) | ||
| Non-current portion | ||||
Maturities of operating lease liabilities were as follows as of May 31, 2021:
| Operating Lease | ||||
| 2022 | $ | |||
| 2023 | $ | |||
| Total | $ | |||
| Less: Imputed interest | $ | ( | ) | |
| Present value of lease liabilities | $ |
Rent expense, prior to the signing of the new lease agreement, amounted to $47,547 for the year ended May 31, 2020. Lease expense amounted to $94,235 and $47,117 for the years ended May 31, 2021 and 2020, respectively.
Contingencies
On November 23, 2020, the Company was served a copy of a complaint filed by Jacksonfill, LLC in the Fourth Circuit Court for Duval County, Florida. The complaint alleges breach of Agreement for non-payments for certain products against the Company. The allegations arise from alleged discrepancies discovered by the Company in the manufacturing of certain product. The Company has retained counsel and intends to vigorously defend the allegations. The product was delivered to the Company. However, the Company believes that the product was defective. The amount of the claim of $204,182 has been recorded as accounts payable, in the accompanying financial statements as of May 31, 2021.
F-16
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 11 – Related Party Transactions
The
Company’s Chief Executive Officer, from time to time, provided advances to the Company for working capital purposes. At
May 31, 2021 and 2020, the Company had a payable to the officer of $
Note 12 – Concentrations
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable and cash
deposits, investments and cash equivalents instruments. The Company maintains its cash in bank deposits accounts. The Company’s
account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Concentration of Revenue, Product Line, and Supplier
During
the year ended May 31, 2021 sales to
During
the year ended May 31, 2021 sales to customers outside the United States represented approximately
During the year ended May 31, 2021, sales by product line which each represented over 10% of sales consisted of approximately 11% from sales of hair shampoo, 21% from sales of hair shampoo and conditioner and 38% from sale of introductory kit (shampoo, conditioner and treatment spray). During the year ended May 31, 2020, sales by product line which each represented over 10% of sales consisted of approximately 15% from sales of hair shampoo, 40% from sales of hair shampoo and conditioner, 10% from sale of moisturizer and conditioner and 16% from sale of introductory kit (shampoo, conditioner and treatment spray).
During the year ended May 31, sales by product line comprised of the following:
| For the Years ended | ||||
| Hair Care Products | May 31, 2021 | May 31, 2020 | ||
| Shampoos and Conditioners | ||||
| Ancillary Products | ||||
| Total | ||||
At
May 31, 2021, accounts receivable from
The
Company purchased inventories and products from
Note 13 – Income taxes
The
Company has incurred aggregate net operating losses of approximately $
F-17
REVIV3
PROCARE COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021 AND 2020
Note 13 – Income taxes (continued)
The items accounting for the difference between income taxes at the effective statutory rate and the provision for income were as follows:
| For the Year Ended May 31, | ||||||||
| 2021 | 2020 | |||||||
| Tax benefit computed at statutory rate of 21% | $ | ( | ) | $ | ( | ) | ||
| State tax benefit of 9% | ( | ) | ( | ) | ||||
| Change in federal tax rate estimate for prior years | ||||||||
| Non-deductible expenses: Stock-based compensation | ||||||||
| Non deductible expense: Other | ||||||||
| Non taxable: PPP Loan forgiveness gain | ( | ) | ||||||
| Increase (decrease) in valuation allowance | ( | ) | ||||||
| Net income tax benefit | $ | |||||||
The Company has a deferred tax asset which is summarized as follows at:
Deferred tax assets:
| May 31, 2021 | May 31, 2020 | |||||||
| Net operating loss carryover | $ | $ | ||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
The Company provided a valuation allowance equal to the deferred income tax asset at May 31, 2021 and 2020 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The increase (decrease) in the allowance was $41,211 in fiscal 2021 and $(23,023) in fiscal 2020.
Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.
The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2018, 2019 and 2020 Corporate Income Tax Returns are subject to Internal Revenue Service examination.
F-18
Exhibits
ITEM 16. Form 10-K Summary
Not Applicable.
-16-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this __th day of August 2021.
| REVIV3 PROCARE COMPANY | ||
| (the “Registrant”) | ||
| BY: | /s/Jeff Toghraie | |
| Jeff Toghraie | ||
| Chief Executive Officer (principal executive officer) | ||
| BY: | /s/Christopher Go | |
| Christopher Go | ||
Interim Chief Financial Officer and Secretary (principal accounting officer and principal financial officer) | ||
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date |
| /s/Jeff Toghraie | Chairman of the Board of Directors | August __, 2021 |
| Jeff Toghraie | ||
| /s/Nancy Hundt | Director | August __, 2021 |
| Nancy Hundt |
-17-
EXHIBIT INDEX
-18-