| Revision of Prior Period Financial Statements |
Note 2 – Revision of Prior Period
Financial Statements
The Company corrected certain errors in
its 2019 financial statements. In accordance with ASC 50-10-S99 and S55 (formerly Staff Accounting Bulletins (“SAB”)
No. 99 and No. 108), Accounting Changes and Error Corrections, the Company concluded that these errors were not, individually,
and in the aggregate, quantitatively or qualitatively, material to the financial statements in these periods.
On March 15, 2019, the Company acquired
AVX Design & Integration Inc. Upon further review, we noticed that some revenue recognized immediately after the acquisition
and before the financial statement reporting period were recognized prematurely. There were also some expense reclassifications
between expense items. Consequently, revenue was overstated by $88,855, cost of revenue was understated by $9,603, selling expenses
were overstated by $9,209, compensation – officers was understated by $3,325, professional fees was overstated by $4,875,
and general and administrative expenses was understated by $197. The Company had accounted for these errors correctly on the audited
year end financials.
The below discloses the effects of the
revisions on the financial statements for the period reported.
Condensed consolidated statement of operation
| |
|
Previously reported |
|
|
|
Revised |
| |
|
For the three months ended |
|
|
|
For the three months ended |
| |
|
3/31/2019 |
|
Adjustment |
|
3/31/2019 |
| Revenue |
|
$ |
239,738 |
|
|
$ |
(88,855 |
) |
|
$ |
150,883 |
|
| Revenue - related party |
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
| Total revenue |
|
|
242,738 |
|
|
|
(88,855 |
) |
|
|
153,883 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of Revenue |
|
|
122,128 |
|
|
|
9,603 |
|
|
|
131,731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
120,610 |
|
|
|
(98,458 |
) |
|
|
22,152 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operation Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling |
|
|
9,209 |
|
|
|
(9,209 |
) |
|
|
– |
|
| Compensation - officers |
|
|
31,675 |
|
|
|
3,325 |
|
|
|
35,000 |
|
| Research and development |
|
|
62,004 |
|
|
|
|
|
|
|
62,004 |
|
| Professional fees |
|
|
355,274 |
|
|
|
(4,875 |
) |
|
|
350,399 |
|
| General and administrative |
|
|
110,456 |
|
|
|
197 |
|
|
|
110,653 |
|
| Total Operating Expenses |
|
|
568,618 |
|
|
|
(10,562 |
) |
|
|
558,056 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(448,008 |
) |
|
|
(87,896 |
) |
|
|
(535,904 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
|
725 |
|
|
|
|
|
|
|
725 |
|
| Total other expense |
|
|
725 |
|
|
|
|
|
|
|
725 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(447,283 |
) |
|
|
(87,896 |
) |
|
|
(535,179 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Tax expense |
|
|
– |
|
|
|
|
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(447,283 |
) |
|
$ |
(87,896 |
) |
|
$ |
(535,179 |
) |
Condensed consolidated statement of cash
flows
| |
|
Previously reported |
|
|
|
Revised |
| |
|
For the three months ended |
|
|
|
For the three months ended |
| |
|
3/31/2019 |
|
Adjustment |
|
3/31/2019 |
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(447,283 |
) |
|
|
(87,896 |
) |
|
$ |
(535,179 |
) |
| Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Inventories reserve |
|
|
26,435 |
|
|
|
|
|
|
|
26,435 |
|
| Depreciation expense |
|
|
32,925 |
|
|
|
|
|
|
|
32,925 |
|
| Amortization of right-of-use assets |
|
|
2,033 |
|
|
|
|
|
|
|
2,033 |
|
| Stock-based compensation |
|
|
35,999 |
|
|
|
|
|
|
|
35,999 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(99,176 |
) |
|
|
|
|
|
|
(99,176 |
) |
| Accounts receivable - related party |
|
|
37,625 |
|
|
|
|
|
|
|
37,625 |
|
| Inventories |
|
|
9,187 |
|
|
|
|
|
|
|
9,187 |
|
| Other receivable |
|
|
(2,151 |
) |
|
|
|
|
|
|
(2,151 |
) |
| Prepaid expenses |
|
|
46,671 |
|
|
|
|
|
|
|
46,671 |
|
| Accounts payable and accrued liabilities |
|
|
11,216 |
|
|
|
(959 |
) |
|
|
10,257 |
|
| Accounts payable - related party |
|
|
(4,921 |
) |
|
|
|
|
|
|
(4,921 |
) |
| Other current liabilities |
|
|
(7,210 |
) |
|
|
|
|
|
|
(7,210 |
) |
| Customer deposit |
|
|
(10,467 |
) |
|
|
88,855 |
|
|
|
78,388 |
|
| Net cash flows used in operating activities |
|
|
(369,117 |
) |
|
|
|
|
|
|
(369,117 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash from acquisition |
|
|
201,482 |
|
|
|
|
|
|
|
201,482 |
|
| Purchase of property and equipment |
|
|
(181,121 |
) |
|
|
|
|
|
|
(181,121 |
) |
| Cash paid for acquisition |
|
|
(550,000 |
) |
|
|
|
|
|
|
(550,000 |
) |
| Net cash flows used in investing activities |
|
|
(529,639 |
) |
|
|
|
|
|
|
(529,639 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Payment on long term debt and finance lease obligation |
|
|
(2,021 |
) |
|
|
|
|
|
|
(2,021 |
) |
| Net cash flows used in financing activities |
|
|
(2,021 |
) |
|
|
|
|
|
|
(2,021 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash |
|
|
(900,776 |
) |
|
|
|
|
|
|
(900,776 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash beginning of period |
|
|
4,455,751 |
|
|
|
|
|
|
|
4,455,751 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash end of period |
|
$ |
3,554,975 |
|
|
|
|
|
|
$ |
3,554,975 |
|
There was no impact on the Company’s
consolidated balance sheet.
|