| 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, for the three months ended September 30, 2019 revenue was understated by $107,118, cost of revenue
was understated by $211,104, selling expenses were overstated by $81,637, compensation - officers was overstated by $4,905, professional
fees were overstated by $1,700, and general and administrative expenses were understated by $52,840. The Company had accounted
for these errors correctly on the audited year end financials. For the nine months ended September 30, 2019 revenue was understated
by $116,445, cost of revenue was understated by $315,495, selling expenses were overstated by $159,547, compensation - officers
was understated by $3,420, professional fees were overstated by $13,452, and general and administrative expenses were understated
by $56,804. 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 operations
for the three months ended September 30, 2019
| |
|
Previously reported |
|
|
|
|
|
Revised |
|
| |
|
For the three months ended |
|
|
|
|
|
For the three months ended |
|
| |
|
9/30/2019 |
|
|
Adjustment |
|
|
9/30/2019 |
|
| Revenue |
|
$ |
324,870 |
|
|
$ |
107,118 |
|
|
$ |
431,988 |
|
| Revenue - related party |
|
|
7,300 |
|
|
|
– |
|
|
|
7,300 |
|
| Total revenue |
|
|
332,170 |
|
|
|
107,118 |
|
|
|
439,288 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of Revenue |
|
|
348,371 |
|
|
|
211,104 |
|
|
|
559,475 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
(16,201 |
) |
|
|
(103,986 |
) |
|
|
(120,187 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling |
|
|
93,904 |
|
|
|
(81,637 |
) |
|
|
12,267 |
|
| Compensation - officers |
|
|
44,905 |
|
|
|
(4,905 |
) |
|
|
40,000 |
|
| Research and development |
|
|
66,282 |
|
|
|
7 |
|
|
|
66,289 |
|
| Professional fees |
|
|
399,650 |
|
|
|
(1,700 |
) |
|
|
397,950 |
|
| General and administrative |
|
|
269,961 |
|
|
|
52,840 |
|
|
|
322,801 |
|
| Total Operating Expenses |
|
|
874,702 |
|
|
|
(35,395 |
) |
|
|
839,307 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(890,903 |
) |
|
|
(68,591 |
) |
|
|
(959,494 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
|
(232 |
) |
|
|
(16 |
) |
|
|
(248 |
) |
| Other income |
|
|
8,460 |
|
|
|
1,183 |
|
|
|
9,643 |
|
| Total other expense |
|
|
8,228 |
|
|
|
1,167 |
|
|
|
9,395 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(882,675 |
) |
|
|
(67,424 |
) |
|
|
(950,099 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Tax expense |
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(882,675 |
) |
|
$ |
(67,424 |
) |
|
$ |
(950,099 |
) |
Condensed consolidated statement of
operations for the nine months ended September 30, 2019
| |
|
Previously reported |
|
|
|
|
|
Revised |
|
| |
|
For the nine months ended |
|
|
|
|
|
For the nine months ended |
|
| |
|
9/30/2019 |
|
|
Adjustment |
|
|
9/30/2019 |
|
| Revenue |
|
$ |
984,945 |
|
|
$ |
116,445 |
|
|
$ |
1,101,390 |
|
| Revenue - related party |
|
|
10,300 |
|
|
|
– |
|
|
|
10,300 |
|
| Total revenue |
|
|
995,245 |
|
|
|
116,445 |
|
|
|
1,111,690 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of Revenue |
|
|
752,451 |
|
|
|
315,495 |
|
|
|
1,067,946 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
242,794 |
|
|
|
(199,050 |
) |
|
|
43,744 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling |
|
|
183,570 |
|
|
|
(159,547 |
) |
|
|
24,023 |
|
| Compensation - officers |
|
|
106,580 |
|
|
|
3,420 |
|
|
|
110,000 |
|
| Research and development |
|
|
193,002 |
|
|
|
7 |
|
|
|
193,009 |
|
| Professional fees |
|
|
971,789 |
|
|
|
(13,452 |
) |
|
|
958,337 |
|
| General and administrative |
|
|
619,131 |
|
|
|
56,804 |
|
|
|
675,935 |
|
| Total Operating Expenses |
|
|
2,074,072 |
|
|
|
(112,768 |
) |
|
|
1,961,304 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(1,831,278 |
) |
|
|
(86,282 |
) |
|
|
(1,917,560 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
|
836 |
|
|
|
(16 |
) |
|
|
820 |
|
| Other income |
|
|
10,440 |
|
|
|
1,183 |
|
|
|
11,623 |
|
| Total other expense |
|
|
11,276 |
|
|
|
1,167 |
|
|
|
12,443 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(1,820,002 |
) |
|
|
(85,115 |
) |
|
|
(1,905,117 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Tax expense |
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(1,820,002 |
) |
|
$ |
(85,115 |
) |
|
$ |
(1,905,117 |
) |
Condensed consolidated statement of
cash flows
| |
|
Previously reported |
|
|
|
|
|
Revised |
|
| |
|
For the nine months ended |
|
|
|
|
|
For the nine months ended |
|
| |
|
9/30/2019 |
|
|
Adjustment |
|
|
9/30/2019 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(1,820,002 |
) |
|
$ |
(85,115 |
) |
|
$ |
(1,905,117 |
) |
| Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Inventories reserve |
|
|
3,601 |
|
|
|
– |
|
|
|
3,601 |
|
| Depreciation expense |
|
|
112,107 |
|
|
|
– |
|
|
|
112,107 |
|
| Amortization of intangible assets |
|
|
16,521 |
|
|
|
– |
|
|
|
16,521 |
|
| Amortization of right-of-use assets |
|
|
48,569 |
|
|
|
(48,865 |
) |
|
|
(296 |
) |
| Stock-based compensation |
|
|
59,964 |
|
|
|
– |
|
|
|
59,964 |
|
| Stock option compensation |
|
|
172,900 |
|
|
|
– |
|
|
|
172,900 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
262,099 |
|
|
|
(68,373 |
) |
|
|
193,726 |
|
| Accounts receivable - related party |
|
|
39,625 |
|
|
|
– |
|
|
|
39,625 |
|
| Inventories |
|
|
(5,210 |
) |
|
|
– |
|
|
|
(5,210 |
) |
| Other receivable |
|
|
(3,625 |
) |
|
|
– |
|
|
|
(3,625 |
) |
| Prepaid expenses |
|
|
68,914 |
|
|
|
– |
|
|
|
68,914 |
|
| Deposit |
|
|
7,210 |
|
|
|
– |
|
|
|
7,210 |
|
| Accounts payable and accrued liabilities |
|
|
(22,860 |
) |
|
|
184,324 |
|
|
|
161,464 |
|
| Accounts payable - related party |
|
|
(4,921 |
) |
|
|
– |
|
|
|
(4,921 |
) |
| Other liabilities |
|
|
(7,210 |
) |
|
|
– |
|
|
|
(7,210 |
) |
| Customer deposit |
|
|
(5,348 |
) |
|
|
(30,836 |
) |
|
|
(36,184 |
) |
| Net cash flows used in operating activities |
|
|
(1,077,666 |
) |
|
|
(48,865 |
) |
|
|
(1,126,531 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash from acquisition |
|
|
201,482 |
|
|
|
– |
|
|
|
201,482 |
|
| Purchase of property and equipment |
|
|
(220,793 |
) |
|
|
– |
|
|
|
(220,793 |
) |
| Cash paid for acquisition |
|
|
(550,000 |
) |
|
|
– |
|
|
|
(550,000 |
) |
| Net cash flows used in investing activities |
|
|
(569,311 |
) |
|
|
– |
|
|
|
(569,311 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Payment on long term debt and finance lease obligation |
|
|
(48,865 |
) |
|
|
48,865 |
|
|
|
– |
|
| Net cash flows used in financing activities |
|
|
(48,865 |
) |
|
|
48,865 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash |
|
|
(1,695,842 |
) |
|
|
– |
|
|
|
(1,695,842 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash beginning of period |
|
|
4,455,751 |
|
|
|
– |
|
|
|
4,455,751 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash end of period |
|
$ |
2,759,909 |
|
|
$ |
– |
|
|
$ |
2,759,909 |
|
There was no impact on the Company’s
consolidated balance sheet.
|