Quarterly report pursuant to Section 13 or 15(d)

2. Revision of Prior Period Financial Statements

v3.20.2
2. Revision of Prior Period Financial Statements
9 Months Ended
Sep. 30, 2020
Accounting Changes and Error Corrections [Abstract]  
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.