| Basis of Presentation and Summary of Significant Accounting Policies | Note
2 – Basis of Presentation and Summary of Significant Accounting Policies Basis
of Presentation The
unaudited consolidated financial statements for the three months ended August 31, 2022, and 2021 have been prepared by us pursuant
to the rules and regulations of the Securities and Exchange Commission. In the opinion of the management, all adjustments necessary to
present fairly our financial position, results of operations, and cash flows as of August 31, 2022, and 2021, and for the periods
then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally
included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been
omitted. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2022. The results of operations
for the three months ended August 31, 2022 are not necessarily indicative of the results to be expected for the full year. Principles
of Consolidation The
consolidated financial statements include Reviv3 Procare Company, and its wholly owned subsidiary Reviv3 Acquisition Corporation. All intercompany balances and transactions
have been eliminated in consolidation. 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 has been, and may continue to 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 our 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 consolidated financial statements. The accompanying consolidated 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 7 – Notes Payable. Liquidity
and Capital Resources 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 in the past. We believe
our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital
requirements. We intend to continue to control our cash expenses as a percentage of expected revenue on an annual basis and thus may use our cash
balances in the short-term to invest in revenue growth. As a result of the acquisition of Axil’s assets, we have generated and expect we will continue to generate sufficient cash for our operational needs,
including any required debt payments, for at least one year from the date of issuance of the accompanying consolidated financial statements.
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 including those resulting from the purchase of Axil’s assets in June 2022, will likely lead to cash utilization at levels greater than
recently experienced. We may need to raise additional capital in the future. However, the Company cannot provide any assurance 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 consolidated financial
statements. Use
of estimates The
preparation of the consolidated 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 deferred tax assets, the value of stock-based compensation,
contract liability, allowance on sales returns, valuation of lease liabilities and related right of use assets, fair value of securities
issued for business combinations, fair value of assets acquired and liabilities assumed in business combinations and the fair value of
non-cash common stock issuances. Cash
and cash equivalents The
Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased,
to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal
Deposit Insurance Corporation. (See Note 13) Accounts
receivable and allowance for doubtful accounts The
Company has a policy of providing an 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 consist primarily of cash prepayments to vendors for inventory and prepayments for trade shows and
marketing events which will be utilized within a year, prepayments on credit cards and the right to recover assets (for the cost of goods
sold) associated with the right of returns for products sold. Inventory The
Company values inventory, consisting of finished goods and raw materials, at the lower of cost and net realizable value. Cost is determined
using an average cost method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage
or other issues affecting marketability, equal to the difference between the cost of the inventory and its net realizable value. The
Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classifies
inventory markdowns in the statement of operations as a component of cost of goods sold. These markdowns are estimates, which could vary
significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Property
and Equipment Property
and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.
When assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included
in the statement of operations. Product
warranty The
Company provides a one-year or three-year limited warranty on its hearing enhancement and hearing protection products. The Company records
the costs of repairs and replacements, as they are incurred, to the cost of sales. Revenue
recognition and Contract Liabilities The
Company follows Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers. This revenue recognition
standard has a five steps process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the
transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The
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. The
Company also sells hearing protection and hearing enhancement devices and the following steps are followed for the revenue recognition: Identify
the contract with a customer. Identify
the performance obligations in the contract However,
as the historical redemption rate under the warranty policy has been low, the option is not accounted for as a separate performance obligation.
The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the
contract with the customer. Determine
the transaction price and allocation to performance obligations Allocate
the transaction price to the performance obligations in the contract Recognize
revenue when or as the Company satisfies a performance obligation As
of August 31, 2022 and 2021, contract liabilities amounted to $ 1,125,666 0 Contract liabilities associated with
product invoiced but not received by customers at the balance sheet date was $16,913 and $0, respectively; contract liabilities associated
with unfulfilled performance obligations for warranty services offered for a period of one to three years was $1,016,144 and $0, respectively,
and contract liabilities associated with unfulfilled performance obligations for customers’ right of return was $92,609 and $0,
respectively. Our contract liabilities amounts are expected to be recognized over a period of one year to three years. See
Note 13 for revenue disaggregation disclosures. Cost
of Sales The
primary components of cost of sales include the cost of the product and shipping fees paid to vendors for inventory purchase. 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 $ 285,329 71,677 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. Business
Combinations For
all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the
acquired business, including goodwill, generally at their fair values. Goodwill
represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.
Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. If the business combination
provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date. Changes
in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows:
(1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement
is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value and accretion
costs are recognized in earnings. The increases or decreases in the fair value of contingent consideration can result from changes in
anticipated revenue levels and changes in assumed discount periods and rates. Goodwill Goodwill
is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and
identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units
on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value. The
Company performs its annual goodwill impairment assessment on May 31st of each year or as impairment indicators dictate. When
evaluating the potential impairment of goodwill, management first assesses a range of qualitative factors, including but not limited
to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products
and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall
financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it
is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the quantitative
impairment testing methodology primarily using the income approach (discounted cash flow method). Under
the quantitative method we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by
its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment
to be recognized is recognized as the amount by which the carrying amount exceeds the fair value. When
required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows
to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated
cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates,
industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions.
The use of different assumptions or estimates for future cash flows could produce different results. 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 did not record any impairment loss during the three months ended August 31,
2022 and 2021. Stock-based
compensation Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock
Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and non-employee
services received in exchange for an award of equity instruments over the period the employee or non-employee 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,
non-employee and director services received in exchange for an award based on the grant-date fair value of the award. For
non-employee stock option based awards, the Company follows ASU 2018-7, which substantially aligns share based compensation for employees
and non-employees. Net
income (loss) per share of common stock Basic
net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares during the
period. Diluted net income (loss) per share is computed using the weighted average number of common shares and potentially dilutive securities
outstanding during the period. At August 31, 2022, the Company had 5,300,000 250,000,000 Lease
Accounting In
February 2016, the FASB issued ASU No. 2016-02, Leases The
Company renewed its lease for its corporate headquarters commencing December 1, 2019. This has been classified as an operating lease.
Please see Note 10 – “Commitments and Contingencies” – “Leases” below for more information about
the Company’s leases. Segment
Reporting The
Company follows ASC Topic 280, Segment Reporting Reclassifications Certain
reclassifications have been made to the prior year data to conform with the current period’s presentation specifically,
the accounts payable have been separated from accrued expenses and combined with equipment payable and customer deposits and are
included in other current liabilities in the accompanying consolidated financial statements, to conform with the current period’s
presentation. (See Note 8) 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 In
October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g. deferred revenue)
acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606,
“Revenue from Contracts with Customers”. Generally, this new guidance will result in the acquirer recognizing contract assets
and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at
fair value in purchase accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim
periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have
not yet been issued. The Company opted to adopt this ASU as of June 1, 2022. 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. |
