Notes to Financial Statements
For the Year Ended July 31, 2021
NOTE 1 – ORGANIZATION AND OPERATIONS:
Peregrine Industries, Inc. (the “Company”) was formed on October 1, 1995 for the purpose of manufacturing residential pool heaters. The Company was formerly located in Deerfield Beach, Florida. Products were primarily sold throughout the United States, Canada, and Brazil. In June 2002, the Registrant and its subsidiaries filed a petition for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Florida. At present, the Company has no business operations and is deemed to be a shell company. The Company had a change in control on July 8, 2013 as a result of the sale by our former principal shareholders, Richard Rubin, Thomas J. Craft, Jr. and Ivo Heiden, of their 324,000 shares of common stock, representing approximately 61.8% of the Company’s outstanding common stock, to Dolomite Industries Ltd (“Dolomite”). In connection with the private sale of their shares of common stock to Dolomite on July 2, 2013, Messrs. Rubin and Heiden agreed to waive a total of $224,196 in liabilities owed to them at June 30, 2013. In connection with the change of control transaction, two former principal shareholders transferred and assigned all $195,000 of their two convertible notes to three unaffiliated third parties and one affiliated party. See also note 3. On June 12, 2017, the Board of Directors of the Registrant appointed Mr. Zohar Shpitz as Chief Financial Officer (CFO) of the Registrant. Mr. Shpitz was appointed as CFO in connection with the resignation of Mr. Ofer Naveh as the Registrant’s CFO, effective June 19, 2017. On July 21, 2017, new management acquired, 22,477,843 or 97.7% of the issued common restricted shares. The new management is developing a business plan which they anticipate implementing within the current fiscal year.
On September 3, 2021, through our wholly owned subsidiary Mace Merger, Corp., Mace, Corporation was merged into our Company, through the issuance to each shareholders of one share of Peregrine, Industries for each four share of Mace, Corporation which they held. A total of 250,000,000 were issued. The 22,477,843 shares held per the above paragraph were returned to the Company for cancelation.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
On December 1, 2017, the Board of Directors of Peregrine Industries (the “Company”) approved a change in the fiscal year end from June 30, to July 31, effective beginning with fiscal year commencing on July 1, 2019. The Company expects to make the fiscal year change on a prospective basis and will not adjust operating results for previous periods. However, the change will impact the prior year comparability of each of the fiscal quarters and annual period in 2020 in future filings. The Company believes this change will provide benefits, including aligning its reporting periods to be consistent with an intended merger with an operating company.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
Use of Estimates:
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and cash equivalents
The Company maintains its cash in United States’ dollars in United States’ bank accounts which balances, may exceed the federal insured limit of $250,000.
Earnings (loss) per share:
Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the weighted average number of common and dilutive equivalent shares outstanding during the period. Dilutive common equivalent shares consist of options to purchase common stock (only if those options are exercisable and at prices below the average share price for the period) and shares issuable upon the conversion of issued and outstanding preferred stock. Due to the net losses reported, dilutive common equivalent shares were excluded from the computation of diluted loss per share, as inclusion would be anti-dilutive for the periods presented. There were no common equivalent shares required to be added to the basic weighted average shares outstanding to arrive at diluted weighted average shares outstanding as of July 31, 2021 and 2020.
Revenue Recognition
The Company adopted Accounting Standards Codification (“ASC”) 606. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The Company has assessed the impact of the guidance by performing the following five steps analysis:
Step 1: Identify the contract
Step 2: Identify the performance obligations
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognize revenue
The Company generates revenue from the sale of items used for the care of babies. Although the Company plans to sell, its products through distributors, the bulk of current revenue is derived through internet and social media venues. Revenue is recognized upon delivery of services and when the Company has the right to invoice the customer using the allowable practical expedient under ASC 606-10-55-18 since the right to invoice the customer corresponds with the performance obligations completed. Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occurs when shipping is performed, and the customers assume risk of loss. The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
Recent Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. The Company currently does not have any recent accounting pronouncements that they are studying and feel may be applicable.
Revenue is derived from the sale of the “baby items” invented by the Company. Revenue through July 31, 2020 is minimal as the Company is in its infancy and has been focused on product development, manufacturing and the creation of a distributorship network.
Revenue is recognized when persuasive evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured and delivery or performance of service has occurred. Customer prepayments are reflected as deferred revenue as long as there is persuasive evidence that the purchased product will be shipped within a reasonable time.
The Company recognizes revenue when it is realized or realizable and earned. Product sales are recognized upon delivery of the products.
The Company must meet all of the following four criteria in order to recognize revenue:
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Persuasive evidence of an arrangement exists
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Delivery has occurred
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The sales price is fixed or determinable
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Collection is reasonably assured
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Payments received in advance of satisfaction of the relevant criteria for revenue recognition are recorded as advances from customers.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Accounts receivable as of July 31, 2021 and 2020 were $26,420 and $34,805 respectively. An allowance for doubtful accounts will be provided for those accounts receivable considered to be uncollectable based on historical experience and management’s evaluation of outstanding accounts receivable at the end of the period. Management has reviewed the current accounts receivable and has concluded that no allowance was necessary as of July 31, 2021 nor 2020. Bad debts will be written off against the allowance when identified.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
Inventory
As at July 31, 2021 and 2020 respectively the Company had $784,374 and $785,500 worth of inventory, stated at the lower of cost or market, valued on an average cost basis. The inventory is reviewed at least quarterly and adjusted for and discrepancies. Managements’ evaluation was that there was no impairment required on July 31, 2021 or on July 31, 2020.
Recently Adopted Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Related Party Transactions
We consider all directors, officers and those who own more than 5% shares to be related parties and record any transactions between them and the Company to be related party transactions and disclose such transactions on notes to the financial statements.
Prepaid Expenses and Product Deposits
Prepaid expenses, totaling $11,232 and $12,239 at July 31, 2021 and 2020 respectively consist of cash paid in advance for services to be provided. The Company outsources all of the manufacturing processes and has paid deposits, to its manufacturers. At July 31, 2021 and 2020, there were no outstanding deposits. Service provider prepayments are amortized over the useful life of the service.
Property and Equipment
Property and equipment consists primarily of office furniture and equipment stated at original cost less accumulated depreciation. Depreciation is calculated using the straight line method based on the estimated useful life of the underlying asset, generally three to five years. Expenditures for repairs and maintenance are expensed as incurred.
Production Molds
The building of production molds is outsourced to specialists and is recorded at the total cost to acquire each. The molds are built to specifications that include the number of parts anticipated to be produced. The cost of the mold is depreciated on a straight line basis over 5 years. Cost of repairs and maintenance will be expensed as incurred. The value of each mold is reviewed quarterly and will be impaired, when necessary, based on managements’ valuation of the molds continuing viability. Depreciation of $103,299 and $102,270 was recorded for each of the years ended July 31, 2021 and 2020, respectively.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
Patents
Patent costs consist of the legal fees paid to prepare, file and process the patent applications. Patents will be amortized, utilizing the straight line method, over the useful life of the patent and will be reviewed quarterly to determine if impairment is required. Research and development are not included in the cost of patents, and, are expensed as incurred. Management determined that patent assets should be impaired by $66,888 for the year ended July 31, 2021.
Land and Building
On September 27, 2017 the Company purchased property consisting of land and building at a total cost of $502,474, allocating $440,167 to the building and $62,307 to land. The building has been built out to serve as the Company’s office headquarters. The building is being depreciated on a straight line basis over 25 years.
Income taxes
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of July 31, 2021, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. As of July 31, 2021, no income tax expense has been incurred.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows:
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July 31
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2021
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2020
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Operating loss
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$
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3,287,397
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$
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3,146,935
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Deferred tax benefit
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690,353
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660,856
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Valuation allowance
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(690,353
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)
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(660,856
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)
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Net deferred tax asset
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$
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-
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$
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-
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Share-Based Compensation
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718 Compensation—Stock Compensation. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period.
Fair Value Measurement
The Company adopted FASB 820 – Fair Value Measurement and Disclosures, or 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 require 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 prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
The Company did not have any Level 2 or Level 3 assets or liabilities as of July 31, 2021.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
Recent Accounting Pronouncements
The Company has evaluated the recent accounting pronouncements through the date of this report and believes that none of them will have a material effect on the company’s financial statements.
NOTE 3 – GOING CONCERN:
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business for the foreseeable future. The Company has accumulated losses aggregating $3,287,397 as of July 31, 2021 and $3,146,935 as of July 31, 2020 and has insufficient working capital to meet operating needs for the next twelve months, all of which raise substantial doubt about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustment relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company is taking appropriate action to provide the necessary capital to continue its operations. These steps include, but are not limited to: 1) implementation of new business plan 2) focus on sales to minimize the need for capital at this stage; 3) raising equity financing; 4) continuous focus on reductions in cost where possible.
NOTE 4 – RELATED PARTY TRANSACTIONS:
During the year ended July 31, 2020 Mace Corporation paid a total $14,097 directly to service providers compared to $15,935 for the year ended July 31, 2021. The advances were unsecured, non-interest bearing and do not have stated repayment terms. Total advances though July 31, 2020 total $70,111. The accounts were each eliminated upon completion of the merger.
The four controlling shareholders, as a condition of the Merger Agreement, returned their 22,477,843 common restricted shares to the Company for cancelation.
NOTE 5 – STOCKHOLDERS’ DEFICIT:
Common Stock
The articles of incorporation authorize the issuance of 500,000,000 shares of common stock, par value $0.0001. All issued shares of common stock are entitled to one vote per share of common stock. Effective July 30, 2021 the Company issued 250,000,000 common restricted shares to 100% of the Mace Corporation shareholders in return for 100% of the Mace equity. The Company’s controlling shareholders, simultaneously, returned their 22,477,843 common shares to be cancelled.
Preferred Stock
The articles of incorporation authorize the issuance of 5,000,000 shares of preferred stock with a par value of $0.0001 per share. None are issued.
Peregrine, Industries, Inc.
Notes to Financial Statements
For the Year Ended July 31, 2021
NOTE 6 – PAYCHECK PROTECTION PROGRAM
On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes provision for a Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”). The PPP allows qualifying businesses to borrow up to $10 million calculated based on qualifying payroll costs. The loan is guaranteed by the federal government, and does not require collateral. On May 4, 2020, the Company accepted a Bank of America PPP Loan, in the amount of $76,061. The PPP Loan matures on April 30, 2022 and bears interest at a rate of 1.0% per annum, unless forgiven. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan funds were received on May 4, 2020. The PPP Loan contains events of default and other provisions customary for a loan of this type. The PPP provides that (1) the use of PPP Loan amount shall be limited to certain qualifying expenses, (2) 100 percent of the principal amount of the loan is guaranteed by the SBA and (3) an amount up to the full principal amount may qualify for loan forgiveness in accordance with the terms of CARES. On February 10, 2021 the Company accepted a second loan, under the same program, in the amount of $79,982. The Company expects to use the full proceeds of the PPP loans in accordance with the provisions of CARES. Both loans were forgiven during the year ended July 31, 2021.
NOTE 7 – SUBSEQUENT EVENTS
Subsequent to July 31, 2021 and through the date when this report was completed, the Company has evaluated subsequent events through the date the financial statements were issued and has not identified any reportable events.