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Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note 9 – Subsequent Events

 

In accordance with ASC 855, Subsequent Events, the Company has evaluated all subsequent events through June 24, 2020, the date the financial statements were available to be issued. No material subsequent events occurred after March 31, 2020, other than as set out below:

 

On April 22, 2020, the Company entered into a loan with its current bank in the principal amount of $554,000, for working capital purposes. Following the receipt of these loan funds, the Company reinstated all staff who previously had been placed on furlough. Staff receiving salaries of $100,000 per year or less were restored to their full salaries. All executives, including the CEO, had their compensation reduced to the greater of $100,000 per year or 75% of their previous salary level. The Company re-engaged its staff so as to be able to fulfill its current customer contracts and any new sales orders and to continue its marketing and selling efforts. The loan amount bears interest at 1% and was initially due on April 20, 2022. Subsequently, the term of the loan may now potentially be extended to April 20, 2025. The loan may be repaid in advance without penalty. The loan is also potentially forgivable in full provided proceeds are used for payment of payroll expenses, rent, utilities and mortgage interest and certain other terms and conditions are met. The loan has typical default provisions, including for change of ownership, general lender insecurity as to repayment, non-payment of amounts due, defaults on other debt instruments, insolvency, dissolution or termination of the business as a going concern and bankruptcy.

 

Effective April 30, 2020, 800,000 restrictive stock units became fully vested. However, the holder of the RSUs elected not exercise them and accordingly these RSUs have lapsed, unexercised as further disclosed in Note 7 – Equity Incentive Plan – Restrictive Stock Units above.

 

Revenue recognition on contracts continues to be unpredictable and inconsistent quarter-over-quarter, however, current indications are that many of the Company’s existing contracts will be subject to substantial delays, at least in the short term, due to the economic disruption caused by the impact of the COVID-19 pandemic. The full extent of the disruption cannot be accurately forecast at this time.

 

Effective June 1, 2020, the Company received notification that an existing customer contract with an outstanding balance of work to be performed of $1,984,051 had been terminated as the customer has permanently ceased operations due to lack of funding for the project. As of March 31, 2020, there was an existing accounts receivable balance due to the Company of $81,008 in respect of engineering work already performed under this contract. No provision had been made in respect of this balance of accounts receivable as of March 31, 2020, as there had been no indication at that time that there would be any difficulty in collecting these funds. Consequently, the full balance of $81,008 has been written off as uncollectible effective June 1, 2020.

 

Effective June 8, 2020, the Company furloughed several employees and implemented further 25% salary reductions for all remaining salaried employees. All hourly employees were moved to part-time status.

 

Effective June 9, 2020, the Arbitrator ruled in the action against a former employee regarding a dispute over the issuance of 6,750,000 restricted stock units and unpaid wages issued his final award in the Company’s favor. The Arbitrator found against the former employee and awarded the Company costs of $33,985, with interest at 8% per year. The Company will now lodge the judgment with the State court so that it can collect upon this debt.

 

Effective June 24, 2020, the Company appointed two new independent directors, Randy Shipley and Nick Etten, and Mr. McDonald was appointed Chairman of the Board. The Company issued 2 million non-qualified stock options under the 2017 Equity Plan to the newly appointed directors. The options will vest 50% upon grant and 50% on April 1, 2021, if the Director remains on the Board up to that time. The options have a term of 5 years and have an exercise price equal to the closing price of the Company’s common stock on The OTC Markets on the day immediately preceding the grant date.