ITEM 1 - BUSINESS
Unless the context otherwise requires, all references in this report to “Arrestage” “AII” “Company” “our” and “we” refer to Arrestage International, Inc.
Arrestage International, Inc. (the “Company”) was formed and incorporated under the laws of the state of Nevada on June 15, 2011. The first organizational meeting was held on June 20, 2011 where the articles of incorporation and bylaws were adopted. In the same meeting the stock specimen certificate and the annual meeting set for June 6th each fiscal year. The registered agent is Registered Agents, Inc. with offices located at 401 Ryland St., Suite 200-A, Reno, NV 89502.
Overview
Arrestage International, Inc. (“AII”) is a Nevada Corporation within the natural skin care space. The Company will explore opportunities to enter into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities within the Natural & Organic Skin Care industry, which we refer to as “Target Businesses.”
Arrestage is led by a management team and Board with extensive business experience in managing and financing public and private companies in different industries, including the Cosmetic and Health/Wellness sector, including professional managers, doctors and medical professionals knowledgeable in public and private companies and management and financing. The Company currently has limited operating costs and intends to maintain minimal overhead for the foreseeable future. Management believes that by making accretive business combinations within the Natural Skin Care and/or Nutraceutical Health and Wellness sector it will scale rapidly while keeping its general and administrative costs at a minimum until growth manifests itself.
The Company currently does not trade on an exchange. However, the Company hopes to engage a FINRA Registered Broker Dealer to re-file a 15 (c) 211 with FINRA on the Company’s behalf during 2020, in hopes of obtaining a trading symbol and beginning trading on the OTC markets within the near future., or upon the successful completion of a registered secondary offering, whichever occurs first.
Natural Skin Care
Arrestage currently owns the rights to formulations under an exclusive license for several unique product lines and formulations for natural skin care products. The Company will also explore opportunities to enter into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities within the Natural Skin Care industry nutraceutical/wellness industry, which we refer to as “Target Businesses.”
Strategic Overview
We will seek to capitalize on the investing and operating experience and contacts of our officers and directors in consummating an initial business combination to identify and acquire Target Businesses that primarily operate in the skin care industry, although we may pursue acquisition opportunities in related industries. We believe our management team is well positioned to take advantage of opportunities that have the potential to create value for our stockholders by capturing the inherent arbitrage present in less developed companies. Through past business and investment activities, the management and Board of the Company has developed an extensive network of relationships, ranging from owners of private and public companies, private equity funds, investment bankers, attorneys, accountants and business brokers, which allows us to generate a substantial number of attractive risk-adjusted acquisition opportunities on a proprietary basis.
According to London-based analysts Future Market Insights, demand for natural cosmetics for skin care is increasing at CAGR of over 5% and is estimated to increase from an estimated $36 billion in 2019 to $54 billion by 2027 at the global level based on shifting consumer perceptions concerning ingredients included within cosmetics.
The Company feels that the growing trend among consumers to improve overall health habits is likely to boost the demand for natural cosmetics. Across a vast array of various industries, consumers want to know where ingredients or materials for products are sourced, how they are made, what the ingredients are, and whether they will support or damage their overall health in the long term. A broad interest in holistic health has triggered a new consumer interest in natural ingredients and processes, and skin care products, being placed directly on the skin, are scrutinized for potential benefits or alternatively for potential harmful effects.
Rise in disposable income, increasing consumer awareness concerning health issues, and rapid urbanization are likely to boost the nutraceutical market growth over the forecast years. Positive outlook towards medical nutrition owing to the increasing weight management programs, along with cardiovascular and other chronic diseases, is anticipated to propel the demand for nutraceuticals.
Our Strategy
Our strategy is to update and improve the existing products covered under the exclusive license agreement, then promote, market and sell those products through various sales channels including, but not limited to ecommerce and distributors to reach retail outlets such as hypermarkets, convenience stores, specialty stores and club stores.
Emergence of Social Media
Social media has opened up new avenues for purchasing and discussing skincare routines and trends. Social Media is the key to the shift in consumer demands. Trends are shared mor quickly through celebrities and market influencers, as well as everyday people, posting content which urges others to become a conscious consumer. We believe that as the world changes, a new form of consumerism is emerging, based on principles of awareness and caring about ourselves, other people and the world.
The emergence of Social Media has created opportunities for small companies to gain acceptance and loyal customers without the need for extremely large marketing budgets.
Focus on a large, growing market and.
While big legacy companies within the skin care industry, such as Estee Lauder and L’Oreal, have started entering the natural skin care market, it has taken them a while to meet consumer demand based on consumers desire for more information regarding ingredients included in the products, creating an opportunity for lots of smaller natural based companies.
We feel that due to the emergence of so many smaller companies within the industry there will be extensive opportunities to enhance and expand our product lines by expanding sales channels through the business combinations to be pursued, utilizing and improving upon the Targeted Businesses existing channels..
Pursue Opportunities to enhance our product lines
We plan to expand our product lines through various business combinations creating a more inclusive line of products. By maintaining our cost-effective structure and leveraging the network of experts in applicable fields we feel we will be able to penetrate the market place in an expedited manner. Our relationships are extensive within the cosmetics, medical, finance and entertainment fields. By leveraging those contacts, we hope to be able to showcase products utilizing channel influencers from known persons and entities.
Competition
Significant competition for natural skin care products exists and more small competitors may enter the market more quickly than we anticipate which may significantly harm our anticipated revenues and may cause us to be unable to recover the losses we have incurred and expect to incur in the updating and development of our products. Anticipated markets may not develop our product technology, or they may develop more slowly than anticipated, while other markets and opportunities not anticipated may become opportunities. we believe that due to the structure we have chosen, i.e. small management team utilizing outside advisors that are experts in their fields, we will be able to pivot to take advantage of opportunities either currently known or unknown. Not being able to be nimble and pivot when needed would significantly harm our anticipated revenues and in such a case we may be unable to recover the losses we have incurred and expect to continue to incur in the development and marketing of our products. Natural Skin Care products represent an emerging segment of a larger market, and whether or not end-users will continue to use them may be affected by many factors.
Big name companies such as L’Oreal, Estee Lauder and Nuetrogena are players in the Natural Skin Care market. However, that market has seen the emergence of hundreds of smaller brands and the companies with those brands are enjoying increasing revenues because of the tremendous boom in online sales and the continued power of hypermarket retailers, such as Target and Walmart, and boutique retailers driven by the “buy local” movements.
Young, Independent brands are supporting a surge in creativity, and entrepreneurship is boiling over in the ,Natural Skin Care industry. This surge in popularity and acceptance of smaller relatively unknown brands is due, in major part, to customer’s online access to significant information regarding ingredients and the missions of companies, and a willingness, and even desire, to support smaller brands and share that desire online through social media.
Given the current state of the Natural Skin Care market, Arrestage believes the current trends will continue into the foreseeable future and we will be able to compete, due to the company structure, and will be successful in carving out a profitable market niche, understanding the competitive challenges.
Our Corporate Information
We are incorporated in Nevada. Our principal executive offices are located at 20343 N. Hayden Road, Ste 101, Scottsdale, Arizona 85255. Our website address is www.arrestageinternational.com.
The information on, or that may be accessed through our website, is not incorporated by reference into this registration statement and should not be considered a part hereof.
Compliance with Government Regulation
Utilizing advisors that are experts in their fields, Management will manage all government regulation diligently, including the process of SEC reporting, and work to insure all relevant material information is disclosed as prescribed by law.
Changes in government policies and regulations could change the market for our products. The skin care market is in a phase where it is currently subject to limited industry-specific government regulations in the United States relating to matters such as ingredients, design, storage, and testing of these products. However, given that their production is subject to government regulation, we may expect to encounter more industry specific government regulations in the future in the jurisdictions and markets in which we operate. We will work to maintain the highest level of compliance with all government regulations.
Cyber Compliance
Cyber Security, Data Protection and Privacy
Arrestage has assessed its level of controls and procedures for cybersecurity risk. Due to the current lack of exposure within its current business operations, Arrestage has been informed the effect of any cyber-attack would be minimum. Arrestage has not had any such occurrence to date. The Company is informed of cyber-risk factors and will create disclosure controls and procedures when they become relevant to its business model.
Based on new Regulatory authority of the European Unions’ General Data Protection Regulation (“GDPR”) and tightening US laws, Arrestage International must abide by and follow directives provided by such regulation.
For Privacy Protection Compliance in the US, California’s SB1386 bill of 2003, implemented in 2015 as (California Electronic Communication Privacy Act (S.B. 178) a pioneered mandatory data-breach notification across the United States, spurring a decade of unprecedented corporate spending on information security. Europe has expanded this idea into its landmark General Data Protection Regulation (GDPR). As such, Arrestage International, Inc., now needs to update its US privacy incident-response playbook in many areas outlined in the GDPR’s May 2018 compliance directives.
Data Protection in the US deals with the security of the electronic transmission of personal data. While the US does not have any centralized, formal legislation at the federal level regarding this issue, it does mandate a form of compliance through various organizations. Again, California has taken the lead as far as State mandates (California A.B 1541, 2015), but the EU’s GDPR creates a centralized regulatory framework that multi-nationals must now follow (as of May 25, 2018). While Arrestage International, Inc. has acted to abide by data privacy and protection mandates, any misinterpretation or non-adherence would case regulatory scrutiny, fees/fines, and other potential issues. Any such regulatory mandate would affect business operations and percentage of profitability.
Employees
At December 31, 2019 we utilize our four Board of Directors and Management jointly. We also utilize the expertise of outsourced professionals as needed. It is possible that some may become a part of the Arrestage management team in the future. Currently, many necessary services are performed by consultants and contracted parties.
ITEM 1A.
ITEM 1A. RISK FACTORS
Business Challenges
In operating our business, we will face significant challenges. Our revenues, profitability and future growth depend significantly on (1) continued access to the capital markets for acquisition capital, (2) our ability to grow current business sectors and to expand by acquiring new suitable businesses. Prices received affect the amount of future cash flow available for capital expenditures and repayment of indebtedness and our ability to raise additional capital. In addition, among the risks and uncertainties that face our business are the following:
●We have a need for additional funding
●The Company’s recent operating history has produced no revenue and has no customers
●High production of products will create a considerable amount of inventory
●Underproduction could lead to undercapitalization of market demand
●The industry is competitive
Undercapitalization; Need for Additional Funding
No assurance can be given as to how much additional working capital will be required or that additional financing can be obtained, or if obtainable, that the terms will be satisfactory to AII, or that such financing would not result in a substantial dilution of shareholder’s interest.
The Company’s Recent Operating History Has Produced no Revenue and has no Customers
Although the company has purchased an exclusive license for products and formulas it currently has no customers and has generated no revenues. There is no assurance that the Company can generate revenues or sell any of its formulas or products in the market place, and even if revenues are generated there is no assurance that the Company can earn a profit, in which case the Investors’ may not realize a return on their equity investment.
Specific Risk Factors- Nutraceutical Division
High Production of Products will create a considerable amount of inventory.
In order to produce our products at affordable prices, we will have to produce through high volume automated processes. We do not know whether we will be able to contract efficient, automated, low-cost assembly capability and processes that will enable us to meet the quality, price, and production standards, or production volumes required to successfully mass market our product. Even if we are successful in developing our high-volume production capabilities and processes, we do not know whether we will do so in time to meet our product commercialization schedules or to satisfy the requirements of customers. Our failure to develop such processes and capabilities could have a material adverse effect on our business, results of operations and financial condition.
Underproduction could lead to undercapitalization of Market demand.
We may not meet our product development and commercialization milestones. We have several development programs that are in the pre-commercial stage. The success of each formulation development program is highly dependent on our correct interpretation of commercial market requirements, and our translation of those requirements into applicable product specifications and appropriate development milestones. If we have misinterpreted market requirements, or if the requirements of the market change, we may develop a product that does not meet the cost and performance requirements for a successful commercial product. In addition, if we do not meet the required development milestones, our commercialization schedules could be delayed, which could result in potential adverse effects on our business.
Competitive Landscape.
Significant competition for topical aesthetic products may develop or may develop more slowly than we anticipate which would significantly harm our revenues and may cause us to be unable to recover the losses we have incurred and expect to incur in the development of our products. Significant markets may never develop our product technology, or they may develop more slowly than we anticipate. Any such delay or failure would significantly harm our revenues and we may be unable to recover the losses we have incurred and expect to continue to incur in the development and marketing of our products. If this were to occur, we may never achieve profitability and our business could fail. Natural Skin Care products represent an growing market, and whether or not end-users will want to use them may be affected by many factors, some of which are beyond our control, including:
●the emergence of more competitive technologies and products, including other products that could render our products obsolete;
●the future cost of components that may affect our delivery systems;
●the regulatory requirements of agencies, including the development of uniform codes and standards that may result in higher costs;
●government support for preventive medicine may wane;
●the assembling and supply costs may escalate to levels that would restrict our marketing efforts;
●the perceptions of consumers regarding the safety of our products;
●the continued development and improvement of existing technologies that we may not be able to access or license; and
●the future cost of components used in existing products.
Governmental Policies Could Affect our Revenue or Profitability
Changes in government policies and regulations could hurt the market for our products. The OTC cosmetic market is in a phase where it is currently subject to limited industry-specific government regulations in the United States relating to matters such as design, storage, testing of these products. However, given that their production is subject to government regulation, we may expect to encounter more industry specific government regulations in the future in the jurisdictions and markets in which we operate. To the extent that there may be implementation of further regulations, delays in gaining such regulatory approval, may hinder our development and our growth may be constrained.
Reliance on Third Party Suppliers Could be a Barrier
We rely upon third party suppliers to supply key materials and components for our products. A supplier’s failure to supply materials or components in a timely manner, or to supply materials and components that meet our quality, quantity or cost requirements, or our inability to obtain substitute sources for these materials and components in a timely manner or on terms acceptable to us, may harm our ability to manufacture our products cost-effectively or at all, and our revenues and gross margins might suffer.
If we fail to properly manage our anticipated growth, our business could suffer.
Our strategy involves substantial growth. If we experience periods of rapid growth and expansion, our limited personnel, operational infrastructure and other resources could be significantly strained. In particular, the possible internalization of manufacturing, and anticipated expansion of our direct sales force in the U.S. will require significant management, financial and other supporting resources. In addition, in order to manage expanding operations, we will need to continue to improve our operational and management controls, reporting and information technology systems and financial internal control procedures. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our operating results and business could suffer. Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our goals.
We may be unable to develop and retain distributors, which would adversely affect our ability to meet our revenue targets and other goals. Further, Foreign Markets May Create a Need for Separate Potentially Costly Analysis
As we launch products, increase sales efforts and expand into new geographies, we will need to retain, grow and develop our distributors and agents. We may not succeed in entering into, and maintaining, productive arrangements with an adequate number of distributors and or agents that are sufficiently committed to selling our products. The establishment and maintenance of a distribution network is expensive and time consuming. Even if we engage and maintain suitable relationships with an adequate number of distributors, they may not generate revenue as quickly as we expect them to, commit the necessary resources to effectively market and sell our products, or ultimately succeed in selling our products. Moreover, if our distributors are unable to attract and retain new customers, we may be unable to achieve our expected growth, and our business could suffer.
When we acquire other companies or businesses, we will be subject to risks that could hurt our operations in the future.
We are planning in the near future acquire complementary businesses, products or technologies. Any acquisition may not produce the revenues, earnings or business synergies anticipated, and any acquired business, product or technology might not perform as expected. Our management could spend a significant amount of time, effort and money in identifying, pursuing and completing acquisitions. If we complete an acquisition, we may encounter significant difficulties and incur substantial expenses in integrating the operations and personnel of the acquired company into our operations. In particular, we may lose the services of key employees of the acquired company, and we may make changes in management that impair the acquired company’s relationships with employees, vendors and customers. Additionally, we may acquire development-stage companies that are not yet profitable and require continued investment, which could decrease our future earnings or increase our futures losses. Any of these outcomes could prevent us from realizing the anticipated benefits of an acquisition.
To pay for an acquisition, we may use equity or cash. Alternatively, we might borrow money from a bank or other lender. If we use equity, our stockholders will experience dilution of their ownership interests. If we use cash or debt financing, our financial liquidity would be reduced.
Any acquisition could result in recording significant amounts of goodwill or other intangible assets, some of which could result in significant quarterly amortization expense. Moreover, if we determine during annual reviews or otherwise that an intangible asset has been impaired, we may need to write off some or all of its carrying value, resulting in large charges to expense. Amortization charges and write-downs or write-offs of intangibles would decrease our future earning or increase our future losses.
Future Acquisitions Could Create Synergistic Issues
We intend to acquire brands or companies in the future, and these acquisitions could disrupt our business and dilute our shareholders’ interests. We intend to acquire other companies or brands in the future and we cannot provide assurances that we will be able to successfully integrate them into our operation, or that the cost savings we anticipate will be fully realized. Entering into an acquisition or investment entails many risks, any of which could materially harm our business, including:
●diversion of management’s attention from other business concerns;
●failure to effectively assimilate the acquired brands, employees, or other assets of the company into our business;
●the loss of key employees from either our current business or the acquired business;
●assumption of significant liabilities of the acquisitions.
If we complete acquisitions, we may dilute the ownership of current shareholders. In addition, achieving the expected returns and cost savings from acquisitions will depend in part upon our ability to integrate the products and services, technologies, research and development programs, operations, sales and marketing functions, finance, accounting and administrative functions, and other personnel of these businesses into our business in an efficient and effective manner. We cannot ensure that we will be able to do so or that the acquired businesses will perform at anticipated levels. If we are unable to successfully integrate acquired businesses, our anticipated revenues may be lower and our operational costs may be higher.
Competitive Landscape Challenges
The world natural skin care market stands enthused by the growing need for appearance-enhancing and age-defying skin cosmetics among the aging population according to a new report by Global Industry Analysts. In addition to changes in lifestyles by modern consumers to increase their chances of longevity, changing practices in personal grooming is resulting in more time and money being spent on external grooming to minimize visible effects of aging.
This is leading to increased demand for products, such as, skin lotions, toners, wrinkle-removal creams, skin whiteners, luxury topical skin care products, concealers, and cover-ups. The growing acceptance of vitamins and antioxidants as effective anti-aging nutrients is expected to prod the growth of anti-aging drugs and pharmaceuticals. With younger consumers becoming more proactive about their skin maintenance regime, women aged between 25 years to 30 years are increasingly beginning to use anti-aging creams, thereby resulting in expanded market opportunities. Manufacturers are additionally adding fuel to the trend by unveiling new promotional mother-daughter packages, which are designed to discreetly inculcate adherence to anti-aging treatment regimens as early as possible. Growing wariness over harsh chemicals is expected to lead to increased demand for skin care products with natural, herbal and botanical extracts as active ingredients. Natural Skin Care products, which include natural ingredients such as chamomile, copper, gold, minerals and amino acids, are expected to score huge gains in the marketplace in the upcoming years. Driven by the desire to stay young and healthy, sales of dietary supplements, vitamins, and minerals are forecast to rise in the upcoming years.
The Company anticipates that it will face additional competition from new entrants that may offer significant performance, price, creative or other advantages over those offered by the Company. Many of these competitors have greater name recognition and resources than the Company.
Additionally, potential competitors with established market shares and greater financial resources may introduce competing products. Thus, there can be no assurance that we will be able to compete successfully in the future or that competition will not have a material adverse effect on our results of operations.
Corporate Management Risks
Reliance upon Key Personnel and Necessity of Additional Personnel
Arrestage International is largely dependent upon the personal efforts and abilities of existing management and the Board of Directors, especially John Muldoon III (Chief Executive Officer and Director), Kimberly Shapiro (Chairman of the Board of Directors); Roy Shapiro ( Director); and Gary Croft (Director) Our success will also be largely dependent upon our ability to attract quality management and employees to help operate the Company as its operations may grow.
Control by Existing Management
Currently, officers, directors and founders of AII, as a group directly or indirectly own approximately 3,451,000 restricted shares of Common Stock in AII which is 95.86% of the 3,600,000 shares of Common Stock issued.
As a result, officers, directors and founders of AII as a group could exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership limits the power to exercise control by the minority shareholders who will have purchased their stock in this Offering.
Specific Risks Related to our Regulatory Environment
We are subject to various federal, state and foreign healthcare laws and regulations, and a finding of failure to comply with these laws and regulations could have a material adverse effect on our business.
Our operations are, and will continue to be, directly and indirectly affected by various federal, state and foreign healthcare laws, including, but not limited to, those described below.
●Federal Anti-Kickback Statute (42 U.S. Code §1320a-7b), which prohibits any person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, in cash or in kind, in return for or to induce the referring, ordering, leasing, purchasing or arranging for or recommending the referring, ordering, purchasing or leasing of any good, facility, item or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as the Medicare and Medicaid programs.
●Federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, persons or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim to, or the knowing use of false records or statements to obtain payment from, or approval by, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act (31 U.S. Code §3729-3733), it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim.
●Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, statute, which, among other things, created federal criminal laws that prohibit knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of or payment for healthcare benefits, items or services. Additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and applicable implementing regulations, impose certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on entities subject to the law, such as health plans, clearinghouses, and healthcare providers and their business associates. Internationally, substantially every jurisdiction in which we operate has established its own data security and privacy legal framework with which we must comply, including the Data Protection Directive 95/46/EC and national implementation of the Directive in the member states of the European Union.
The off-label use or misuse of our products may harm our image in the marketplace, result in injuries that lead to costly product liability suits, or result in costly investigations and regulatory agency sanctions under certain circumstances.
If the U.S. Food and Drug Administration determines that our promotional materials or training constitute promotion of an off-label or other improper use, it could request that we modify our training or promotional materials, or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil or administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs, and the curtailment of our operations. Any of these events could significantly harm our business and results of operations.
These regulations or codes may limit our ability to affectively market our products, or we could run afoul of the requirements imposed by these regulations, causing reputational harm, imposing potentially substantial costs, and adversely affecting our operations as a result.
Specific Risks Related to our Intellectual Property
If our anticipated patents and other intellectual property rights do not adequately protect our products, we may lose market share to competitors and be unable to operate our business profitably.
Our success depends significantly on our ability to protect our proprietary rights to the technologies used in our products. We rely on the formulations which we have acquired, as well as a combination of copyright, trade secret and trademark laws, and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, any future pending applications may be unsuccessful. The U.S. Patent and Trademark Office may deny or require significant narrowing of claims in our pending patent applications or future patent applications, and patents issued as a result of these patent applications, if any, may not provide us with significant commercial protection or be issued in a form that is advantageous to us. We could also incur substantial costs in proceedings before the U.S. Patent and Trademark Office. These proceedings could result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in our patents. Third parties may successfully challenge our issued patents and those that may be issued in the future, which would render these patents invalidated or unenforceable, and which could limit our ability to stop competitors from marketing and selling related products. In addition, our pending patent applications include claims to aspects of products and procedures that are not currently protected by issued patents, and third parties may successfully patent those aspects before us or otherwise challenge our rights to these aspects.
In the event a competitor infringes upon one of our patents or other intellectual property rights, enforcing those patents and rights may be difficult and time consuming. Even if successful, litigation to defend our patents against challenges or to enforce our intellectual property rights could be expensive and time consuming and could divert management’s attention from managing our business. Moreover, we may not have sufficient resources to defend our patents against challenges or to enforce our intellectual property rights, any of which would adversely affect our ability to compete and our business operations as a result.
If our trademarks or trade names are not adequately protected, then we may be unable to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to infringe other marks. We may be unable to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in markets of interest. If our trademarks are challenged, infringed upon, circumvented, or declared generic or infringing, or if we are unable to establish name recognition based on our trademarks and trade names, then we may be unable to compete effectively and our business may be adversely affected.
Our executive officers, directors and principal stockholders may exert control over us and may exercise influence over matters subject to stockholder approval.
Our executive officers and directors, and significant shareholders together with their respective affiliates, beneficially owned approximately 92.67% of our outstanding common stock as of December 31, 2019 and December 31, 2018. Accordingly, these stockholders, if they act together, may exercise substantial influence over matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or acquisition. This concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discourage a potential acquirer from attempting to obtain control over us, which in turn could have a material adverse effect on the market value of our common stock.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our common stock share price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We may be unable to attract or sustain coverage by well-regarded securities and industry analysts. If either none or only a limited number of securities or industry analysts cover us or our business, or if these securities or industry analysts are not widely respected within the general investment community, the trading price for our common stock would be materially and negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who cover us or our business downgrade our common stock or publish inaccurate or unfavorable research about us or our business, the price of our common stock would likely decline. If one or more of these analysts cease coverage of us or our business or fail to publish reports on us or our business regularly, demand for our common stock could decrease, which might cause the price of our common stock and trading volume to decline.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us or our business could be harmed, resulting in the decrease in value of our common stock.
As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in our internal controls. In addition, in our annual reports on Form 10-K for our fiscal years ending December 31 to be filed in the following year, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are continually in the process of upgrading, implementing and testing the internal control over financial reporting required to comply with this obligation, which process is time-consuming, costly and complicated. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. Our compliance with Section 404 of the Sarbanes-Oxley Act will require us to incur substantial accounting expense and expend significant efforts. If we are unable to comply with the requirements of Section 404 in a timely manner, or we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common stock could decline and we could be subject to sanctions.
Our ability to implement our business plan successfully and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new, operational and financial systems, procedures and controls to manage our business effectively as the Company grows. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors when required under Section 404 of the Sarbanes-Oxley Act. Moreover, we may not implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and, when required, our auditors were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, because of our inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements or omissions.
Our common stock is a penny stock. Trading of our common stock may be restricted by SEC penny stock regulations and FINRA sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
If and until a liquid trading market does develop for our common stock, it is likely we will be subject to the regulations applicable to “Penny Stock.” The regulations of the SEC promulgated under the Exchange Act that require additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The SEC regulations define penny stocks to be any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Unless an exception is available, those regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a standardized risk disclosure schedule prepared by the SEC, to provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer’s account, to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a stock that becomes subject to the penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage market investor interest in and limit the marketability of our common stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock.
New Regulation Could Affect Our Business Negatively
Our business may become subject to additional future product certification regulations, which may impair our ability to market our products. We cannot assure you that our products will continue to meet potentially changing standards. The failure to comply with changing requirements could result in the recall of our products or in civil or criminal penalties.
Emerging Growth Company Status
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and a “smaller reporting company” as defined by the Securities and Exchange Act of 1934, and Regulation S-K, which permits us to elect not to be subject to certain disclosure and other requirements that otherwise would have been applicable to us had we not been an “emerging growth company,” and “smaller reporting company.” These provisions include:
●reduced disclosure about our executive compensation arrangements;
●no non-binding advisory votes on executive compensation or golden parachute arrangements; and
●exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We may take advantage of these exemptions for up to five years or such earlier time as we are no longer an “Emerging Growth Company.” We will qualify as an “Emerging Growth Company” until the earliest of (1) the last day of our fiscal year following the fifth anniversary of the date of notice of effectiveness, (2) the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more, (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (4) the last day of the fiscal year in which we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Summary
We believe it is important to communicate our expectations to our shareholders. There may be events in the future, however, that we are unable to predict accurately or which we have no control. The risk factors listed on the previous pages, as well as any cautionary language in this registration statement, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in the previous risk factors and elsewhere in our previous filings could negatively impact our business, cash flows, results of operations, prospects, financial condition and stock price.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are currently no unresolved staff comments.
The Company responded in order to resolve the following past comments:
●On January 22,2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on February 23, 2018.
●On February 26, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on March 9, 2018.
●On March 9, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on May 11, 2018.
●On May 25, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on June 7, 2018.
●On January 22, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on June 29, 2018.
●On July 16, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on July 20, 2018.
●On August 6, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on August 8, 2018.
●On August 8, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on August 27, 2018.
●On September 7, 2018, the Company received a letter from the Staff of the SEC’s Division of Corporation Finance as part of its review of the Company’s Form S-1 filed on December 19, 2017 to register the Company’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company responded to the letter with the filing of an amendment to the Form S-1 on September 14, 2018.
●On October 11, 2018, the Company filed a Notice of Effectiveness for the filing of its S-1 registration statement pursuant to the final comments of the SEC’s division of corporate finance completing the review of registration of the Company’s common stock.
●On December 20, 2018 a Form 15 c 211 was filed with FINRA by Network 1 Financial Securities requesting the right to quote and make markets in the Arrestage International, Inc. stock.
●On March 15, 2019 FINRA requested additional due diligence material from Network 1 Financial Securities. On April 28, 2019 the Company provide Network one with response to the additional due diligence request.
●As of the date of this filing no further action has been taken by the Company that has developed a stratgey to register free trading shares.
ITEM 2
ITEM 2 PROPERTIES
The Company did not own any property as of December 31, 2019.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Presently and during the past year there are no pending or recently adjudicated legal proceedings to which the Company is a party. No other such proceedings are known to the registration to be threatened or contemplated against it.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY
At the time of this filing, our common stock is not traded on a United States public trading market. Arrestage has not registered any of its shares through the S-1 Registration Filing state was effective October 11, 2018 and is hoping to work with a FINRA registered broker/dealer to register shares and to secure a listing on a US OTC exchange.
The Company has two classes of authorized capital stock: Common Stock and Preferred Stock. Both were authorized June 22, 2011 and both have a par value of $0.001. The holders of Common Stock are entitled to one vote per share. Rights and Preferences for the Preferred Stock will be determined by the Board of Directors prior to issuance of any Preferred Stock.
There are 30,000,000 shares of Common Stock authorized. As December 31, 2019 there were 3,600,000 shares of Common Stock issued and outstanding.
During the year ended December 31, 2019, the Company did not issue any shares of common stock.
There are 5,000,000 shares of Preferred Stock authorized and zero outstanding as of December 31, 2019.
Holders
As of the date of this Filing, there are 52 holders of record of our common stock.
Dividends
We have never paid a cash dividend on our common stock and anticipate that for the foreseeable future any earnings will be retained for use in our business and, accordingly, we do not anticipate the payment of cash dividends.
Equity Compensation Plan Information
During the year ended December 31, 2019, the Company did not issue any common shares in exchange for services.
There are no equity compensation plans as of December 31, 2019, under which our equity securities were authorized for issuance:
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
Not applicable
ITEM 7
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations
On October 11, 2018, Arrestage International filed a Notice of effectiveness for the filing of its S-1 Registration Statement pursuant to final comments of the SEC’s division of Corporate Finance, completing the review of the registration of the Company’s common stock.
Arrestage International, Inc. is a Nevada Company within the natural skin care space that plans to develop an international presence in the Natural Skin Care and Anti-Aging arena, using our brand, updated custom formulas and trademarks. We will establish an comprehensive Internet presence with a ecommerce platform, create distributorships to reach targeted retail markets. We plan to to develop these aspects of the business and aggressively pursue opportunities to enter mergers, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combinations with one or more businesses or entities within the Natural Skin Care industry, or related industries, that provide synergistic products and or markets. Arrestage International intends to create a significant brand in the natural skin care marketplace. Various officers and directors of the Company have created or participated in the marketing and development of branded products in this space.
We have two employees, and by design utilize, to largest extent possible, outside consultants and advisors. As the company’s operations grow, it may become advantageous to add additional employees to optimize performance as growth may dictate.
We have a license for the full use of all intellectual property and formulas of the developer, Ann Shapiro, for all geographical regions and chAnnls of distribution. Mrs. Shapiro formulated the products that the Company now exclusively licenses. Mrs. Shapiro is the wife of the majority shareholder, and Director of the Company, Dr. Roy Shapiro. Ann has worked closely with her daughter, Kimberly Shapiro, (who is a current board member of the Company) in the creation of the product line. Arrestage International plans to address the ever-increasing world demand for natural skin care products, in addition to the increasing demand in US domestic markets. In addition to aa significant Internet presence we seek to engage distribution organizations in the US and Internationally to market our proprietary product line(s) of natural skin care formulations and additional products that it may potentially acquire.
Acquisition of a Licensing Agreement
Effective June 22, 2011 Arrestage entered into an agreement to acquire an exclusive licensing agreement from Ann Shapiro. Mrs. Ann Shapiro is the wife of one of the BOD members Dr. Roy Shapiro, so he had direct insight on this product line. This transaction was completed as a related party transaction with Arrestage. As part of the license agreement Arrestage agreed to pay $50,000 in three installments of unspecified amounts and on unspecified dates in exchange for consideration received. The license agreement expires in 2025.
Ann Shapiro owns the registered trademark of Arrestage and cosmetic formulas (“Arrestage mark & formulas”). In accordance with this agreement, Arrestage International, Inc. an exclusive license to sell the Arrestage mark & formulas. Ann Shapiro retains title and ownership of the Arrestage mark & formulas.”
All rights other than those specifically granted herein to Licensee are reserved to Licensor, including, without limitation, Licensors right to continue to use the Licensed Property in any form, manner, and medium.
Arrestage will work to expand its growth quickly. During the 4th quarter of 2020, Arrestage will work with a FINRA registered broker dealer to register free trading shares and have a 15( c ) 211 re-filed on the Company’s behalf. During the same time frame the Company will work with formulators to update and improve the existing products covered under the exclusive license, and to begin the process of identifying new business combination targets, and update discussions with companies talked with in the past.
Also, within Q4 of 2020, we will work to update the Company’s website to create a robust ecommerce site, and begin discussions with potential distributors.
During the 1st quarter of 2021 we hope to launch the ecommerce sight and the first re-designed products of the product line both online and through distributors.
With regards acquisitions, the Company will work with its broker dealer and hopefully be in a position during the first six months of 2021 to have an deal agreed to, if not closed.
Funding during the next twelve months will come primarily from existing debt financing and, sources to be negotiated through our broker dealer relationship. The Company will be reliant on such debt financing, access to capital markets, and future revenues, since the company currently has no revenue.
The initial products have previously gone through behavioral testing and several reformulations. We will re-examine each product to confirm that all products are meeting the needs and desires of todays more educated and discerning consumers.
Financial Condition and Results of Operations
Revenues
The Company is not currently generating revenues and does not expect to generate any during 2020 while it completes its restructuring and works to obtain a trading symbol . The Company has a limited operating history and faces all the risks and uncertainties associated with an unproven history.
While this uncertainty exists, the Company believes it will achieve growth and profitability through advancement of its product line and through targeted acquisitions and joint ventures.
License and advanced industry experience
Effective June 22, 2011 Arrestage entered into an agreement to acquire an exclusive licensing agreement from Ann Shapiro. Ms. Ann Shapiro is the wife of one of the BOD members Dr. Roy Shapiro, so he had direct insight on this product line. This transaction was completed as a related party transaction with Arrestage. As part of the license agreement Arrestage agreed to pay $50,000 in three installments of unspecified amounts and on unspecified dates in exchange for consideration received. The license agreement expires in 2025.
Certain members of management and of the Board have a long history of experience in the wellness, cosmetic and health care sectors and plan on using their expertise, as well as the expertise of consultants and advisors, to grow our product base, create a market presence, and leverage its strategic relationships for specific partnership and targeted acquisitions.
Net operating loss
At December 31, 2019 and 2018, the Company has net operating loss and loss carry forwards of approximately $431,332 and $346,541 respectively. Net operating loss carry forwards may be used in future years to offset taxable income. Currently all of the tax years filing is subject to examination.
Operating Expenses
Our operating expenses for the year ended December 31, 2019 were $69,376 of which $42,611 represented Professional and Legal Fees, $25,849 were for Accounting and Bookkeeping and $916 represented miscellaneous General and Administrative Expenses. The Company recognized Interest Expense of $15,914 during 2019. Total Expenses totaled $85,290. Our operating expenses for the year ended December 31, 2018 were $108,265 of which $82,238 represented Professional and Legal Fees, $23,290 represented Accounting and Bookkeeping Fees and 2,747 represented miscellaneous General and Administrative Expenses. The Company recognized Interest Expense of $9,430 during 2018.
Liquidity and Capital Resources
Our immediate future principal demands for liquidity are to enable the Company to continue to fund the expenses associated with maintaining reporting requirements, becoming a trading Company, launch an updated ecommerce website, update products, and general corporate purposes. We have no history of sales and have incurred negative operating cash flows since inception to date in 2019. To date we have borrowed $219,879 from a shareholder and Director in the form of a multiple advance 8% Demand Note, with accrued interest of $31,960 as of December 31, 2019.
Although the Company may produce revenues within the next few operating quarters, we do not plan on our operating activities being able to fund operations over the next four quarters. In December 2017, the Company filed an S-1 Registration with the SEC with the plan of raising equity financing to raise capital to execute on its business plan. On October 11, 2018 the Company received a Notice of Effectiveness from the SEC indicating that the S-1 Registration was effective as of that date. The Company has been in conversations with Network 1 Financial Securities, a FINRA registered broker/dealer, and other broker dealers, to facilitate the filing of a Form 15(c)211 with FINRA to enable the Company to become a trading company. The Company and Network 1 has determined that the quickest route to a trading symbol may be to file a post effective amendment to the S-1 registering existing shares. Subsequent to acceptance by the SEC of that amendment, the Company and its broker dealer will determine the best strategy for raising additional capital through the capital markets.
There can be no assurance that required future financing can be successfully completed on a timely basis, or on terms acceptable to us. Any future issuance of equity securities could cause dilution to our shareholders. Any incurrence of indebtedness would increase our debt service obligations and would cause us to be subject to restrictive operating and financial covenants.
We had negative net working capital of ($278,880) as of December 31, 2019 as compared to (194,091) as of December 31, 2018.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, as reflected in the accompanying financial statements, the Company has no operations, a net loss of ($84,790) for the year ended December 31, 2019 as compared to ($117,695) for the year ended December 31, 2018, an accumulated deficit of ($431,331) as of December 31, 2019 and ($346,541) as of December 31, 2018 and a working capital deficiency of ($278,880) and ($278,880) at December 31, 2019 and December 31, 2018 respectively. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The financial statements included herein are prepared on a going concern basis. The Directors, officers and significant shareholders have undertaken to provide continuing financial support so that the Company is able to pay its debts as and when they fall due. In addition, Management’s plans to ensure the Company continues as a going concern include the pay-down of outstanding debt of the Company and funding of future operations using proceeds from the revenues expected to be generated from the sale of products and services within acquired companies.
While the Company looks to acquire targeted acquisitions, adverse changes in market conditions or limits on the Company’s ability to obtain financing could limit the Company’s acquisition of such targets and the production, marketing and sale of products and services of the targeted acquisitions. The impact of such eventualities could influence future operations of the Company.
Future Capital Requirements
The Company has no commitments for material expenditures beyond professional reporting, accounting, and consulting fees, which has already been contracted and paid. Management believes that with its limited commitments the Company has adequate liquidity to fund its operations at current levels through year-end 2021.
We expect to rely on debt and sales of our equity and/or debt in order to continue to fund our business operations. Issuances of additional shares or convertible debt will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of such securities or arrange for debt or other financing to fund planned acquisitions and growth initiatives.
In addition, the Company intends to continue to pursue joint ventures and acquisitions using authorized Company shares to increase revenue producing assets. Management believes the time and resources spent on seeking value propositions in acquisitions and joint ventures with prove to accretive in the long term.
Off Balance Sheet Arrangements
There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Non-GAAP Financial Measures Disclosure and Reconciliation
The information below references non-GAAP financial measures that we use in order to track the progress of our business. These measures include core net loss, core net loss per diluted share and EBITDA from continuing operations (earnings before interest, taxes, depreciation and amortization). We believe these measures provide helpful information with respect to the Company’s operating performance and cash flows. We believe that the inclusion of these non-GAAP financial measures are important to assist investors in comparing year ended 2018 to 2017, on a comparable basis. In addition, we use EBITDA because it: (i) measures performance over the periods in which executives can have significant impact, (ii) is directly linked to our annual incentive plan and long-term growth plan, and (iii) is a key metric used by management and the Board to assess our operating performance. However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for net loss, net loss per diluted share or cash flows from operating activities in accordance with GAAP. This additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
ITEM 8.
ITEM 8. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
During the first quarter of 2018 our CEO, the Chairman of the Audit Committee of the Board of Directors, and a financial consultant began evaluating the design and effectiveness of our “disclosure controls and procedures” (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). As of that date the President, Chairman of the audit committee and the consultant concluded that the disclosure controls and procedures were effective. Again, on December 31, 2018 the CEO and CFO evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2018 and concluded that the Company’s disclosure controls and procedures were effective.
The Company reviews its disclosure controls and procedures on a quarterly basis. The Company’s Chief Executive Officer and Chief Financial Officer participate in the evaluation. Where required, they have the authority to implement appropriate disclosure controls and procedures to remedy any material weaknesses. For the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective. . On December 31, 2019 the CEO, audit committee members, and outside financial advisor evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2019 and concluded that the Company’s disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in rule 13a-15(f) o the Exchange Act. The Company’s internal control system is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:
●Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
An evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and its audit committee, of the effectiveness of the design and operation of the Company’s procedures and internal control over financial reporting as of December 31, 2019. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that evaluation, the Company concluded that the Company’s internal controls over financial reporting effective in that there was not a material inherent weakness as of December 31, 2019.
Management will continue to make accounting procedures strong and maintain outsourcing of certain financial functions to mitigate and potential material weakness in internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, wherein non-accelerated filers are exempt from Sarbanes-Oxley internal control audit requirements.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the year ending December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Inherent Limitations of Internal Controls
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention and overriding of controls and procedures. A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error fraud may occur and not be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.
Management is aware that there is a lack of segregation of duties and accounting personnel with appropriate qualifications at the Company due to the small number of employees dealing with general administrative and financial matters. This constitutes a deficiency in the internal controls. Management has decided that considering the employees involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation beyond that position and the company added and staffed an internal controller position to assist with company financial accounting and disclosure. In light of the Company’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions. However, when the cash flow situation improves, the Company intends to increase personnel with appropriate accounting qualifications to mitigate the current lack of segregation of duties within the general administrative and financial functions.
Item 8B. Other Information
Cyber Security, Data Protection and Privacy
Arrestage has assessed its level of controls and procedures for cybersecurity risk. Due to the current lack of exposure within its current business operations, Arrestage has been informed the effect of any cyber-attack would be minimum. Arrestage has not had any such occurrence to date. The Company is informed of cyber-risk factors and will create disclosure controls and procedures when they become relevant to its business model.
Based on new Regulatory authority of the European Unions’ General Data Protection Regulation (“GDPR”) and tightening US laws, Arrestage International must abide by and follow directives provided by such regulation.
For Privacy Protection Compliance in the US, California’s SB1386 bill of 2003, implemented in 2015 as (California Electronic Communication Privacy Act (S.B. 178) a pioneered mandatory data-breach notification across the United States, spurringV a decade of unprecedented corporate spending on information security. Europe has expanded this idea into its landmark General Data Protection Regulation (GDPR). As such, Arrestage International, Inc., now needs to update its US privacy incident-response playbook in many areas outlined in the GDPR’s May 2018 compliance directives.
Data Protection in the US deals with the security of the electronic transmission of personal data. While the US does not have any centralized, formal legislation at the federal level regarding this issue, it does mandate a form of compliance through various organizations. Again, California has taken the lead as far as State mandates (California A.B 1541, 2015), but the EU’s GDPR creates a centralized regulatory framework that multi-nationals must now follow (as of May 25, 2018). While Arrestage International, Inc. has acted to abide by data privacy and protection mandates, any misinterpretation or non-adherence would case regulatory scrutiny, fees/fines, and other potential issues. Any such regulatory mandate would affect business operations and percentage of profitability.
ITEM 9
ITEM 9 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Arrestage international, INC.
fINANCIAL STATEMENTS
december 31, 2019 AND DECEMBER 31, 2018
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Arrestage International, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Arrestage International, Inc. as of December 31, 2019 and 2018, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2018
Lakewood, CO
September 8, 2020
ARRESTAGE INTERNATIONAL, INC.
BALANCE SHEET
AS of DECEMEBR 31, 2019 AND 2018
The accompanying notes are an integral part of these financial statements
ARRESTAGE INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
The accompanying notes are an integral part of these financial statements
STATEMENT OF CHANGES IN STOCKHOLDERS (DEFICIT)
For The Period from January 1, 2016 through December 31, 2019
The accompanying notes are an integral part of these financial statements
ARRESTAGE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND DECEMBER 31, 2018
The accompanying notes are an integral part of these financial statements
ARRESTAGE INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Arrestage International, Inc. (the “Company”) is presented to assist in understanding the Company’s financial statements. The financial statements and footnotes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements.
Organization and Description of the Business
The Company was incorporated under the laws of the State of Nevada on June 15, 2011 and is in the Nutraceutical business and holds formulas on skin care products as well as brand formulas, and other intellectual property.
Use of Estimates by Management
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in banks and highly liquid investments with original maturities of three months or less that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the carrying amount of cash and cash equivalents approximates fair value.
Concentrations of Credit Risk
The Company places its cash and cash equivalents with major financial institutions. At December 31, 2019 and December 31, 2018 the Company did not have any cash balances on deposit with banks which exceeded the balance insured by the FDIC, and does not believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.
Intangible Assets
Goodwill and Intangible Assets-Intangible assets with finite useful lives are amortized while intangible assets with indefinite useful lives are not amortized. Amortizable intangible assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Indefinite-lived intangible assets are tested annually for impairment and when events or changes in circumstances indicate the carrying value may not be recoverable. The appropriateness of the indefinite-life classification of non-amortizable intangible assets is also reviewed as part of the annual testing or when circumstances warrant a change to a finite life. The Company performs its annual impairment testing as of December 31 each year, which is the last day of the Company’s fiscal year.
Intangible assets with indefinite useful lives (The Trademark License) are tested for impairment at the individual asset level by comparing the fair value of the indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recognized to reduce the carrying amount to fair value. Fair values of indefinite-lived intangible assets are estimated using discounted cash flow (“DCF”) models.
In using a DCF method of establishing a fair value, management must make certain assumptions as to the likelihood of having cash flow from operations in the future based on past performance and prospects of sales in the future. The Company has no history of sales and no orders pending. Therefore, it is not possible to determine an appropriate level of cash receipts from operations into the future. Based on this assumption, during 2014 management determined that the fair value of the Trademark License under Generally Accepted Accounting Principles was zero. Accordingly, the Company has chosen to write the carrying value of the Trademark license to zero as of December 31, 2014.
Fair Value of Financial Instruments. The Company’s financial instruments include cash, accounts receivable, employee advances, due from related parties, prepaid expenses, development costs, deposits, accounts payable, credit cards payable, accrued expenses, and due to related parties. The estimated fair value of these instruments approximates its carrying amount due to the short maturity of these instruments. The carrying value of short and long-term debts approximates fair value because those financial instruments bear interest at rates that approximate current market rates for loans with similar maturities and credit quality.
Recent Accounting Pronouncements
The Company does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Ricks and Uncertainties
The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance that the Company will be able to complete a business combination.
Basis of Presentation-Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, as reflected in the accompanying financial statements, the Company has no operations, a net loss of ($84,790) for the year ended December 31, 2019, and ($117,695) for the year ended December 31, 2018, an accumulated deficit of ($431,331) as of December 31, 2019 and ($346,542) as of December 31, 2018, and a working capital deficiency of ($278,880) and ($194,090) at December 31, 2019 and December 31, 2018 respectively. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
These financial statements are prepared on a going concern basis because the Directors, officers and significant shareholders have undertaken to provide continuing financial support so that the Company is able to pay its debts as and when they fall due. In addition, Management’s plans to ensure the Company continues as a going concern include the pay-down of outstanding debt of the Company and funding of future operations using proceeds from the revenues expected to be generated from the sale of products and services within acquired companies.
While the Company looks to acquire targeted acquisitions, adverse changes in market conditions or limits on the Company’s ability to obtain financing could limit the Company’s acquisition of such targets and the production, marketing and sale of products and services of the targeted acquisitions. The impact of such eventualities could influence future operations of the Company.
Income Taxes
The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) ASC 740, “Accounting for Income Taxes.” The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, the effect of net operating losses, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
Earnings per Share
Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding. There were no options or warrants outstanding at December 31, 2019 nor December 31, 2018. Diluted earnings per share is not shown for the periods in which the Company incurs a loss because it would be anti-dilutive.
Other
The Company has selected December 31 as its fiscal year end.
The Company has paid no dividends.
No advertising expense has been incurred.
The Company consists of one reportable business segment.
The Company has not entered into any leases.
NOTE 2 - INCOME TAXES
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist entirely of the benefit from net operating loss (NOL) carry forwards. The net operating loss carry forward if not used, will expire in various years through 2037, and is severely restricted as per the Internal Revenue code if there is a change in ownership. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry forwards. Net operating loss carry forwards may be further limited by other provisions of the tax laws. With few exceptions, our income tax returns are no longer subject to Federal tax examinations by tax authorities for years before December 31, 2012.
The Company is subject to federal and state income tax. No provision for tax has been made at December 31, 2019, and 2018 as the Company had no taxable income for both periods. The following table reconciles the Company’s statutory tax rate to its effective tax rate as a percentage of income before income taxes:
The components of the Company’s deferred income tax assets are set forth below:
NOTE 3 - RELATED PARTY TRANSACTIONS
On June 27, 2011 the Company entered into a Multiple Advance Demand Note with The Shapiro Trust, owner of 40% of the outstanding equity in the Company. The Note is due upon Demand and bears an interest rate of 8% per annum. As of December 31, 2019 and December 31, 2018 the principal balance on the Note was $219,879 and $150,857, respectively. As of December 31, 2019 and December 31, 2018 the accrued interest on the Note was $31,960 and $16,046, respectively. The total principal and interest due The Shapiro Trust as of December 31, 2019 and December 31, 2018 was $251,839 and $166,903, respectively. See Note 4.
On June 22, 2011 the Company entered into a Trademark License Agreement with Ann Shapiro, a beneficiary of the Shapiro Trust and wife of one of the Company’s directors. Ms. Shapiro owns the Registered Trademark and cosmetic formulas. Under the terms of the Agreement the Company was granted an exclusive license to sell “Arrestage Mark and Formula” in exchange for a Royalty of $50,000 to be paid in three installments. Ms. Shapiro retains title and ownership of the Mark and Formulas. The Termination Date of the License is 2025. See Note 3.
NOTE 4 - TRADEMARK LICENSE
On June 22, 2011 the Company entered into a Trademark License Agreement with Ann Shapiro. Ms. Shapiro owns the Registered Trademark and cosmetic formulas. Under the terms of the Agreement the Company was granted an exclusive license to sell “Arrestage Mark and Formula” in exchange for a Royalty of $50,000 to be paid in three installments. Ms. Shapiro retains title and ownership of the Mark and Formulas. The Termination Date of the License is 2025.
The Trademark License was originally recorded at a cost of $50,000 and tested for impairment in December 2014, at which time it was determined that the fair value of the License was zero and an impairment allowance of $50,000 was recorded. See Footnote 1-Intangible Assets.
NOTE 5 - FINANCING ACTIVITIES
Note Payable
The Following is a summary of The Note Payable-Current
NOTE 6 - CAPITAL STOCK and STOCKHOLDERS’ EQUITY
Description of Capital Stock--The Company has two classes of authorized capital stock: Common Stock and Preferred Stock. Both were authorized June 22, 2011 and both have a par value of $001. The holders of Common Stock are entitled to one vote per share. Rights and Preferences for the Preferred Stock will be determined by the Board of Directors prior to issuance of any Preferred Stock.
There are 30,000,000 shares of Common Stock authorized. As of December 31, 2018, and 2017 there were 3,600,000 shares of Common Stock issued and outstanding.
During the years ended December 31, 2019 and December 31, 20187, the Company did not issue any shares of common stock
There are 5,000,000 shares of Preferred Stock authorized and zero outstanding as of December 31, 2019.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
There are no Commitments and Contingencies.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated events subsequent to December 31, 2019 and the date the financial statements were available to be issued, to assess the need for potential recognition or disclosure. No subsequent events were noted that require recognition or disclosure in the financial statements.
ITEM 10
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the name, age, and position of the individuals who currently serve as executive officers and directors of Arrestage International, Inc. The following also includes certain information regarding our directors’ and officers’ individual experience, qualifications, attributes and skills and brief statements of those aspects of our directors’ backgrounds that led us to conclude that they are qualified to serve as directors.
Kimberly Shapiro- Chairman and Director
Ms. Shapiro has been in the Staffing and Recruiting industry for the past three years. She previously had focused on a career in financial services and investments with Northwest Mutual Life. She worked in the Cosmetic and Beauty industry with various positions in retail, wholesale as well as Salon services businesses before graduating from California State University in Long Beach. After obtaining her Bachelor of Arts degree in Communications and Business Marketing, Ms. Shapiro was involved in the early developmental stages and clinical trials of Arrestage Laboratories’ formulations branding model.
During the past five years, Ms. Shapiro has been in management for Randstad in Irvine, California. Prior to that, Ms. Shapiro focused on financial services management at Northwest Mutual Life. Neither Randstad nor Northwest Mutual Life is affiliated with Arrestage in any way.
John W. Muldoon-CEO and Director
John W. Muldoon, III has over 26 years of experience providing strategic guidance and leadership within his assigned areas of responsibility. As SVP for Allied Universal, he has oversight for 15 branch offices, 13,000 security / event professionals and over $235 million in annual revenue. John Is also responsible for our Special Event business throughout North America. As a seasoned senior leader, John has provided vital oversight and direction within the security industry.
He previously served as President, Western Region, for U.S. Security Associates and Area Vice President for Securitas. John prioritizes feedback and identifies performance improvement opportunities in order to ensure exceptional customer service delivery for his clients. In his previous leadership and management roles, John utilized his talent for critical thinking and problem solving to direct high functioning teams to achieve results across wide geographies.
John has been consistently recognized throughout his career for outstanding achievement and overall performance. He is active in many industry associations, including ASIS International, where he has held leadership roles including Vice Chair, Treasurer, and Executive Board Member of the Irwindale Chamber of Commerce. John has completed numerous Critical Infrastructure Security and Resilience courses offered through the Department of Homeland Security. Numerous Leadership, Management and Securitas Executive Training Program.
Gary Croft- Director
Mr. Croft brings over 26 years of experience in dermatology and aesthetics commercialization to Arrestage International, as well as worldwide business development and leadership skills. Before joining Arrestage International, he was Vice President of Aesthetics at Merz Pharmaceuticals and more recently, President at The Aesthetics Group, an aesthetics and dermatology consulting company focused on business planning and marketing services. Mr. Croft led the Sales organization for OrthoNeutrogena Aesthetics (Johnson and Johnson) in the U.S. and Canada and has held a variety of positions in Sales, Marketing, New Product Development and Business Development with Medicis, GlaxoSmithKline and Aventis from 1985 through 2004. Mr. Croft holds a Bachelor of Arts in Economics from the University of East Anglia. Mr. Croft is the Principal, President, and CEO of Yorkshire Square Craft Brewery Based in Los Angeles, California since 2015. Yorkshire Square Craft Brewery is located at 1109 Van Ness Ave., in Torrance, California 90501.
Mr. Croft is also the Principal of a Los Angeles based Healthcare consulting firm called The Aesthetics Group that specializes in aesthetics and skincare sales, marketing and business development. The Aesthetics Group started in January of 2099 and still operates today. Neither Yorkshire Square or The Aesthetics Group is affiliated with Arrestage International in any way.
Dr. Roy Shapiro- Director
Dr. Shapiro has worked in diagnostic radiology, and is an expert in aesthetic procedures using lasers and intense light sources. He is also the co-founder of Hi-Tech Medical Lasers, one of the first Carbon Dioxide Laser companies to manufacture and market hand held, air-cooled lasers which was sold to Pfizer. Subsequently, Dr. Shapiro formed Lakes Imaging Centers, which built and acquired 15 Diagnostic Imaging Centers operating in eight states and sold them to MedPartners and a private equity firm. He has also been acting in an advisory capacity in medical technology to Wharton Private Equity Fund, Westwood Advisors, ShapiroGroup Aesthetics LLC and CLRS Technology, and has served on the Board of Directors of HealthMed Services LTD, a public company. Dr. Shapiro currently sits on the board of an investment firm that invests in technology transfers to developing countries.
He has over 20 years of experience creating financial models and managing transition teams. Dr. Shapiro has overseen strategic planning and sales expansion of the medical/healthcare businesses and has played a role in a wide range of executive management experiences in private and public sectors. In 1997 he constructed one of the earliest platforms for a Medical Diagnostic Service Enterprise and helped launch an HIPAA compliance and Image storage/forward software company. Dr. Shapiro also specializes in: aesthetic medicine, medical devices, clinic management, imaging center development, healthcare investing, anti-aging telemedicine/teleradiology, venture capital & investment banking. Mr. Shapiro is also a collaborator and officer of CrestRock Advisors, Inc. (“CrestRock”). CrestRock is located at 20843 N. Hayden Road, Suite 105-193 in Scottsdale, Arizona 85255. CrestRock is a structured finance consulting firm. CrestRock is an affiliate of the offering due to the fact it owns shares of Arrestage.
Board of Directors
Our Board of Directors currently consists of four directors; Kimberly Shapiro, Dr. Roy Shapiro, John Muldoon and Gary Croft. The Directors are elected to serve one-year terms, renewed until replaced or resign and our Bylaws permit up to ten directors, as well as an advisory board. Two of our directors qualify as independent directors for purposes of compliance with the corporate governance rules as approved by the SEC for the NYSE-AMEX.
Board Committees
Audit Committee
The Company will grow its Audit committee from its current members of Mr. Gary Croft and Mr. John Muldoon. Mr Croft meets the definition of “independent director” for purposes of the listed market rules (we will add specifics when determined our listing) and the independence requirements of Rule 10A-3 under the Exchange Act. We believe that Mr. Croft also qualifies as an “audit committee financial expert” under SEC rules.
Our audit committee will be responsible for, among other matters:
●appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
●discussing with our independent registered public accounting firm their independence from management;
●reviewing with our independent registered public accounting firm the scope and results of their audit;
●approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
●overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
●reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements;
●establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal control or auditing matters; and
●reviewing and approving related person transactions.
Our board of directors has adopted a written charter for the audit committee to and will be publicized upon listing on the exchange. Such information will be available on our website.
All audit and non-audit services to be provided by our independent public accounting firm must be approved, in advance, by the audit committee.
Compensation Committee
The Company will grow its Compensation committee from its current member Dr. Shapiro. Our board of directors has affirmatively determined that it will elect one members of the compensation committee that will meet the heightened definition of “independent director” for purposes of the rules applicable to members of the compensation committee, and the definition of “non-employee director” for purposes of Section 16 of the Exchange Act.
The compensation committee will be responsible for, among other matters:
●annually reviewing and approving our goals and objectives for executive compensation;
●annually reviewing and approving for the chief executive officer and other executive officers (1) the annual base salary level, (2) the annual cash incentive opportunity level, (3) the long-term incentive opportunity level, and (4) any special or supplemental benefits or perquisites;
●reviewing and approving employment agreements, severance arrangements and change of control agreements for the chief executive officer and other executive officers, as appropriate;
●making recommendations and reports to the board of directors concerning matters of executive compensation;
●reviewing compensation plans, programs and policies;
●handling such other matters that are specifically delegated to the compensation committee by the board of directors from time to time.
Nominating and governance Committee
Mr. Gary Croft currently heads our nominating and corporate governance committee. Members of such committee will be listed on our web site before the Company becomes exchange traded. Currently the charter for such committee calls for responsibilities listed below.
The nominating and corporate governance committee will be responsible for, among other matters:
●identifying the requisite skills and characteristics to be found in individuals qualified to serve as members of the board of directors;
●conducting inquiries into the background and qualifications of possible candidates;
●recruiting of qualified candidates for membership on the board of directors;
●recommending for selection by the board of directors, (1) nominees to the board of directors and (2) committee members for each committee of the board of directors;
●overseeing the corporate governance of the company;
●evaluating the performance of the committee and its charter on an annual basis;
●handling such other matters that are specifically delegated to the nominating and corporate governance committee by the board of directors from time to time.
Code of Conduct and Ethics
Our Board of Directors will adopt a code of conduct and ethics that will be effective immediately following the effective date of this registration statement. The code of conduct and ethics will establish the standards of ethical conduct applicable to all directors, officers, and employees of our Company. The code addresses, among other things, conflicts of interest, compliance with disclosure controls and procedures and internal control over financial reporting, corporate opportunities and confidentiality requirements. The audit committee of our board will be responsible for applying and interpreting our code of conduct and ethics in situations where questions arise.
Corporate Governance
We believe that good corporate governance is important to ensure that, as a public company, we will be managed for the long-term benefit of the shareholders. In preparation for the completion of our public offering and in the event the Company makes a future application for listing of the Company’s shares on the NYSE-AMEX, we have been reviewing the corporate governance policies and practices of other public companies. We have also considered the provisions of the Sarbanes-Oxley Act and the rules of the SEC and NYSE-AMEX Exchange. Based on that review, our Board of Directors will begin taking steps to implement many of those provisions and rules.
Election of Directors and Vacancies
The Company’s Bylaws provide that the Board of Directors, which currently consist of six (6) directors may have up to a maximum of seven (7) directors. Our Bylaws further provide that vacancies on our Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors or a super majority vote of the shareholders. Directors elected to fill vacancies hold office until the expiration of the term of the director they replaced.
Compensation Discussion and Analysis
As of the date of this filing, the process of determining executives’ base salaries will be determined. After the initial two-year period covered by the provisions of the Exchange Agreement, the compensation for our executive officers will be determined by the Compensation Committee.
Planned objectives
We expect that our executive compensation programs for our named executive officers will be designed to achieve the following objectives:
●To provide executives with overall levels of compensation that we believe are competitive with the high growth energy sector and insure all pay packages are signed at arm’s length and structured ethically.
●To attract the highest caliber of talent.
●To provide executive pay packages with appropriate short and long-term incentives, including annual bonus and equity compensation tied to individual and company performance.
●To reward performance that creates shareholder value for our company.
While we have not adopted any formal policies regarding executive compensation, including policies or guidelines for allocating compensation among salary, cash incentives, long-term incentives and other benefits, we expect to do so within the next 6 months.
ITEM 11
ITEM 11 - EXECUTIVE AND DIRECTOR COMPENSATION
To date our named executive officers have not received direct compensation for their efforts with Arrestage International.
Director Compensation
The independent members of the Company’s Board of Directors do not receive any compensation for board meetings attended.
No retirement, pension, profit sharing, or stock option programs have yet been adopted by the Company for the benefit of its employees.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the filing of this Form 10-K, certain information concerning the beneficial ownership of our common stock as of December 31, 2019, by (i) each stockholder known by us to own beneficially five percent or more of our outstanding common stock (ii) each director (iii) each named executive officer, and (iv) all of our executive officers and directors as a group and their percentage ownership and voting power.
Principal Shareholders
As of December 31, 2019
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as otherwise described herein, there have been no related party transactions, or any other off-balance sheet transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
Indebtedness/ Related Transactions
On June 27, 2011 the Company entered into a Multiple Advance Demand Note with The Shapiro Trust, owner of 40% of the outstanding equity in the Company. The Note is due upon Demand and bears an interest rate of 8% per annum. As of December 31, 2019 and December 31, 2018 the principal balance on the Note was $219,879 and $150,857, respectively. As of December 31, 2019 and December 31, 2018 the accrued interest on the Note was $31,960 and $16,046, respectively. The total principal and interest due The Shapiro Trust as of December 31, 2019 and December 31, 2018 was $251,839 and $166,903, respectively. See Note 4.
On June 22, 2011 the Company entered into a Trademark License Agreement with Ann Shapiro, a beneficiary of the Shapiro Trust and wife of one of the Company’s directors. Ms. Shapiro owns the Registered Trademark and cosmetic formulas. Under the terms of the Agreement the Company was granted an exclusive license to sell “Arrestage Mark and Formula” in exchange for a Royalty of $50,000 to be paid in three installments. Ms. Shapiro retains title and ownership of the Mark and Formulas. The Termination Date of the License is 2025. See Note 3.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Policies and Procedures with Respect to Related Party Transactions.
The chairman of our audit committee has managerial and forensic accounting experience and he also has served on numerous public boards as audit committee member and is thoroughly familiar with the types of related party transactions that occur in smaller companies. Management relies on his and our outside accounting firm’s expertise regarding potential conflicts and disclosure.
Director Independence
Our Board of Directors has determined that the following directors are independent directors for purposes of compliance with the corporate governance rules of the NYSE AMEX exchange; Messrs. Croft, and Muldoon. We intend to comply with the rules relating to the number of independent directors composing our board and we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only the independent directors are present. We intend to comply with future governance requirements to the extent they become applicable to us.
ITEM 14
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth information regarding the amount billed to us by our independent auditors, BFBorgers CPA PC for the years ended December 31, 2019 and 2018 respectively:
(1)Audit Fees are the aggregate fees billed by the independent auditor for the audit of the annual financial statements, reviews of interim financial statements, and attestation services that are provided in connection with statutory and regulatory filings or engagements.
Generally, the board of directors approves in advance audit and non-audit services to be provided by our independent auditors. In other cases, in accordance with Rule 2-01(c)(7) of Securities and Exchange Commission Regulation S-X, the board of directors has delegated preapproval authority to our President for matters that arise or otherwise require approval between regularly scheduled meetings of the board of directors, provided that such approvals are reported to the board of directors at its next regularly scheduled meeting.
ITEM 15.
ITEM 15. EXHIBITS
(1)Previously filed in connection with the Company’s Form 10 Registration Statement and incorporated herein by reference.
(2)Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 8th September, 2020.
ARRESTAGE INTERNATIONAL, INC.
SIGNATURE: /s/ John Muldoon III
John Muldoon III, CEO
In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated, on the 8th September, 2020.
Signatures
Capacity
/s/ John Muldoon
CEO
/s/ Roy Shapiro
Director
/s/ Kimberly Shapiro
Director
/s/ Gary Croft
Director
(1)Previously filed in connection with the Company’s Form 10 Registration Statement and incorporated herein by reference.
(2)Filed herewith