Item 1.Description of Business
Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico.
Effective January 16, 2014, Vladimir Leonov, the Chief Executive Officer, majority shareholder and sole director of the Company sold 8,000,000 shares of our common stock (approximately 77% of the issued and outstanding shares of common stock of the Company) owned by him to Thru Pharma, LLC (d/b/a PharmaCline), a Delaware limited liability company (“Thru Pharma”), for total cash consideration of $275,000 in a private transaction (the “Acquisition”). The Acquisition resulted in a change in control of the Company. Simultaneous with the closing of the Acquisition, Mr. Leonov resigned as a director and from all offices he held with us, and Steven J. Keough, who is a controlling member of Thru Pharma, was elected as our director and appointed as the Company’s Chief Executive Officer, President, Secretary and Treasurer.
Following the changes in control and management of the Company related to the Acquisition, we have been reevaluating our business plan. We have been assessing potential new business models to replace our previous business model relating to hot dog stands in Mexico. While it is quite possible that there will be a new business model for us, we have not finalized that decision as yet. It is possible that such a new model could be relate to a new business sector other than the food sector as we have been reviewing business models which are in sectors other than the food sector. It is also possible that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2014, and as of the date of this filing, we continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.
Pursuant to a Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014 and February 9, 2015 (the “Consulting Agreement”), Thru Pharma transferred (effective April 1, 2014) 7,660,000 shares of the Company’s common stock to Strategic (“the Transfer”) as partial compensation for consulting services provided to Thru Pharma by Strategic. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.
In connection with the Transfer, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of said 7,660,000 shares of common stock until the later of (i) the achievement of the objectives by Thru Pharma and Strategic set out in the Consulting Agreement and (ii) June 30, 2015.
As part of the Consulting Agreement, Thru Pharma also agreed that upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, Thru Pharma would cause such entity to issue to Strategic a non-qualified stock option or warrant to purchase 1,000,000 (one million) shares of common stock of the entity that was the subject of the M&A Transaction. Such option or warrant will be of five-year duration, exercisable at the greater of the fair market value per share on the date of grant or $0.10 per share, as well as other routine terms.
Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.
The Company’s status as a “shell company” as of the date of this report remains unchanged.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not generated any revenues as of October 31, 2014. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $81,306 as of October 31, 2014 and further losses are anticipated in the development of its business. The Company currently has no cash balance, a working capital and stockholders’ deficit of $45,458 and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
The Company is dependent on additional investment capital to fund operating expenses. The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Item 1A.
Item 1A.Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 2.
Item 2.Description of Property
We do not own any real estate or other properties.
Item 3.
Item 3.Legal Proceedings
On June 4, 2014, we were named as a defendant in a lawsuit filed by AMERIFINANCIAL, INC. (“AMERIFINANCIAL”), of Houston, Texas. The action relates primarily to a contract dispute between AMERIFINANCIAL and our former majority shareholder, THRU PHARMA, LLC. The dispute alleged unpaid balances of $171,870 and five membership units in THRU PHARMA, LLC. The dispute does not allege any actions or inactions by our officers or representatives acting on our behalf. Counsel for THRU PHARMA, LLC, has requested that we be dismissed from this lawsuit, as we are not party to the disputed contract. As we have been advised by our legal counsel that there is no legal basis for us being a part of the lawsuit, we have not recognized a liability in connection with it. Subsequent to our year end, on November 18, 2014, counsel for THRU PHARMA, LLC, filed an Original Answer and Request for Rule 194 Disclosures with the court. That filing included a general denial of all allegations against all defendants.
Item 4.
Item 4.Mine Safety Disclosures
Not applicable to our Company.
PART II
Item 5.
Item 5.Market for Common Equity and Related Stockholder Matters
Market Information
Our shares of common stock are traded on the OTCBB under the symbol “ARAT.” Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
The following table sets forth the high and low trade information for our common stock for each quarter of the fiscal year ended October 31, 2014. As of October 31, 2013, no shares of our common stock had traded. No shares were traded during the fiscal quarters ended January 31, 2014 and July 31, 2014. The first trade of our common stock was on February 19, 2014.
1No shares traded during quarter. Bid price remained at $0.60.
Number of Holders
As of October 31, 2014, the 10,300,000 issued and outstanding shares of common stock were held by a total of 38 shareholders of record.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal years ended October 31, 2014 and 2013. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
No sales of unregistered securities were completed in the twelve months ended October 31, 2014.
Purchase of our Equity Securities by Officers and Directors
No purchase of equity securities took place in the twelve months ended October 31, 2014.
Other Stockholder Matters
None
Item 6.
Item 6.Selected Financial Data
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 7.
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K (this “Report”) contains forward-looking statements which reflect management’s expectation or belief concerning future events that involve risks and uncertainties. Our actions, results and performance could differ materially from what is contemplated by the forward-looking statements contained in this Report. Factors that might cause differences from the forward-looking statements include those referred to or identified in our Registration Statement on Form S-1 filed with the SEC on April 25, 2013 and other factors that may be identified elsewhere in this Report. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements.
The following is management’s discussion and analysis of the financial condition and results of operations of the Company, as well as our liquidity and capital resources. The discussion, including known trends and uncertainties identified by management, should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in this Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico.
Effective January 16, 2014, Vladimir Leonov, the Chief Executive Officer, majority shareholder and sole director of the Company sold 8,000,000 shares of our common stock (approximately 77% of the issued and outstanding shares of common stock of the Company) owned by him to Thru Pharma, LLC (d/b/a PharmaCline), a Delaware limited liability company (“Thru Pharma”), for total cash consideration of $275,000 in a private transaction (the “Acquisition”). The Acquisition resulted in a change in control of the Company. Simultaneous with the closing of the Acquisition, Mr. Leonov resigned as a director and from all offices he held with us, and Steven J. Keough, who is a controlling member of Thru Pharma, was elected as our director and appointed as the Company’s Chief Executive Officer, President, Secretary and Treasurer.
Following the changes in control and management of the Company related to the Acquisition, we have been reevaluating our business plan. We have been assessing potential new business models to replace our previous business model relating to hot dog stands in Mexico. While it is quite possible that there will be a new business model for us, we have not finalized that decision as yet. It is possible that such a new model could be relate to a new business sector other than the food sector as we have been reviewing business models which are in sectors other than the food sector. It is also possible that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2014, and as of the date of this filing, we continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.
Pursuant to a Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014 and February 9, 2015 (the “Consulting Agreement”), Thru Pharma transferred (effective April 1, 2014) 7,660,000 shares of the Company’s common stock to Strategic (“the Transfer”) as partial compensation for consulting services provided to Thru Pharma by Strategic. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.
In connection with the Transfer, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of said 7,660,000 shares of common stock until the later of (i) the achievement of the objectives by Thru Pharma and Strategic set out in the Consulting Agreement and (ii) June 30, 2015.
As part of the Consulting Agreement, Thru Pharma also agreed that upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, Thru Pharma would cause such entity to issue to Strategic a non-qualified stock option or warrant to purchase 1,000,000 (one million) shares of common stock of the entity that was the subject of the M&A Transaction. Such option or warrant will be of five-year duration, exercisable at the greater of the fair market value per share on the date of grant or $0.10 per share, as well as other routine terms.
Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.
The Company’s status as a “shell company” as of the date of this report remains unchanged.
RESULTS OF OPERATIONS
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We will require additional capital to meet our operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern
FISCAL YEAR ENDED OCTOBER 31, 2014 COMPARED TO FISCAL YEAR ENDED OCTOBER 31, 2013.
Revenue
We recognized no revenue during the twelve months ended October 31, 2014 and 2013 as we have not commenced revenue generating operations as yet.
Operating Expenses
During the fiscal year ended October 31, 2014, our operating expenses were $50,294 compared to $30,933 during the prior fiscal year. During the twelve months ended October 31, 2014, our operating expenses comprised professional fees of $49,813, loss on disposal of an asset of $428, depreciation expense of $29 and bank service charges of $24. By comparison, for the twelve months ended October 31, 2013, our operating expenses comprised professional fees of $29,734, bank service charges of $918, business licenses and permits of $167 and depreciation expense of $114.
Expenses incurred during the fiscal year ended October 31, 2014 compared to fiscal year ended October 31, 2013 increased primarily due to the change in control and vendors. Professional fees generally include financial and administrative contracted services.
Net Loss
Our net loss for the fiscal year ended October 31, 2014 was $50,294 compared to a net loss of $30,933 during the fiscal year ended October 31, 2013 due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2014, we had no assets and $45,458 of current liabilities comprised of a loan from a related party. As of October 31, 2013, our total assets were $4,209 comprised of cash of $3,752 and equipment less accumulated depreciation of $457 and our total liabilities were $4,221 comprised of notes payable to related parties.
FISCAL YEAR ENDED OCTOBER 31, 2014 COMPARED TO FISCAL YEAR ENDED OCTOBER 31, 2013.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. During the fiscal year ended October 31, 2014, we used $49,837 in operating activities compared to $30,819 during the fiscal year ended October 31, 2013. The increase between the two periods related primarily to the increase in the loss over the prior fiscal year.
Cash Flows from Investing Activities
We neither used nor generated cash flow from investing activities during the fiscal years ended October 31, 2014 or 2013.
Cash Flows from Financing Activities
During the fiscal year ended October 31, 2014, we received $46,085 by way of loans from our related parties to fund our working capital requirements. During the fiscal year ended October 31, 2013, we received $3,550 by way of a loan from our then principal shareholder and sole director and officer and $23,000 from the sale of 2,300,000 shares of common stock.
PLAN OF OPERATION AND FUNDING
Historically, we have funded working capital requirements primarily through the proceeds of the private placement of equity instruments and by way of loans from related parties. Our working capital requirements are expected to increase as our business grows. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) personnel; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We expect that working capital requirements will be funded through advances from Thru Pharma, and through further issuances of our securities.
We have no lines of credit or other bank financing arrangements. Additional issuances of equity or issuances of convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material commitments.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any off-balance sheet arrangements 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 are material to investors.
GOING CONCERN
The independent auditors’ report accompanying our October 31, 2014 and October 31, 2013 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Item 7A.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 8.
Item 8.Financial Statements and Supplementary Data
FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2014 AND 2013
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Arax Holdings Corp.
N. Career Avenue, Suite 317
Sioux Falls, South Dakota, 57107
We have audited the accompanying balance sheets of Arax Holdings Corp. as of October 31, 2014 and 2013 and the related statement of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arax Holdings Corp. as of October 31, 2014 and 2013, 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 of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company has suffered losses from operations since Inception (February 23, 2012) and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cutler & Co., LLC
Wheat Ridge, formerly Denver, Colorado
West 49th Ave. Suite 200 Wheat Ridge, Colorado 80033 ~ Phone 303-968-3281 ~ Fax 303.456.7488 www.cutlercpas.com
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ARAX HOLDINGS CORP.
BALANCE SHEETS
See accompanying notes to financial statements.
F - 2
ARAX HOLDINGS CORP.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
F - 3
ARAX HOLDINGS CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
See accompanying notes to financial statements.
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ARAX HOLDINGS CORP.
STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements.
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ARAX HOLDINGS CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2014 AND 2013
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico.
Effective January 16, 2014, Vladimir Leonov, the Chief Executive Officer, majority shareholder and sole director of the Company sold 8,000,000 shares of our common stock (approximately 77% of the issued and outstanding shares of common stock of the Company) owned by him to Thru Pharma, LLC (d/b/a PharmaCline), a Delaware limited liability company (“Thru Pharma”), for total cash consideration of $275,000 in a private transaction (the “Acquisition”). The Acquisition resulted in a change in control of the Company. Simultaneous with the closing of the Acquisition, Mr. Leonov resigned as a director and from all offices he held with us, and Steven J. Keough, who is a controlling member of Thru Pharma, was elected as our director and appointed as the Company’s Chief Executive Officer, President, Secretary and Treasurer.
Following the changes in control and management of the Company related to the Acquisition, we have been reevaluating our business plan. We have been assessing potential new business models to replace our previous business model relating to hot dog stands in Mexico. While it is quite possible that there will be a new business model for us, we have not finalized that decision as yet. It is possible that such a new model could be relate to a new business sector other than the food sector as we have been reviewing business models which are in sectors other than the food sector. It is also possible that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2014, and as of the date of this filing, we continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.
Pursuant to a Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014 and February 9, 2015 (the “Consulting Agreement”), Thru Pharma transferred (effective April 1, 2014) 7,660,000 shares of the Company’s common stock to Strategic (“the Transfer”) as partial compensation for consulting services provided to Thru Pharma by Strategic. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.
In connection with the Transfer, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of said 7,660,000 shares of common stock until the later of (i) the achievement of the objectives by Thru Pharma and Strategic set out in the Consulting Agreement and (ii) June 30, 2015.
As part of the Consulting Agreement, Thru Pharma also agreed that upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, Thru Pharma would cause such entity to issue to Strategic a non-qualified stock option or warrant to purchase 1,000,000 (one million) shares of common stock of the entity that was the subject of the M&A Transaction. Such option or warrant will be of five-year duration, exercisable at the greater of the fair market value per share on the date of grant or $0.10 per share, as well as other routine terms.
Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.
The Company’s status as a “shell company” as of the date of this report remains unchanged.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not generated any revenues as of October 31, 2014. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $81,306 as of October 31, 2014 and further losses are anticipated in the development of its business. The Company currently has no cash balance, a working capital and stockholders’ deficit of $45,458 and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
The Company is dependent on additional investment capital to fund operating expenses. The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company has adopted an October 31 fiscal year end.
Development Stage Company
The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities” and among the additional disclosures required as a development stage company are that its financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of its Inception (February 23, 2012) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist of amounts due to its related parties. The carrying amount of these financial instruments approximates fair value due either to length of maturity.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes”. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and state jurisdictions.
The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations.
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Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” (“ASC-605”), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the twelve months ended October 31, 2014 and 2013.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no such common stock equivalents outstanding during the years ending October 31, 2014 and 2013.
Recent Accounting Pronouncements
The Company has reviewed all the recent accounting pronouncements issued to date of the issuance of these financial statements, and does not believe any of these pronouncements will have a material impact on the company.
NOTE 4 - STOCKHOLDERS’ DEFICIT
Common Stock
The Company is authorized to issue 75,000,000 shares of common stock with a par value of $0.001 per share.
On October 18, 2013, the Company issued 2,300,000 shares of common stock for cash proceeds of $23,000 at $0.01 per share.
The Company had 10,300,000 shares of common stock issued and outstanding as of October 31, 2014.
Additional Paid in Capital
The Company owed its principal shareholder and Chief Executive Officer Vladimir Leonov, a total of $4,221 as of October 31, 2013, in the form of an unsecured loan. The note was due on demand and was non-interest bearing.
During the three months ended January 31, 2014, Mr. Leonov advanced the Company a further $627 for working capital purposes.
Effective January 16, 2014, coincidental with the sale of his controlling interest in the Company, Mr. Leonov forgave repayment of his outstanding loan balance which was credited to additional paid in capital at that time.
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NOTE 5 - RELATED PARTY TRANSACTION
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
The Company owed its principal shareholder and Chief Executive Officer Vladimir Leonov, a total of $4,221 as of October 31, 2013, in the form of an unsecured loan. The note was due on demand and was non-interest bearing.
During the three months ended January 31, 2014, Mr. Leonov advanced the Company a further $627 for working capital purposes.
Effective January 16, 2014, coincidental with the sale of his controlling interest in the Company, Mr. Leonov forgave repayment of his outstanding loan balance which was credited to additional paid in capital at that time.
The Company owed its shareholder, Thru Pharma, a total of $45,458 as of October 31, 2014, in the form of a related party payable. It is due on demand and is non-interest bearing.
NOTE 6 - INCOME TAXES
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
As of July 31, 2014, the Company had a net operating loss carry-forward of approximately $81,306 that may be used to offset future taxable income and begins to expire in 2031. Because of the change in ownership that occurred on January 16, 2014, net operating loss carry forwards could be limited as to use in future years.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Legal
On June 4, 2014, the Company was named as a defendant in a lawsuit filed by AMERIFINANCIAL, INC. (“AMERIFINANCIAL”), of Houston, Texas. The action relates primarily to a contract dispute between AMERIFINANCIAL and the Company’s former majority shareholder, THRU PHARMA, LLC. The dispute alleged unpaid balances of $171,870 and five membership units in THRU PHARMA, LLC. The dispute does not allege any actions or inactions by the Company’s officers or representatives acting on behalf of the Company. Counsel for THRU PHARMA, LLC, has requested that the Company be dismissed from this lawsuit, as it is not a party to the disputed contract. As the Company has been advised by its legal counsel that there is no legal basis for the Company being a part of the lawsuit, the Company has not recognized a liability in connection with it. Subsequent to the Company’s year end, on November 18, 2014, counsel for THRU PHARMA, LLC, filed an Original Answer and Request for Rule 194 Disclosures with the court. That filing included a general denial of all allegations against all defendants.
NOTE 8 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, “Subsequent Events” the Company has analyzed its operations subsequent to October 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.
F - 9
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of October 31, 2014. Based upon this evaluation, our management concluded that the Company’s disclosure controls and procedures were not effective as of October 31, 2014
Management’s Annual Report on Internal Control over Financial Reporting.
Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of October 31, 2014, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1. We do not have an Audit Committee - While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.
2. We did not maintain appropriate cash controls - As of October 31, 2014, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
3. We did not implement appropriate information technology controls - As at October 31, 2014, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of October 31, 2014 based on criteria established in Internal Control - Integrated Framework issued by COSO.
This Annual Report on Form 10-K 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 our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting. Management plans to routinely assess its internal control over financial reporting against appropriate standards, and to make changes as determined necessary and according to the scope of business operations.
PART III
Item 10.
Item 10.Directors, Executive Officers, Promoters and Control Persons of the Company
DIRECTORS AND EXECUTIVE OFFICERS
The name, address and position of our present officers and directors are set forth below:
Name and Address of Executive
Officer and/or Director
Age
Position
Steven J. Keough
N. Career Avenue, Suite 317
Sioux Falls, South Dakota, 57107
Chairman, President, Secretary,
Treasurer and Director
Mr. Keough is the Chairman and Chief Executive Officer of THRU PHARMA, LLC, a related party to the Company. He received his Bachelor of Science degree from the U.S. Naval Academy (Annapolis, MD), his Master of Arts degree from the Catholic University of America (Washington, D.C.) and his Juris Doctorate degree from Boston College Law School (Newton, MA.). He is the recipient of a financial management certificate from the University of Chicago Graduate School of Business. Mr. Keough was Senior Vice President of a NASDAQ-listed company, SurModics, during a vibrant growth period of that company. He may only be devoting limited time to our operations, and our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could result in a lack of revenues and a cessation of operations.
AUDIT COMMITTEE
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
SIGNIFICANT EMPLOYEES
We have no employees other than our sole director, Steven Keough who currently devotes minimal time per week to company matters. We intend to hire employees on an as needed basis.
Item 11.
Item 11.Executive Compensation
The following tables set forth certain information about compensation paid, earned or accrued for services by our President, and Secretary and all other executive officers (collectively, the “Named Executive Officers”) for the years ended October 31, 2014 and 2013.
There are no current employment agreements between the Company and its sole officer. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
As of October 31, 2014, we had no pension plans or compensatory plans or other arrangements that provide compensation in the event of a termination of employment or a change in our control.
Item 12.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table provides certain information regarding the ownership of our common stock, as of October 31, 2014 and as of the date of the filing of this annual report by:
·
each of our executive officers;
·
each director;
·
each person known to us to own more than 5% of our outstanding common stock; and
·
all of our executive officers and directors and as a group.
(1) Shares are owned by Strategic Universal Advisors but voting rights for these shares were granted to Steven J. Keough through an irrevocable proxy.
The percent of class is based on 10,300,000 shares of common stock issued and outstanding as of the date of this annual report.
Item 13.
Item 13.Certain Relationships and Related Transactions
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
The Company owed its principal shareholder and Chief Executive Officer Vladimir Leonov, a total of $4,221 as of October 31, 2013, in the form of an unsecured loan. The note was due on demand and was non-interest bearing.
During the three months ended January 31, 2014, Mr. Leonov advanced the Company a further $627 for working capital purposes.
Effective January 16, 2014, coincidental with the sale of his controlling interest in the Company, Mr. Leonov forgave repayment of his outstanding loan balance which was credited to additional paid in capital at that time.
During the year ended October 31, 2014, we borrowed $45,458 from our shareholder, Thru Pharma, in the form of a related party payable. It is due on demand and is non-interest bearing.
Item 14.
Item 14.Principal Accountant Fees and Services
During fiscal year ended October 31, 2014, we incurred approximately $7,750 in fees to our principal independent accountants for professional services rendered in connection with the audit of our financial statements and for the reviews of our financial statements for the quarters ended January 31, 2014, April 30, 2014 and July 31, 2014. This compares to approximately $5,500 in fees during fiscal year ended October 31, 2013 in connection with the audit of our financial statements and for the reviews of our financial statements for the quarters ended January 31, 2013, April 30, 2013, and July 31, 2013.
Item 15.
Item 15.Exhibits
The following exhibits are filed as part of this Annual Report.
Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
32.1 Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act
101.INS XBRL Instance Document (furnished herewith)*
101.SCH XBRL Taxonomy Extension Schema Document (furnished herewith)*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)*
101.LAB XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)*
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.