Item 1. Description of Business
BUSINESS HISTORY
Joey New York, Inc. ("the Company") was incorporated under the laws of the State of Nevada on December 22, 2011. Effective August 27, 2013, the Board of Directors approved a name change to Joey New York, Inc. On May 12, 2014, the Company merged with a Florida limited liability company, RAR Beauty, LLC, which distributes natural skin care and beauty products on the wholesale and retail levels and operates under the name of Joey New York and with Pronto Corp a registered company. The Company accounted for the acquisition as a reverse merger whereby, the operations of RAR Beauty, LLC is the continuing entity for financial reporting purposes and the former members of RAR Beauty, LLC owning approximately 75% of the Company. On May 12, 2014, RAR Beauty, LLC became a wholly owned subsidiary of the Company.
On February 26, 2016 Joey New York, Inc. ("JOEY" or the "Company") entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Joey Merger Subsidiary, Inc., a Nevada Corporation ("Merger Sub"), with Merger Sub being the surviving entity but with a name change to Joey New York, Inc.. As part of that merger, each 200 shares of our common stock were exchanged for one share in the surviving company. The officers and directors of JOEY remain the officers and directors subsequent to the merger. The reverse exchange ratio of 1 share for 200 shares became effective on August 1, 2016 on the stock market upon review by the Financial Industry Regulatory Authority ("FINRA").
BUSINESS DESCRIPTION
The Company's headquarters is based in Sunny Isles Beach, Florida.
Joey New York is divided into two divisions. One being "THE LABB", Aesthetic Beauty Bar. The other is the Joey New York® cosmetics. There is a high degree of synergy between the Cosmetic line and the LABB services. With the decades of skincare experience that the team at Joey have, it is only logical that they leverage their experience by employing a new concept in the injectables market, (Botox® and Fillers). It's a concept called The LABB (Labb Aesthetic Beauty Bar).
The LABB is focused on eliminating unwanted wrinkles by exclusively performing Botox® and filler injections, nothing else, no facials, no laser, just Botox® and fillers. This is a large segment of a 13-Billion-dollar market that has grown 6,400% since 1997. The concept is pretty simple. Excellent technicians, standardized training, multiple locations, consistent branding, incredibly low overhead and state of the art facilities with bulk buying purchasing power. With more people searching for a youthful look, Joey New York intends to lead them to it.
Joey New York Inc. through its wholly owned subsidiary RAR Beauty, LLC is the manufacturer and marketer of its Joey New York brand of quality skin care and beauty products. The company's products are sold through various retailers, professional salons and spas and beauty websites in the United States and Internationally.
The LABB
The Original BOTOX LABB is powered by Joey New York. Botox LABB has two south Florida locations - South Beach, Miami and Fort Lauderdale. Botox LABB is an injectable only suite. It is considered The Dry Bar of Botox and Fillers
Botox LABB is expanding nationally across the United States. California, Nevada, NY and Texas. Botox LABB providers are master level injectors who use the Allergan portfolio as well as Galderma's portfolio of product.
A wide range of injectable procedures are performed at BOTOX LABB Miami and Botox Labb Ft Lauderdale using only FDA approved on label procedures. Botox Cosmetics, Juvederm, Voluma, Volbella, Kybella and Latisse from Allgeran as well as Dysport, Restylane, Restylane Silk, Restylane Lyft, Restylane Refyne and Restylane Defyne.
BOTOX® Cosmetic LABB Providers can easily treat the worst of frown lines with BOTOX® Cosmetic injections. In just one treatment patients can visibly see a drastic difference in the softening of their wrinkles. The 11's or frown lines are a result of furrowing your brows (glabellar and corrugator muscles). The 11's are one of the most commonly treated areas for botox injections. Patients with deeper 11's may require MULTIPLE treatments before the wrinkles are fully lifted. In some cases, a combination of botox, filler, and skin care should be used for optimal results. To assess the best treatment option for your frown lines, schedule your Aesthetic consultation today.
Botox and the Botox Labb - BOTOX® Cosmetic is used to reduce the appearance of fine lines and wrinkles by having a skilled and trained provider inject BOTOX® Cosmetic into specific targeted areas. BOTOX® Cosmetic usually take full effect within 7 to 10 days. The treatment results last 3 to 4 months. BOTOX® cosmetic requires maintenance treatments to sustain the best results. your lprovider will help you to determine the best maintenance treatment plan to meet your aesthetic goals. results may vary for duration and degree of improvement.
Millennials and Baby Boomers, as well as men all over the world, have enjoyed BOTOX and Filler treatments at all Botox LABB locations. Celebrities and profile people have complete privacy in our luxury by appointment only suites.
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Joey New York
Joey New York product lines include skin care treatments and beauty enhancements that are health conscious, effective and affordable. In keeping with our beauty mission, we have utilized the water from tender young green coconuts, blended with Indian ginseng extract, into our new fast-acting QUICK RESULTS skincare collection.
The Company seeks to increase market share and introduce its product line through multiple channel markets. The Company faces competition from nationally recognized firms that may have greater resources of personnel, capitalization, and reputation. The Company has therefore concentrated its efforts on product quality and performance.
Principal Products
In the early 1990's the Joey New York brand pioneered the "instant visible results spa at home concept" and was the innovator of producing products that were deemed "the safe alternatives to painful, costly dermatological procedures", selling beauty products to the prestige market.
Skincare expert and Founder Joey Chancis has reinvented the Joey New York brand. One of the new and recently launched collections is the quick results coconut water product. These products are designed to deliver amazing results in a healthy new way with the help of one of nature's most healing, soothing ingredients: Young Green Tender Coconut Water.
Joey New York® formulates and develops trendsetting products that don't currently exist and fills a void in today's marketplace. Joey is known for creating new market niches by constantly launching innovative new products utilizing the latest skin care technology and best raw materials available on the planet. Joey New York® products are designed for at home use as topicals which are marketed to be safe, less expensive alternatives to sometimes painful dermatological procedures or spa treatments such as facial peels and fillers.
The Joey New York® product line is a curated collection of "Hero Items" that instantly address specific skin needs from blackheads to wrinkles to rosacea and beyond. These products are not meant to compete with other skin care products or brands on the market, but to complement them.
They are specifically designed to amplify any skin care regimen enhancing results dramatically. The Quick Results® collection represents the culmination of 20+ years of experience in formulation and meeting the needs of Joey's loyal customers. All products have been created with the "health conscious", ingredient savvy, and results-oriented consumer in mind.
THE COCONUT REVOLUTION: The Hawaiians call Coconut Water "NEOLANI" which means "Dew from the Heavens". Through new technology, Joey New York® has formulated Coconut Water harvested from young, tender, green coconuts and integrated it with other active ingredients to develop its Quick Results® collection of skin care products.
Many Latin American women take great interest in preserving their youthful appearances and good health. A long kept daily "lifestyle" secret is their use of Coconut Water both topically and internally. Fresh Coconut Water offers unparalleled nutritional value that is rich in vitamins, minerals and protein. It provides trace amounts of Calcium, Potassium, Folic Acid, Magnesium and Zinc, as well as protein for added moisturization to the skin. Coconut Water naturally replenishes the skin with these nutrients restoring a healthy, youthful glow.
Marketing & Distribution Methods
SALES AND MARKETING STRATEGY. Joey New York® will directly target certain vertical markets primarily driven by age, education and the demand for health and natural products. Positioning is determined by developing small collections as opposed to being too "SKU" intensive in one category allowing diversity of product amongst a cross-section of the consumer base. Joey fills a void in the market with items that previously were nonexistent and continually expanding a foothold in this space. Efforts focused on advertising, editorial events, and training will help Joey remain relevant and current while being an innovative visionary. Also, Joey will capitalize on retail relationships in the founder's rolodex developed through past commercial success.
SALES AND SUPPORT RESOURCES: At present Joey Chancis is responsible for overseeing approximately 2,000 accounts in the professional and salon industry, as well as, boutique chain stores in the U.S. Some of these stores have sold Joey's original collection in the past. Joey also has retained freelance independent contractors that are strategically placed in key territories around the country who are always available to train, sell or provide services when needed.
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SHORT-TERM MARKETING STRATEGY: Joey New York® currently has a proven collection, called Quick Results®, with a strategy of having a strong retail presence in Masstige and specialty stores in the U.S. and internationally.
Currently, Joey's products can be found in Look boutiques, Peninsula Beauty stores, as well as, online at Urban Outfitters and dermstore.com.
In addition to the Quick Results Coconut Water collection, Joey is currently in R&D with plans to bring to market three new collections. These collections will be proprietary brands powered by Joey New York. It will consist of a twelve SKU collection sold through the prestige markets, an eight SKU collection sold through the health/wellness markets and a six SKU collection for the SuperStore markets.
INTERNET MARKETING STRATEGY: In 2015 Joey enhance its website and added other technology components including: Quick response (QR) codes on all packaging that will revert back to the site and with product information, tutorials and "how to" videos for quick reference.
* JNY Mobile App.
* Strong social media campaigns through Instagram, YouTube, Twitter, Facebook and LinkedIn.
* Working with a website and SEO agency to complete the initial project utilizing Magento as a platform.
* "Pay Per Click" marketing program.
Background of Industry & Market Analysis
THE GLOBAL COSMECEUTICALS INDUSTRY: The global cosmetics market was approximately $233 billion in 2012 and is expected to reach $292 billion worldwide by 2017 with a Compound Annual Growth Rate (CAGR) of 4.6%. Cosmeceuticals are capturing an ever-growing share of this market from 13% in 2012 to an expected market share of 16% in 2017 with "skin care" cosmeceuticals as the largest vertical market dominating the category with a 60% share. Despite the ongoing economic difficulties in many parts of the world, the beauty industry continues to defy the downturn. NPD, R&D and the creation of new brands in the beauty sector is outperforming many other consumer industries and the outlook from analysts is largely positive.
"The resilience of the beauty industry is clear to see," says Mary-Ellen Field, Chairman of Brand Finance. "If you compare it to other industries it's holding up very well. Fashion for instance, with the exception of a few retailers, is really suffering."
The beauty industry's ability to weather the financial storm can be attributed to a number of factors: burgeoning consumerism in developing markets is providing demand for personal care and cosmetic products; while in more mature markets spending on discretionary items such as beauty products has increased at the expense of the bigger ticket items. Luxury brands, in particular, have enjoyed a renewed uptake.
Leading business intelligence provider GBI Research states that the global cosmeceuticals market will be driven by "technological advances and consumer awareness" and will "boost commercial potential for innovative and premium-priced products" through 2018. GBI found that the global cosmeceuticals market was estimated to be worth $30.9 billion in 2011, having grown at a CAGR of 3.6% from $24.1 billion in 2004 and trending to conservatively reach $36.88 billion by 2016. In 2011, the top five European countries accounted for almost 65% of the overall cosmeceuticals market, followed by the US as the single largest market. This is mainly driven by the obsession with maintaining a youthful appearance, better results of cosmeceuticals, heavy marketing, slow economic improvement, and rising per-capita disposable income.
Cosmeceutical brand growth is further driven by expanded markets in Asia-Pacific, digital marketing and the offer of personalized customer experiences and e-commerce. Demand is driven by the emergence of the urban middle class with increased incomes, affordability and urbanization who demand efficient products and luxury brands. Anti-oxidants remain one of the most popular ingredients for skin care and are now being included in other healthcare regimens for their perceived benefits to overall health.
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THE COSMECEUTICAL SKIN CARE MARKET: According to IBISWorld from 2008 to 2013, the market has experienced a CAGR of 11% and the current market size is estimated to $5 billion employing nearly 6800 people in 238 companies. Over the past 5 years, strong investment in research and development and an aging population have underpinned rapid growth, even during the recession. While growth is expected to slow slightly over the next four years as the market approaches saturation and competition heats up, higher demand from mass merchandisers and value-priced products will keep demand for the industry strong. The cosmeceutical skincare production industry is in a growth stage of its life cycle. Its contribution to the US economy - measured by its industry value added (IVA) - has far outpaced general economic growth and is expected to continue in this manner through the foreseeable future. Over the 10 years to 2018, IBISWorld has experienced and anticipates IVA growth at an average annual rate of 8.1%; meanwhile, U.S. GDP is forecast to increase at an annualized 2.1%.
Industry-wide, cosmeceutical skin care is the most robust and highest growth vertical market. As with the overall cosmeceuticals industry, strong research and development investment, coupled with technological advances, not only have underpinned the industry's expansion during the recession but more importantly will drive growth through 2018.
THE ORGANIC PERSONAL CARE MARKET: According to Transparency Market Research, the global demand for organic personal care products was over $7.6 billion in 2012 is expected to reach $13.2 billion by 2018, growing at a Compound Annual Growth Rate (CAGR) of 9.6% from 2012 to 2018. More importantly, skin care products dominated the demand in the global organic personal care products market niche in 2011, with a 32.1% share, followed by hair care and cosmetics segments.
The industry is witnessing significant growth in terms of sales and technological advancements over the past few years because of increasing consumer awareness towards personal hygiene and health. Growing concern regarding skin care is particularly fueling the robust growth across all market segments and geographies. Increasing demand for organic and natural cosmetic and toiletries products is creating new growth opportunities in this field which is encouraging the emergence of new market players in this arena.
Competitive Business Conditions and Methods of Competition
According to ranker.com, while many of the Global Beauty large-cap competitors in the beauty industry provide broad-base, SKU-intensive product lines, many of the smaller companies enjoy fierce customer loyalty amongst their brands. They state that once customers find the perfect beauty or makeup product, they tend to stick to their favorites. Because consumers have such strong brand loyalty, people are often more willing to pay a price premium for their favorites. There are also many inexpensive, quality beauty brands that are affordable for the average consumer.
Skin Care Competition: According to LiveStrong.com, a non-profit and unbiased healthy living organization, they rank the Top 10 Skin Care product lines as:
1. Proactiv: According to the Tanning Advisor website, Proactiv is the most popular acne product. Proactiv is effective at removing blemishes and fighting acne flare-ups. The Proactiv product line contains a cleanser, toner, repair treatment, moisturizer and mask.
2. Kiehl's: Offers a complete line of cleansers, toners and moisturizers designed to work together to provide healthy skin. The Cosmetics Cop website claims that the best product to clean your face is Kiehl's Ultra Facial Cleanser. It is free from fragrance and gentle, yet can still remove most of your makeup.
3. Sephora: Carries a variety of product lines, including their own brand of skin care and makeup. The Cosmetics Cop recommends Sephora's FACE Waterproof Eye Makeup Remover. This product has no fragrance added, and will take all your makeup off, including mascara that is waterproof.
4. Mary Kay: Offers skin care products as well as makeup that are designed to work together in an overall beauty regime. Before you apply your makeup and after you remove it, use an eye cream to help decrease the number of wrinkles around your eyes. Mary Kay's Instant Action Eye Cream will help smooth out the lines and give you a youthful, bright-eyed look. If you are pressed for time, choose Mary Kay's Timewise 3-in-1 Cleanser. You can clean, exfoliate and freshen your skin in one step. According to the Tanning Advisor website, you'll have the extra benefit of the antioxidant vitamin E.
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5. Neutrogena: Offers a wide variety of cleansers, creams, lotions and self-tanners that are easily found in drugstores. The Neutrogena Norwegian Formula Hand Cream will give you soft hands without making them feel oily. Neutrogena also has self-tanning products that condition your skin as they give you a bronze glow.
6. Estee Lauder: Owns several companies with skin care lines, including Estee Lauder, Aramis, Clinique, Prescriptives, Origins, M-A-C, Aveda, Smashbox and Bobbie Brown. Each of the Estee Lauder companies' skin care lines specialize in a specific demographic. The Estee Lauder brand of skin care is designed to help keep skin youthful and glowing, with some repair creams and wrinkle reducing elixirs in the product line. Clinique offers fragrance-free products for all skin types. Presciptives has a line of skin care that works with personalized color-matching makeup.
7. Olay: Offers a complete product line designed to clean, moisturize and tone your skin. The company's Regenerist product line is formulated to repair and minimize the damage cause by aging.
8. Avon: Offers complete skin care for the mature woman under the Avon brand, and a line for younger women and teens under the Mark brand. Most Avon representatives offer testers and samples to help select the products that work for you.
9. Queen Helene: Offers a variety of skin care products, including scrubs, masks and moisturizers. If you need a deep cleaning facial mask, try the Queen Helene Mint Julep Face Mask. You can get rid of pimples and blackheads while you refresh your skin.
10. Burt's Bees: Offers a complete line of all natural skin care products, including cleansers, toners and moisturizers. Marie Claire Magazine has the Burt's Bees Lemon Poppy Seed Facial Cleanser on their list of top six skin care products.
While there is a wide range of competitors globally, Joey New York® is once again establishing itself as unique and innovative.
Materials and Suppliers
Our materials are sourced from various suppliers, products are manufactured under contract and distributed from a central contracted facility that processes orders and ships direct for a per transaction fee.
Certain Agreements
We currently rely on the products and services of a small number of suppliers and service providers. The failure of these suppliers to perform to our standards could adversely affect the quality of our products and our ability to perform timely in delivery. We believe that the loss of any of these providers could impact our operations in the short term while the impacted operations are transitioned to a new provider.
Research and Development
The Company has not incurred significant expense for research and development activities. Research and development activities have been conducted by our CEO Joey Chancis utilizing her longstanding relationships with her preferred lab facilities and support staff. We may incur significant expense for research and development activities in the future as we continue to develop.
Patents and Licenses
We do not currently own and patents or licenses. We do hold certain trademarks related to our products.
Government Regulation
The two most important laws pertaining to cosmetics marketed in the United States are the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA). FDA regulates cosmetics under the authority of these laws.
The FD&C Act defines cosmetics by their intended use, as "articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body...for cleansing, beautifying, promoting attractiveness, or altering the appearance" (FD&C Act, sec. 201(i)). Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup, cleansing shampoos, permanent waves, hair colors, and deodorants, as well as any substance intended for use as a component of a cosmetic product.
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The FD&C Act prohibits the marketing of adulterated or misbranded cosmetics in interstate commerce. "Adulteration" refers to violations involving product composition--whether they result from ingredients, contaminants, processing, packaging, or shipping and handling. "Misbranding" refers to violations involving improperly labeled or deceptively packaged products. Under the FD&C Act, a product also may be misbranded due to failure to provide material facts. This means, for example, any directions for safe use and warning statements needed to ensure a product's safe use.
In addition, under the authority of the FPLA, FDA requires a list of ingredients for cosmetics marketed on a retail basis to consumers (Title 21, Code of Federal Regulations (CFR), section 701.3). Cosmetics that fail to comply with the FPLA are considered misbranded under the FD&C Act. (FPLA, section 1456). This requirement does not apply to cosmetics distributed solely for professional use, institutional use (such as in schools or the workplace), or as free samples or hotel amenities.
FDA can take action against cosmetics on the market that are in violation of these laws, as well as companies and individuals who market such products.
FDA's legal authority over cosmetics is different from their authority over other products they regulate, such as drugs, biologics, and medical devices. Under the law, cosmetic products and ingredients do not need FDA premarket approval, with the exception of color additives. However, FDA can pursue enforcement action against products on the market that are not in compliance with the law, or against firms or individuals who violate the law.
We follow best practices guidelines and utilize quality suppliers that comply with all regulatory requirements.
Cost of Compliance with Environmental laws
We do not incur any significant costs resulting from our operations to comply with environmental Laws.
Employees
The Company currently has a total of three officers and employees including its corporate management, sales and operational employees. We also have two non-executive directors.
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Item 1A.
Item 1A. Risk Factors.
Not Applicable.
Item 1B.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 2.
Item 2. Properties.
We own no properties related to our operations. We operate our cosmetics distribution division. from business offices provided by our executive officers and we contract our warehouse and fulfilment facilities.
The LABB operates from a leased retail facility in Miami Beach, FL which lease was for a one year term form April 15, 2016 to April 14, 2017 after which it is a month to month lease.
Item 3.
Item 3. Legal Proceedings.
We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is quoted on the OTC Bulletin Board under the symbol "JOEY". The following table sets forth, for the fiscal quarters indicated, the high and low closing sale prices per share of our common stock. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The closing sale price of our common stock on May 27, 2016 was $0.007.
Note: The average trading volume per day of our common stock was less than 500 shares for the prior 12 month period.
Holders
As of May 17, 2017, there were approximately 31 record holders of our common stock. This does not include the holders of our common stock who held their shares in street name as of that date.
Dividends
We have never paid or declared any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future but rather intend to retain future earnings, if any, for reinvestment in our future business. Any future determination to pay cash dividends will be in compliance with our contractual obligations and otherwise at the discretion of the board of directors and based upon our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.
Transfer Agent
Our registrar and transfer agent is VStock Transfer, LLC.
Recent Sales of Unregistered Securities
In June 2015, the Company received stock subscriptions for 250,025 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,005.
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In January 2016, the Company received stock subscriptions for 250,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,000.
Equity Compensation Plan Information
We currently have no Equity Compensation plans in place.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Joey New York, Inc. for the years ended February 28, 2016 and 2015.
Forward-Looking Statements
The following Management's Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risks Factors" in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
Financial Condition and 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 expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results of Operations
Revenues for the year ended February 28, 2017 were $467,372 compared to $54,388 for the year ended February 29, 2016, representing a 759% per cent increase resulting primarily from our acquisition of Reflex Productions, Inc. and The LABB, our cosmetic procedural clinic.
Operating expenses for the year ended February 28, 2017 were $994,717 compared to $150,473 for the year ended February 29, 2016, representing a 561% per cent increase resulting primarily from increased operating expenses related to the acquisition of our acquisition of Reflex Productions, Inc. and The LABB, our cosmetic procedural clinic.
Our loss from operations for the year ended February 28, 2017 was $557,323 compared to $142,499 during the year ended February 29, 2016, an increase of 291% . These increased losses are attributable primarily to increased professional fees and other expenses associated operating The LABB. We expect these expenses to continue to increase as we push to develop increased sales volumes and increase distribution channels for our products.
Other expenses for the year ended February 28, 2017 were $764,288 compared to $173,416 during the year ended February 29, 2016, an increase of 340% . This entire increase is attributable to the utilization of convertible debt which includes embedded derivative liabilities we use for financing purposes.
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Liquidity and Capital Resources
As of February 28, 2017, our cash was $25, or current assets were $187,410 consisting of inventory, accounts receivable and cash and our current liabilities were $4,651,500, resulting in a working capital deficit of $4,464,900, an increase of $512,471 from February 29, 2016.
Cash Flows from Operating Activities
We have not yet generated significant cash flows from operating activities. For the fiscal year ended February 28, 2017, net cash used in operating activities was $355,953. For the fiscal year ended February 29, 2016, net cash used in operating activities was $116,445, an increase of $239,508 or 205%.
Cash Flows from Investing Activities
We acquired assets for the year ended February 28, 2017 of $20,110 compared to $1,219 for the year ended February 29, 2016, representing all of our cash used in investing activities.
Cash Flows from Financing Activities
We have financed our operations primarily from related party advances and proceeds from the sale of common stock and convertible debt. For the year ended February 28, 2017 cash provided by related party advances was $51,158, $116,098 from the sale of common stock and cash provided by convertible debt was $136,705. For the year ended February 29, 2016 cash provided by related party advances was $20,449 and $100,005 from the sale of common stock.
Subsequent to the yearend we entered into two promissory notes payable resulting in the following financing act ivies as noted below:
We executed a promissory note payable on April 24, 2017 in the principal amount of $75,000, net of original issue discount in the amount of $7,500 receiving net proceeds of $67,500. This note matures on January 24, 2018, and bears interest at 12%. The notes bears substantial prepayment premiums of from 135% to 145% of principal and unpaid interest for any prepayment form 90 to 180 days after issuance and a prepayment penalty of 150% any time after 180 days from issuance up to the maturity date. This note in convertible 180 days after issuance into common shares at a conversion price defined as 135% of the market price of the shares defined as the average of the two (2) trading prices during the previous twenty (20) trading days to the date of a Conversion Notice.
We executed a promissory note payable on May 3, 2017 in the principal amount of $600,000, net of original issue discount in the amount of $60,000 receiving net proceeds of $540,000. This note matures on February 11, 2018, is non-interest bearing and carries a default interest rate of 24%. The note is convertible into common shares at the lower of $1 per share or 50% of the market price of the shares (lowest trading price for 30 days preceding the conversion date.
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Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through related party advances in the near term as we prepare for future capital raise through an issuance of securities. We have no guarantees or firm commitments that the related party advances will continue in the near term. Our working capital requirements are expected to increase with the growth of our business.
Existing working capital, further advances, capital raises and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through related party advances and proceeds from the sale of our common stock.
Management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses; and (iii) marketing expenses. We intend to finance these expenses with issuances of securities.
Additional issuances of equity or 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 take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Material Commitments
As of the date of this Current 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 Current 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 February 28, 2017 and February 29, 2016 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
As reflected in the accompanying financial statements, the Company had an accumulated deficit of approximately $2,455,750 at February 28, 2017 and net loss from operations of $557,323.
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The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of equity securities and related party advances. In addition, the Company is in the development stage and has generated no revenues since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern.
The ability of the Company to continue operations is dependent on the success of Management's plans, which include the raising of capital through the issuance of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
For a discussion of our accounting policies and related items, please see the Notes to the Financial Statements, included in Item 8.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
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Material Commitments
As of the date of this Current 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 Current 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 February 28, 2016 and February 28, 2015 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
As reflected in the accompanying financial statements, the Company had an accumulated net loss of approximately $4,116,512 at February 28, 2016 and revenue of $54,388.
The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of equity securities and related party advances. In addition, the Company is in the development stage and has generated no revenues since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern.
The ability of the Company to continue operations is dependent on the success of Management's plans, which include the raising of capital through the issuance of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
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Joey New York, Inc.
Financial Statements
For the Years Ending February 28, 2017 and February 29, 2016
Report of Independent Registered Public Accounting Firm
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Joey New York, Inc.
Consolidated Balance Sheets
For the Years Ended February 28, 2017 and February 29, 2016
The accompanying notes are an integral part of these financial statements
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Joey New York, Inc.
Consolidated Statements of Operations
For the Years Ended February 28, 2017 and February 29, 2016
The accompanying notes are an integral part of these financial statements
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Joey New York, Inc.
Consolidated Statements of Stockholders' Deficit
For the years ended February 28, 2017 and February 29, 2016
The accompanying notes are an integral part of these financial statements
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Joey New York, Inc.
Consolidated Statements of Cash Flows
For the years ended February 28, 2017 and February 29, 2016
The accompanying notes are an integral part of these financial statements
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Joey New York, Inc.
Notes to Consolidated Financial Statements
February 28, 2017 and February 29, 2016
NOTE 1. NATURE OF BUSINESS
ORGANIZATION
Joey New York, Inc. ("the Company") was incorporated under the laws of the State of Nevada on December 22, 2011. Effective August 27, 2013, the Board of Directors approved a name change to Joey New York, Inc. On May 12, 2014, the Company merged with a Florida limited liability company, RAR Beauty, LLC, which distributes natural skin care and beauty products on the wholesale and retail levels and operates under the name of Joey New York and with Pronto Corp a registered company. The Company accounted for the acquisition as a reverse merger whereby, the operations of RAR Beauty, LLC is the continuing entity for financial reporting purposes and the former members of RAR Beauty, LLC owning approximately 75% of the Company. On May 12, 2014, RAR Beauty, LLC became a wholly owned subsidiary of the Company.
On February 26, 2016 Joey New York, Inc. ("JOEY" or the "Company") entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Joey Merger Subsidiary, Inc., a Nevada Corporation ("Merger Sub"), with Merger Sub being the surviving entity but with a name change to Joey New York, Inc.. As part of that merger, each 200 shares of our common stock were exchanged for one share in the surviving company. The officers and directors of JOEY remain the officers and directors subsequent to the merger. The reverse exchange ratio of 1 share for 200 shares became effective on August 1, 2016 on the stock market upon review by and approval by the Financial Industry Regulatory Authority ("FINRA").
On August 11, 2016, the Company entered into a purchase agreement for the acquisition of 100% of the common stock of Reflex Productions, Inc. (Reflex) Reflex provides clinical cosmetic procedures including Botox injections and other cosmetic procedures.
In exchange for the common stock of Reflex the Company issued 25,000,000 restricted shares of its common stock and 42,000,000 warrants to the owners of Reflex.
During the three months ended August 31, 2016, the company issued 25,500,000 shares of common stock, 25,000,000 of which were issued in order to acquire a 100% interest in The LABB, LLC. (see note 9).
Joey New York is divided into two divisions. One being "THE LABB", Aesthetic Beauty Bar. The other is the Joey New York® cosmetics.
The LABB offers only FDA approved Injectable Services in state of the art, "by appointment only" luxury suites whose appointments are made either through online booking or by telephone.
The Company through its wholly owned subsidiary, RAR Beauty, LLC doing business under the name Joey New York, distributes natural skin care and beauty products on wholesale and retail levels. The Company's headquarters is based in Sunny Isles Beach, Florida.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the year ended February 28, 2017 the Company has incurred a loss from operations of $889,621. The Company has a history of losses resulting in an accumulated deficit of $4,479,352. The Company has negative working capital, in the amount of $4,464,090, as of February 28, 2017. The Company intends to fund operations and continuing product development through debt and equity financing arrangements, which efforts may be insufficient to fund its capital expenditures, working capital and other cash requirements. The Company cannot be certain that it will be successful in its efforts to attain such capital or that the terms of capital will be at acceptable terms.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Joey New York, Inc.
Notes to Consolidated Financial Statements
February 28, 2017 and February 29, 2016
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. general 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 consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents include demand deposits, money market funds, and all highly liquid debt instructions with original maturities of three months or less.
ACCOUNTS RECEIVABLE
The company uses the reserve method of accounting for doubtful accounts. There were no bad debts as of February 28, 2017 and February 29, 2016. Based on prior experience no provision for doubtful accounts was deemed necessary.
FINANCIAL INSTRUMENTS
The Company's balance sheet includes certain financial instruments, primarily, cash, accounts receivable, inventory, accounts payable, and debt to related parties. The carrying amounts of current assets and current liabilities approximate their fair value due to the relatively short period of time between the origination of these instruments and their expected realization.
CONCENTRATIONS AND CREDIT RISKS
The Company's financial instruments that are exposed to concentrations and credit risk primarily consist of its cash, sales and accounts receivable.
Cash - The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Receivables - The Company issues credit to its customers, based on their credit worthiness. The Company does not have a long history with its customers, to base its credit history and therefore has credit risk. The Company has not incurred bad debts and therefore has not set a provision for doubtful accounts.
Sales - The company had significant revenues from a single customer that represented 75% of total revenues in 2016 and two customers represented 68% of total revenues in 2015.
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INVENTORY
Inventory is stated at the lower of cost or market, determined by the first-in, first-out method. Inventory consists solely of finished goods.
PROPERTY, EQUIPMENT AND LONG-LIVED ASSETS
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the assets, five years, utilizing the straight method. Maintenance and repairs are expensed as incurred. Expenditures which significantly increase value or extend useful asset lives are capitalized. When property or equipment is sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation period or the undepreciated balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment existed at February 28, 2017.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
INTANGIBLE ASSET
The Company's intangible assets consist of goodwill and is accounted for as an indefinite lived intangible asset in accordance with ASC 350 "Goodwill and Other Intangible Assets" ("ASC 350"). Intangible assets
are reviewed annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no impairment charges taken during the years ended February 28, 2017 and February 29, 2016.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC 605, "Revenue Recognition". Revenue from the sale of cosmetics and other retail products is recognized when all of the following criteria have been met:
i)
Persuasive evidence for an agreement exists;
ii)
The product has been provided;
iii)
The fee is fixed or determinable; and,
iv)
Collection is reasonably assured.
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We recognize a sale when the product has been shipped at which time risk of loss has passed to the customer and the above criteria have been met.
Revenue from the provision of cosmetic procedures is recognized at the point of sale. Substantially all sales are paid for at the time of service based on established price lists and when all the following criteria have been met:
i)
Persuasive evidence for an agreement exists;
ii)
Service has been provided;
iii)
The fee is fixed or determinable; and,
iv)
Collection is reasonably assured.
SHARE-BASED COMPENSATION
ASC 718, Compensation - Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized in the period of grant.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity - Based Payments to Non-
Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the years ending February 28, 2017 and February 29, 2016 were $0 and $0, respectively.
INCOME TAXES
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets or liabilities were off-set by a 100% valuation allowance, therefore there has been no recognized benefit as of February 28, 2017.
DERIVATIVE LIABILITY
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At February 28, 2017 and February 29, 2016, the Company did not have any derivative instruments that were designated as hedges.
COMMITMENTS AND CONTINGENCIES
The Company follows ASC 450-20, "Loss Contingencies," to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of February 28, 2017.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs incurred for the period ending February 28, 2017 and February 29, 2016 were $252,321 and $60, respectively.
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EARNINGS PER SHARE
Net income (loss) per share is calculated in accordance with ASC 260, "Earnings Per Share." The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at February 28, 2017 and February 29, 2016. Due to net operating loss, there is no presentation of dilutive earnings per share, as it would be anti-dilutive. As of February 28, 2017, the Company had no dilutive potential common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This guidance changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital ("APIC"), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. All of the guidance will be effective for the Company in the fiscal year beginning October 1, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning October 1, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory.
The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation, rather than the lower of cost or market in the previous guidance. This amendment applies to inventory that is measured using first-in, first-out (FIFO). This amendment is effective for public entities for fiscal years beginning after December 15, 2016, including interim periods within those years. A reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In July 2015, the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning October 1, 2018, with an option to adopt the standard for the fiscal year beginning October 1, 2017. The Company is currently evaluating this standard and has not yet selected a transition method or the effective date on which it plans to adopt the standard, nor has it determined the effect of the standard on its financial statements and related disclosures.
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NOTE 3 - INVENTORY
Inventory consists of finished goods. Inventory is carried at cost on a first-in-first-out basis (FIFO) and held at public warehouse, which performs shipping and distribution function. All products held in inventory are of our popular brands ordered and anticipated minimal order quantities are held in inventory necessary to operate without backlog or delays in order fulfillment. Products have not significantly changed from year to year and there is no concentration of suppliers.
NOTE 4 - PROPERTY AND EQUIPMENT
Property consists of equipment purchased for the production of revenues. As of February 28, 2017 and February 29, 2016:
Depreciation for the years ending February 28, 2017 and February 29, 2016 was $4,690 and $655, respectively.
NOTE 5 - FAIR VALUE DISCLOSURES
The following is an analysis of liabilities presented at fair value by level as of February 28, 2017. No assets or equity instruments were presented at fair value as of February 28, 2017. No assets, liabilities or equity instruments were presented at fair value as of February 2, 2016.
NOTE 6 - RELATED PARTY ADVANCES
The Company's management has advanced funds and has made payments on behalf of the Company for the purpose of meeting obligations. These accumulated advances have been formalized by demand notes payable and accrue interest at 2.6%. The Company is indebted to its two majority shareholders for an aggregate amount of $XXX and $612,737, as of February 28, 2017 and February 29, 2016, respectively.
NOTE 7 - LONG-TERM DEBT
On May 12, 2014, in accordance with the acquisition agreement, the Company issued promissory notes payable, amounting $3,000,000 to its two majority shareholders. The terms of the notes (2, each at $1,500,000) are at a stated interest rate of 5% and mature on May 12, 2016. The company recorded this as an equity transaction as the notes did not represent any prior or future compensation.
In accordance with the acquisition agreement, the previous majority shareholder of Pronto Corp. received a promissory note payable of $15,600 for costs incurred prior to the acquisition. The note has a stated interest rate of 5% and matured on July 12, 2014. The debt was paid in February 2016.
NOTE 8 - INCOME TAXES
Income taxes are provided based upon the liability method. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by accounting standards to allow recognition of such an asset.
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Deferred tax assets/liabilities were as follows as of February 28, 2017 and February 29, 2016:
The valuation allowance was increased by $167,131 during fiscal year ended February 28, 2017.
At February 28, 2017, the Company expected no net deferred tax assets to be recognized, resulting from net operating loss carry forwards. Deferred tax assets were offset by a corresponding allowance of 100%.
At February 28, 2017, the Company had a net operating loss ("NOL") carry forward in the amount of approximately $695,526, available to offset future taxable income through 2037. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
No income tax expense has been realized as a result of operations and no income tax penalties and interest have been accrued related to uncertain tax positions.
NOTE 9 - CONVERTIBLE DEBT
Convertible notes payable as of February 28, 2017 and February 29, 2016, consists of the following:
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NOTE 10 - DERIVATIVE LIABILITIES
The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded derivative interest expenses for the year ended December 31, 2016 of $412,926.
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions during the current quarter:
NOTE 11 - DEBT DISCOUNT, ORIGINAL ISSUE DISCOUNTS AND DEBT ISSUANCE COSTS
During the quarter end March 31, 2017, the Company recorded debt discounts totaling $535,586. The debt discount amount consists of debt discount due to beneficial conversion feature, warrant, original issue cost, and debt issue cost. The Company amortized $18,955 of debt issue costs in the year ended February 28, 2017. The following is a summary of the Company's debt issue costs for the year ended February 28, 217 and February 29, 2016:
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.
Related Party
The Company has limited needs for office administration and does not own or lease property or lease office space. The office space used by the Company was arranged by the officers and directors of the Company to use at no charge.
Facilities
We operate our cosmetics distribution division. from business offices provided by our executive officers and we contract our warehouse and fulfilment facilities.
The LABB operates from a leased retail facility in Miami Beach, FL which lease was for a one year term form April 15, 2016 to April 14, 2017 after which it is a month to month lease.
The Company does not have employment contracts with its key employees, including the controlling shareholders who are officers of the Company.
Legal and other matters
In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company's financial position or results of operations.
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NOTE 13 - EQUITY
The Company is authorized to issue 1,500,000,000 shares of $0.001 par value common stock.
In June 2015, the Company received stock subscriptions for 250,025 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,005.
In January 2016, the Company received stock subscriptions for 250,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,000.
On February 26, 2016 Joey New York, Inc. ("JOEY" or the "Company") entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Joey Merger Subsidiary, Inc., a Nevada Corporation ("Merger Sub"), with Merger Sub being the surviving entity but with a name change to Joey New York, Inc.. As part of that merger, each 200 shares of our common stock were exchanged for one share in the surviving company. The officers and directors of JOEY remain the officers and directors subsequent to the merger. The reverse exchange ratio of 1 share for 200 shares became effective on August 1, 2016 on the stock market upon review by and approval by the Financial Industry Regulatory Authority ("FINRA").
During the three months ended August 31, 2016, the company issued 25,500,000 shares of common stock, 25,000,000 of which were issued in order to acquire a 100% interest in The LABB, LLC. (see note 9).
In connection with the acquisition mentioned above, the Company also issued 42,000,000 warrants, each valued at $.009. These warrants were valued using a Black-Scholes model, with the following inputs:
The stock price of $0.01 was used because with no active market for the Company's stock, the best evidence for its value on the grant date was the exercise price of the warrants.
On October 4, 2016, the Company issued 100,000 restricted shares to an investor for $30,000 cash.
On October 14, 2016, the Company issued 33,333 restricted shares to an investor for $10,000 cash.
On October 17, 2016, the Company issued 50,000 restricted shares to an investor for $15,000 cash.
There are no options outstanding.
NOTE 14 - ACQUISITION OF THE REFLEX PRODUCTIONS, INC.
On August 11, 2016, the Company entered into a purchase agreement for the acquisition of 100% of the common stock of Reflex Productions, Inc. (Reflex) Reflex provides clinical cosmetic procedures including Botox injections and other cosmetic procedures.
In exchange for the common stock of Reflex the Company issued 25,000,000 restricted shares of its common stock and 42,000,000 warrants to the owners of Reflex. The entirety of the value of the equity instruments issued was recorded as goodwill. Net assets acquired in the acquisition consisted of the following:
The Company has used an estimate of the shares and warrants issued for the ownership interest in Reflex as consideration for the acquisition. We do not feel as though there are significant enough operations to determine a fair value of the entity and management's assumptions as to projected revenue and costs have not been born out in initial operations.
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Additionally, the shares and warrants issued have been discounted by approximately 100% of the standard valuation methodology as the Company recently experienced a 200 to 1 stock split and the market had not had sufficient time to adjust to the post-split value of the additional shares issued.
Reflex accounts are consolidated in these financial statements, in accordance with generally accepted accounting principles. Operations of Reflex have been consolidated from the date of acquisition or August 11, 2016.
Below is a pro forma statement of operations, showing the results of the six months ended August 31, 2016 as if the Reflex acquisition had taken place at the beginning of the period. There are no significant adjustments reflected in the pro forma information below, other than the inclusion of Reflex's results from February 28, 2016 to August 11, 2016, and routine consolidation adjustments as required by generally accepted accounting principles.
Since Reflex only began significant operations in the quarter ended August 31, 2016, it is difficult to predict future financial results from the historical financial statements presented above. As a result, we have also prepared a projection of the statement of operations for the year ended February 28, 2017, based on certain assumptions. This financial projection is inherently susceptible to error, and actual results often differ from predicted ones. In preparing this projection, we extrapolated the results of the quarter ended August 31, 2016 and applied them to the subsequent two quarters. In addition, we made adjustments to cost of goods sold and operating expenses, increasing cost of goods sold by $40,000 to account for the historical results being skewed by large rebates, and decreasing operating expenses by $75,000 to account for a projected decrease over time in marketing and other start-up costs. The following should be taken as an illustration of possible results given the above assumptions, and not as a guarantee of actual results:
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NOTE 15 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date of filing the consolidated financial statements with the Securities and Exchange Commission, the date the consolidated financial statements
were available to be issued. Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the consolidated financial statements thereby requiring adjustment or disclosure, other than those notes below:.
We executed a promissory note payable on April 24, 2017 in the principal amount of $75,000, net of original issue discount in the amount of $7,500 receiving net proceeds of $67,500. This note matures on January 24, 2018, and bears interest at 12%. The notes bears substantial prepayment premiums of from 135% to 145% of principal and unpaid interest for any prepayment form 90 to 180 days after issuance and a prepayment penalty of 150% anytime after 180 days from issuance up to the maturity date. This note in convertible 180 days after issuance into common shares at a conversion price defined as 135% of the market price of the shares defined as the average of the two (2) trading prices during the previous twenty (20) trading days to the date of a Conversion Notice.
We executed a promissory note payable on May 3, 2017 in the principal amount of $600,000, net of original issue discount in the amount of $60,000 receiving net proceeds of $540,000. This note matures on February 11, 2018, is non-interest bearing and carries a default interest rate of 24%. The note is convertible into common shares at the lower of $1 per share or 50% of the market price of the shares (lowest trading price for 30 days preceding the conversion date.
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Item 9.
Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure
On August 3, 2015, Joey New York Inc.. (the "Registrant" or the 'Company") was notified by RBSM, LLP ("RBSM") that the firm resigned as the Registrant's independent registered public accounting firm RBSM was engaged by the Company on February 26, 2015. RBSM did not issue an audit report on the Company's financial statements.
During the period February 26, 2015 through August 3, 2015, the Company has not had any disagreements with RBSM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to RBSM's satisfaction, would have caused them to make reference thereto in their reports on the Company's financial statements for such periods.
During the period February 26, 2015 and through August 3, 2015, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
On August 3, 2015 (the "Engagement Date"), the Company engaged Thayer O'Neal Company PLLC ("Thayer O'Neal ") as its independent registered public accounting firm for the Company's fiscal year ending February 28, 2015. The decision to engage Thayer O'Neal as the Company's independent registered public accounting firm has been approved by the Company's Board of Directors.
During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with Thayer O'Neal regarding either:
1.
the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report was provided to the Company nor oral advice was provided that Thayer O'Neal concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
2.
any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).
On February 23, 2015 the Company was notified by L.L. Bradford & Company, LLC that the firm resigned as the Company's independent registered public accounting firm. In connection with the resignation, L.L. Bradford & Company, LLC informed the Company that it will no longer service SEC reporting companies because partners in its SEC practice moved to RBSM, LLP.
On February 26, 2015, the Company, through and with the approval of its Board of Directors, engaged RBSM LLP as its independent registered public accounting firm.
Prior to engaging RBSM LLP, the Company did not consult with RBSM LLP regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by RBSM LLP on the Company's financial statements, and RBSM LLP did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
The report of L.L. Bradford regarding the Company's financial statements for the fiscal year ended February 28, 2014 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended February 28, 2014 and during the period from February 28, 2014 to February 23, 2015, the date of the resignation, there were no disagreements with L.L. Bradford on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of L.L. Bradford would have caused it to make reference to such disagreement in its reports.
The Company provided L.L. Bradford with a copy of this report on Form 8-K prior to its filing with the Securities and Exchange Commission and requested that L.L. Bradford furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether is agrees with above statements and, if it does not agree, the respects in which it does not agree.
Prior to engaging Thayer O'Neal, the Company did not consult with Thayer O'Neal regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Thayer O'Neal on the Company's financial statements, and Thayer O'Neal did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
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The report of L.L. Bradford regarding the Company's financial statements for the fiscal year ended February 28, 2014 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended February 29, 2017 and during the period from February 28, 2017 to May 29, 2017, the date of dismissal, there were no disagreements with Thayer O'Neal on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Thayer O'Neal would have caused it to make reference to such disagreement in its reports.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, consisting of a sole officer and director at that time, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our sole officer and director at that time concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, or person/s performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management's Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of the Company's internal control over financial reporting as of February 29, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on this evaluation, our management, consisting of a sole officer and director at that time, concluded that, as of February 28, 2016, our internal control over financial reporting were not effective.
In response to that assessment we have made a determination that all accounting and financial reporting services should be outsources to a qualified consulting firm and we are in the process of evaluating alternative to our current provider.
We have also made the determination that we need to dedicate more of the company's current and future financial resources to this function
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 our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended February 29, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B.
Item 9B. Other Information
None.
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following persons are our executive officers and directors, and hold the offices set forth opposite their names.
Our Board of Directors consists of two members. We currently do not provide any cash remuneration for acting as a Director. A ll directors may, however be reimbursed their expenses, if any, for attendance at meetings of the Board of Directors.
The following is a brief account of the business experience during the past five years of each of our directors and executive officers:
Joey Chancis became our Chief Executive Officer, Director, and principal shareholder upon the closing of the acquisition of RAR Beauty, LLC on May 12, 2014. Mrs. Chancis founded the Joey New York Brand of products in 1993. She is the innovative driving force, as well as the inspiration of the company and is responsible for all aspects of the business including product development, creativity, design, marketing, promoting, production, sales and management. She is also the company's spokesperson. Joey travels worldwide participating in personal appearances, events, television shows and radio, as well as, store openings and trade shows. Mrs. Chancis gained exposure in the skin care and cosmetic industry while working for two major beauty companies where she experienced all sides of the business from R&D to sales and marketing.
Richard Roer became our President, Director, and principal shareholder upon the closing of the acquisition of RAR Beauty, LLC on May 12, 2014. Richard Roer joined Joey New York Brand in December 1997 to manage the launch of the retail distribution strategy. He has extensive domestic and international experience in the fashion industry working for Leslie Fay as well as owning a prestigious fashion company. Mr. Roer also specialized in licensing popular international brands such as Fila and Roberto Cavalli, and was the first importer to bring these prestigious companies to the U.S. He also served as President of a fashion company that sold licensed apparel under the following trademarks: Anne Klein, Bill Blass, Bob Mackie, and Oleg Cassini. Building on these successful experiences, Mr. Roer is involved in numerous facets of the business, including the sales, marketing, finance and administrative functions.
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Involvement in Certain Legal Proceedings
During the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:
●
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
●
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
●
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
●
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.
●
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
●
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Committees of the Board
Decisions of the Board of Directors are generally taken by written unanimous resolutions. The current Board comprises two members and is intending to hold regularly scheduled meetings. The entire board provides the functions of Audit, Compensation and Governance committees until such time as charters for these committees can be adopted and they can be populated by independent directors.
Code of Ethics
The Company has not yet adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Until recently we have had a sole officer and director conducting all operations. We have recently expanded operations, the Board of Directors and the executive team. We anticipate adopting a formal Code of Ethics soon.
Family Relationships
No family relationships exist between any of our present directors and officers, other than Richard Roer and Joey Chancis who are Father and Daughter.
Compliance with Section 16(A) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the "reporting persons") file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own during the fiscal year ended February 28, 2015, Forms required, if any, were filed with the SEC by such reporting persons.
Changes in Nominating Procedures
None
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Item 11.
Item 11. Executive Compensation
The following table sets forth information concerning the total compensation paid or accrued by us during the past two fiscal years ended February 29, 2017 to:
●
all individuals who served as our chief executive officer, chief financial officer or acted in a similar capacity for us at any time during the fiscal year ended February 28, 2017 and 2016 and
●
all individuals who served as executive officers of ours at any time during the fiscal year ended February 28, 2014 and 2015 and received annual compensation during the fiscal year ended February 28, 2014 and/or 2015 in excess of $100,000.
Summary Compensation Table
Employment Agreements and Benefits
We currently do not currently provide any employee benefit or retirement programs. Our officers' salaries are determined by the Board of Directors. Officers and employees may receive bonuses from time to time in the form of cash or equity at the sole discretion of the Board of Directors.
We currently do not currently have any compensation agreements in place with our officers or directors.
We may also pay bonuses to our named executive officers and other employees at the discretion of the board of directors.
Outstanding Equity Awards
We did not have any outstanding equity awards with any of our executive officers named in the Summary Compensation Table, effective February 28, 2017.
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Director Compensation
The following table sets forth compensation received by our directors in the fiscal year ended February 28, 2017.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
Compensation of Directors
We reimburse our directors for expenses incurred in connection with attending board meetings.
We did not pay director's fees or other cash compensation for services rendered as a director in the year ended February 28, 2017 or February 29, 2016.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of May 29, 2017, the beneficial ownership of Joey New York, Inc. common stock by each of our directors and named executive officers, each person known to us to beneficially own more than 5% of our common stock, and by the officers and directors of the Company as a group. Except as otherwise indicated, all shares are owned directly. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power (subject to applicable community property laws) and that person's address is c/o Joey New York, Inc., Trump Tower I, 16001 Collins Ave. #3202, Sunny Isles Beach, Fl 33160. Shares of Common Stock subject to options, warrants, or convertible notes currently exercisable or convertible or exercisable or convertible within 60 days after May 29, 2017 are deemed outstanding for computing the share ownership and percentage of the person holding such options, warrants, or convertible notes but are not deemed outstanding for computing the percentage of any other person.
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(1)
Joey Chancis is CEO and Director. Includes 7,000,000 shares held in the name of Richard Chancis, who is the spouse of Joey Chancis. Joey Chancis holds directly 22,500,000 shares held in her name. Does not include any shares owned by Richard Roer which is her father of which she disclaims beneficial ownership.
(2)
Richard Roer is President and Director. Does not include any shares owned by Joey Chancis which is his daughter of which he disclaims beneficial ownership.
(5)
Includes 22,500,000 shares held in the name of Joey Chancis, who is his spouse. Richard Chancis holds directly 7,000,000 shares held in his name. Does not include any shares owned by Richard Roer which is his father-in-law of which he disclaims beneficial ownership.
Note: Beneficial Ownership of Securities: Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, a beneficial owner of securities is a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within sixty days through means including the exercise of any option, warrant or conversion of a security.
Item 13.
Item 13. Certain Relationships and Related Transaction, and Director Independence
In addition to the cash and equity compensation arrangements of our directors and executive officers discussed above under "Director Compensation" and "Executive Compensation," the following is a description of transactions to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.
As of the date of this Annual Report, other than as disclosed below and in this Current report, none of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transactions, which has materially affected or will materially affect us.
On May 12, 2014, the Company completed an acquisition agreement with RAR Beauty, LLC, a Florida limited liability company ("RAR"). Pursuant to the Agreement the Company issued promissory notes totaling $3,000,000 due in twenty four months at 5% annual interest to the two members of RAR (Joey Chancis, our now CEO & Director and Richard Roer our now President & Director) in exchange for 100% of the membership interests of RAR.
During 2015, a director of the Company advanced $88,795. During 2016, the same director advanced an additional $________. The advances were non-interest bearing, unsecured and due on demand. As of February 28, 2017, the outstanding balance of related party advances is $461,017.
Director Independence
Our directors are not "independent," as defined by SEC rules adopted pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Although our stock is not listed for trading on the Nasdaq Stock Market at this time, we are required to determine the independence of our directors by reference to the rules of a national securities exchange or of a national securities association (such as the Nasdaq Stock Market). In accordance with these requirements, we have determined that Joey Chancis and Richard Roer are not "independent directors," as determined in accordance with Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market, Inc. The Board has recently been expanded to four members and has appointed new officers. The Board will re-evaluate the continued service of Svetlana Gofman and evaluate our new director Evgeny Smirnov to determine if they are to be considered independent directors going forward.
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Item 14.
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountants for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ending February 28, 2017 and 2016 were: $15,000and $7,500, respectively.
Audit-Related Fees
No aggregate fees were billed in either of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1) for the fiscal years ending February 28, 2017 and 2016.
Tax Fees
No aggregate fees were billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning for the fiscal years ending February 28, 2017 and 2016.
All Other Fees
Other fees billed for professional services provided by the principal accountant, other than the services reported above, for the fiscal years ending February 28, 2017 and 2016 were $0 and $0.
Audit Committee Pre-Approval Policies
Our Board of Directors performing as the Audit Committee by their Chair has approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending February 28, 2017. Audit-related fees, tax fees, and all other fees, if any, were approved by the Board of Directors.
Work Performed by Others
The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than 50 percent.
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Item 15.
Item 15. Exhibits, Financial Statement Schedules
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____________
*
Filed herewith
**
Furnished herewith
+
Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 13, 2017
/s/ Joey Chancis
Joey Chancis, Director
and Principal Executive Officer
Date: June 13, 2017
/s/ Richard Roer
Richard Roer, Director and Principal Financial Officer
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