UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
ARAX HOLDING CORP.
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(Exact name of registrant as specified in its charter)
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Nevada
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99-0376721
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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2329 N. Career Avenue
Suite 317
(Address of principal executive offices, including zip code)
(605) 553 2238
Registrant’s telephone number, including area code
Securities registered under Section 12(b) of the Act:
None
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N/A
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Title of each class
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Name of each exchange on which registered
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Securities registered under Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
x No
☐
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
No ☒*
*
The registrant has filed all Exchange Act reports for the preceding 12 months.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐ No ☒
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer”,
“smaller reporting company”, and
“emerging growth company”, in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☒
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(Do not check if smaller reporting company)
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of
September 25, 2017,
the registrant had 10,335,294 shares of common stock issued and outstanding. The aggregate market value of the common stock held by non-affiliates of
the registrant at
April 29, 2016 (the last business day of
the registrant’s second fiscal quarter) was approximately $817,353. The aggregate market value was computed based upon 2,335,294 shares of common stock at a closing price of $0.35 as reported on the OTC QB Market.
ARAX HOLDINGS CORP.
FORM 10K
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PART 1
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ITEM 1
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3
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ITEM 1A
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4
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ITEM 2
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4
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ITEM 3
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5
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ITEM 4
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5
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PART II
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ITEM 5
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5
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ITEM 6
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6
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ITEM 7
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6
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ITEM 7A
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9
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ITEM 8
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10
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ITEM 9
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11
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ITEM 9A
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11
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PART III
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ITEM 10
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13
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ITEM 11
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13
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ITEM 12
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14
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ITEM 13
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15
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ITEM 14
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15
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PART IV
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ITEM 15
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16
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PART I
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated
or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Item 1. |
Description of Business
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Arax Holdings Corp. (the
“Company”,
“we”,
“our” or
“us”) was incorporated under the laws of the State of Nevada on
February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last year,
the Company stated that it was re-evaluating its business plan.
It was further indicated as possible that a new business model could be related to a new business sector other than the food sector, and that any new business model could entail a capital restructuring of
the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of
the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At
October 31, 2016, and as of the date of this filing, Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and possibly internationally. We will continue to assess these opportunities and structures as well
as the various pre-requisite actions needed to finalize and implement any new business model.
The Company was a majority-owned subsidiary of Thru Pharma, LLC, and these financials are presented on a stand-alone basis. All transactions with Thru Pharma have been identified in Note 5: Related party transactions. As of March 1, 2017, upon merger with Kasten, Inc., a Nevada corporation (
“Kasten”), whereby Kasten was the surviving corporation,
the Company was effectively spun out whereby Chief Executive Officer,
Steven J. Keough will be the majority shareholder.
Pursuant to a revision to a certain Consulting Agreement dated as of
October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (
“Strategic”), as amended effective
January 17, 2014, on or about
February 9, 2015, and most recently on
October 20, 2015, with full effect as of
April 1, 2015 (the
“Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma in the event that a PUBCO M&A transaction did not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of Arax Holdings would equal 3% of
Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by
the Company. As of
September 25, 2017, these shares have not been issued by
the Company.
The Company will issue these shares once it becomes fully reporting.
In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of
the Company and Thru Pharma, an irrevocable proxy (the
“Irrevocable Proxy”), to vote all of the common stock in
the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.
As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms.
Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with
the Company.
Effective
July 1, 2015, Thru Pharma and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the
“Catalyst Note”) and a Securities Purchase Agreement (the
“Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of
the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to multi-year auditing of Thru Pharma financials. The total available funds are $200,000, and Thru Pharma has only drawn $75,000. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction.
On
March 1, 2017,
the Company’s majority shareholder, Thru Pharma LLC entered into a merger agreement with Kasten, Inc., a Nevada corporation (
“Kasten”), whereby Kasten was the surviving corporation. As part of the merger agreement, the shares in
the Company held by Thru Pharma were withheld from the agreement and
the Company was no longer identified as a subsidiary of Thru Pharma thereby effectively spinning out
the Company and excluding it from the surviving entity. Kasten has been identified as party to and co-guarantor of the Catalyst note.
The
Company is in the process of settling the note with Catalyst whereby funds used to satisfy the note are being provided by its Chief Executive Officer,
Steven J. Keough whereas Mr. Keough will be effectively purchasing the 8,000,000 common shares in
the Company and the Arax Holdings Corp receivable (listed on the books of
the Company as a related party payable in the amount of $152,562 for the year ended
October 31, 2016) in exchange for extinguishing the note. The 8,000,000 shares are currently collateralizing the Catalyst loan. Upon satisfaction of the note,
the Company’s related
party payable will be due to Mr. Keough, and he will become the majority shareholder in
the Company.
The Company’s status as a “shell company” as of the date of this report remains unchanged.
Reports to Security Holders
We intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the Commission if they become necessary in the course of
our company’s operations.
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
Environmental Regulations
We do not believe that we are or will become subject to any environmental laws or regulations of the United States. While our products and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our products or potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.
Employees
As of
October 31, 2016, we had one full-time employee, Steven Keough, Chief Executive and Chief Financial Officer. Mr. Keough receives no compensation for his services.
Available Information
All reports of
the Company filed with the SEC are available free of charge through the SEC’s
web site at www.sec.gov. In addition, the public may read and copy materials filed by
the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 2. |
Description of Property
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We do not own any real estate or other properties.
Item 3. |
Legal Proceedings
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On June 4, 2014, we were named as a defendant in a lawsuit filed by AMERIFINANCIAL, INC. (“AMERIFINANCIAL”), of Houston, Texas. The action related primarily to a contract dispute between AMERIFINANCIAL and our majority shareholder, THRU PHARMA, LLC. The dispute did not allege any actions or inactions by our officers or representatives acting on our behalf. Counsel for THRU PHARMA, LLC, requested that we be dismissed from this lawsuit, as we were not party to the disputed contract, and there was no legal basis for the Company being a part of the lawsuit. The
Company did not recognize a liability in connection with it. On August 31, 2015, the Judge in this Harris County, Texas, case ruled that the only remaining Defendant was THRU PHARMA, LLC. On January 8, 2016, THRU PHARMA and AMERIFINANCIAL, INC. reached settlement of the dispute.
Item 4. |
Mine Safety Disclosures
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
Our shares of common stock are traded on the OTCBB under the symbol “ARAT.” Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
The following table sets forth the high and low trade information for our common stock for each quarter of the fiscal year ended
October 31, 2016 and
2015. The first trade of our common stock this fiscal year was on
November 3, 2014.
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2015
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High
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Low
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High
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Low
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First Quarter
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$
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0.40
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0.40
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0.62
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0.52
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Second Quarter
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0.35
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0.40
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0.52
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0.40
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Third Quarter
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0.30
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0.35
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0.40
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0.40
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Fourth Quarter
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0.30
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0.30
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0.40
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0.40
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Number of Holders
As of October 31, 2016, there were 10,335,294 issued and outstanding shares of common stock were held by 38 total shareholders of record.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal years ended
October 31, 2016 and
2015. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
No sales of unregistered securities were completed in the twelve months ended October 31, 2016.
Purchase of our Equity Securities by Officers and Directors
No purchase of equity securities took place in the twelve months ended October 31, 2016.
Other Stockholder Matters
None
Item 6. |
Selected Financial Data
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As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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This Annual Report on Form 10-K (this “Report”) contains forward-looking statements which reflect management’s expectation or belief concerning future events that involve risks and uncertainties. Our actions, results and performance could differ materially from what is contemplated by the forward-looking statements contained in this Report. Factors that might cause differences from the forward-looking statements include those referred to or identified in our Registration Statement on Form S-1 filed with the SEC on April 25, 2013 and other factors that may be identified elsewhere in this Report. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements.
The following is management’s discussion and analysis of the financial condition and results of operations of
the Company, as well as our liquidity and capital resources. The discussion, including known trends and uncertainties identified by management, should be read in conjunction with
the Company’s audited consolidated financial statements and related notes included in this Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
Arax Holdings Corp. (the
“Company”,
“we”,
“our” or
“us”) was incorporated under the laws of the State of Nevada on
February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last fiscal year,
the Company stated that it was re-evaluating its business plan.
It was further indicated as possible that a new business model could be related to a new business sector other than the food sector, and that any new business model could entail a capital restructuring of
the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of
the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At
October 31, 2016, and as of the date of this filing, Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and possibly internationally. We will continue to assess these opportunities and structures as well
as the various pre-requisite actions needed to finalize and implement any new business model.
Pursuant to a revision to a certain Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014, on or about February 9, 2015, and most recently on October 20, 2015, with full effect as of April 1, 2015 (the “Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma in the event that a PUBCO M&A transaction did not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of Arax Holdings
would equal 3% of Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company. As of September 25, 2017, these shares have not been issued by the Company. The Company will issue these shares once it becomes fully reporting.
In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of
the Company and Thru Pharma, an irrevocable proxy (the
“Irrevocable Proxy”), to vote all of the common stock in
the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.
As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an
“M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms. Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or
indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with
the Company.
Effective
July 1, 2015, Thru Pharma and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the
“Catalyst Note”) and a Securities Purchase Agreement (the
“Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of
the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to multi-year auditing of Thru Pharma financials. The total available funds are $200,000, and Thru Pharma has only drawn $75,000. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction. In the event that Thru Pharma is unable to timely make payments under this Agreement, Catalyst has the option of gaining
control of the Thru Pharma shares in
the Company.
The Company’s status as a
“shell company” as of the date of this report remains unchanged.
RESULTS OF OPERATIONS
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We will require additional capital to meet our operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.
Revenue
We recognized no revenue during the years ended
October 31, 2016 and
2015 as we have not commenced revenue generating operations yet.
Operating Expenses
During the fiscal year ended
October 31, 2016, our operating expenses were $163,299 compared to $328,640 during the prior fiscal year. During the twelve months ended
October 31, 2016, our operating expenses comprised professional fees of $132,176 compared to $314,145 for the same period in the prior year and general and administrative cost of $31,123 compared to $14,495 for the same period in the prior year. Expenses incurred during the fiscal year ended
October 31, 2016 compared to fiscal year ended
October 31, 2015 decreased primarily due to the cost of warrants issued in the prior year for professional services.
Net Loss
Our net loss for the fiscal year ended
October 31, 2016 was $234,528 compared to a net loss of $352,256 during the fiscal year ended
October 31, 2015 due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of
October 31, 2016, we had no assets and $300,545 of current liabilities comprised of liability for payments on our behalf by a related party, accrued interest and liability to issue stock. As of
October 31, 2015, our total assets were $0 and our total liabilities were $152,817 comprised of liabilities of a similar nature. The increase was mainly due to an increase in the payable to a related party of $154,979.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. During the fiscal year ended
October 31, 2016, we used $105,962 in operating activities compared to $29,774 during the fiscal year ended
October 31, 2015. The decrease between the two periods related primarily to the decrease in the loss due to professional fees as compared to the prior fiscal year.
Cash Flows from Investing Activities
We have neither used nor generated cash flow from investing activities during the fiscal years ended
October 31, 2016 or 2015.
Cash Flows from Financing Activities
During the fiscal year ended
October 31, 2016,
the Company received $152,562 by way of payments on our behalf by a related party to fund our working capital requirements. During the fiscal year ended
October 31, 2015, we received $29,774 by way of payments on our behalf by our then principal shareholder.
PLAN OF OPERATION AND FUNDING
Historically, we have funded working capital requirements primarily through the proceeds of the private placement of equity instruments and by way of loans from related parties. Our working capital requirements are expected to increase as our business grows. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) personnel; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We expect that working capital requirements will be funded through advances or payables on our behalf from Thru Pharma, and through further issuances of our securities.
We have no lines of credit or other bank financing arrangements. Additional issuances of equity or issuances of convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material commitments.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However,
the Company has not generated any revenues as of
October 31, 2016.
The Company has an accumulated deficit of $668,090 as of
October 31, 2016 and further losses are anticipated in the development of its business.
The Company currently has no cash balance, a working capital and stockholders’ deficit of $300,545 and has not completed
its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
The Company is dependent on additional investment capital to fund operating expenses.
The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that
the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
The independent auditors’ report accompanying our
October 31, 2016 and
October 31, 2015 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared
“assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Recent Accounting Pronouncements
In August 2016, the FASB issued ASU No. 2016-15,
“Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments”. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after
December 31, 2017. Early adoption is permitted.
The Company is assessing the impact, if any, of implementing this guidance on its financial position, results of operations and liquidity.
In August 2014, FASB issued ASU No. 2014-15,
“Presentation of Financial Statements-Going Concern” (
“ASU No. 2014-15”). The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this
ASU are effective for the annual period ending after
December 15, 2016, and for annual periods and interim periods thereafter.
The Company is currently assessing the impact of this ASU on
the Company’s consolidated financial statements.
In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09,
“Revenue from Contracts with Customers”, ASU 2015-14,
“Revenue from Contracts with Customers, Deferral of the Effective Date”, and ASU 2016-12,
“Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients”, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific
guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amendments in these ASUs are effective for annual periods beginning after
December 15, 2017, and interim periods therein. Early adoption is permitted for annual periods beginning after
December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption.
The Company s assessing the impact, if any, of implementing this guidance on its financial position, results of operations
and liquidity.
There are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by
the Company. Management does not believe any of these accounting pronouncements has had or will have a material impact on
the Company’s consolidated financial position or operating results.
Item 7A. |
Quantitative and Qualitative Disclosures about Market Risk
|
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.
Item 8. |
Financial Statements and Supplementary Data
|
C:
Certified Public Accountants
1438 N Highway 89, Suite 130
Office: (
801)447-9572 Fax: (
801)447-9578
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Arax Holdings Corp.
2329 N. Career Avenue, Suite 317
Sioux Falls, South Dakota, 57107
We have audited the accompanying balance sheets of Arax Holdings Corp. as of
October 31, 2016 and
2015 and the related statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arax Holdings Corp. as of
October 31, 2016 and
2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company has suffered continuing losses and has yet to establish a reliable, consistent and proven source of revenue to meet its operating costs on an ongoing basis and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Farmington Utah
Arax Holdings Corp
|
|
For the Years Ended
|
|
|
|
October 31,
|
|
ASSETS
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Total current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Loan from related party
|
|
$
|
228,644
|
|
|
$
|
76,082
|
|
Related party payable for services
|
|
|
2,417
|
|
|
|
-
|
|
Convertible note payable, net of $0 and $43,188 debt discount,
|
|
|
35,404
|
|
|
|
69,312
|
|
respectively
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
9,000
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
25,080
|
|
|
|
1,923
|
|
Derivative liability
|
|
|
-
|
|
|
|
5,500
|
|
Total current liabilities
|
|
|
300,545
|
|
|
|
152,817
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
300,545
|
|
|
|
152,817
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 75,000,000 shares authorized;
|
|
|
10,335
|
|
|
|
10,300
|
|
10,335,294 and 10,300,000 shares issued and outstanding for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability to issue stock
|
|
|
-
|
|
|
|
11,881
|
|
Additional paid-in capital
|
|
|
357,210
|
|
|
|
258,564
|
|
Accumulated deficit
|
|
|
(668,090
|
)
|
|
|
(433,562
|
)
|
Total stockholders' deficit
|
|
|
(300,545
|
)
|
|
|
(152,817
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
-
|
|
|
$
|
-
|
|
See accompanying notes to financial statements
Arax Holdings Corp.
|
|
For the Years Ended
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENESES
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
31,123
|
|
|
|
14,495
|
|
Professional fees
|
|
|
132,176
|
|
|
|
314,145
|
|
TOTAL OPERATING EXPENSES
|
|
|
163,299
|
|
|
|
328,640
|
|
|
|
|
|
|
|
|
|
|
NET LOSS FROM OPERATIONS
|
|
|
(163,299
|
)
|
|
|
(328,640
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(76,729
|
)
|
|
|
(18,116
|
)
|
Derivative expense
|
|
|
-
|
|
|
|
(25,434
|
)
|
Change in fair value of derivative
|
|
|
5,500
|
|
|
|
19,934
|
|
TOTAL OTHER INCOME
|
|
|
(71,229
|
)
|
|
|
(23,616
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE INCOME TAXES
|
|
|
(234,528
|
)
|
|
|
(352,256
|
)
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(234,528
|
)
|
|
$
|
(352,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING: BASIC AND DILUTED
|
|
|
10,326,037
|
|
|
|
10,300,000
|
|
See accompanying notes to financial statements
Arax Holdings Corp.
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(234,528
|
)
|
|
$
|
(352,256
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Stock issued as note incentive
|
|
|
-
|
|
|
|
38,400
|
|
Warrants issued as compensation
|
|
|
58,000
|
|
|
|
-
|
|
Stock liability assumed by related party
|
|
|
28,800
|
|
|
|
-
|
|
Derivative expense
|
|
|
-
|
|
|
|
25,434
|
|
Related party payable for services
|
|
|
2,417
|
|
|
|
27,450
|
|
Change in fair value of derivative
|
|
|
(5,500
|
)
|
|
|
(19,934
|
)
|
Options granted for compensation
|
|
|
-
|
|
|
|
16,217
|
|
Warrants issued for professional fees/ compensation
|
|
|
-
|
|
|
|
216,799
|
|
Amortization of debt discount
|
|
|
43,188
|
|
|
|
16,193
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
31,061
|
|
|
|
1,923
|
|
Accrued expenses
|
|
|
9,000
|
|
|
|
-
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(67,562
|
)
|
|
|
(29,774
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
-
|
|
|
|
-
|
|
NET CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from related party loans
|
|
|
152,562
|
|
|
|
29,774
|
|
Repayments on convertible note
|
|
|
(85,000
|
)
|
|
|
-
|
|
Proceeds from convertible note
|
|
|
-
|
|
|
|
65,000
|
|
Repayments to related party
|
|
|
-
|
|
|
|
(65,000
|
)
|
NET CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
67,562
|
|
|
|
29,774
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS:
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH
|
|
|
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Stock issued as compensation
|
|
$
|
58,000
|
|
|
$
|
-
|
|
TOTAL NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
$
|
58,000
|
|
|
$
|
-
|
|
See accompanying notes to condensed unaudited financial statements
Statements of Changes in Stockholders' Deficit
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid In
Capital
|
|
|
Stock
Subscription
Payable
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders'
Deficit
|
|
|
|
|
10,300,000
|
|
|
$
|
10,300
|
|
|
$
|
25,548
|
|
|
$
|
-
|
|
|
|
(81,306
|
)
|
|
$
|
(45,458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Granted for
Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
16,217
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,217
|
|
Warrants Issued for
Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
216,799
|
|
|
|
-
|
|
|
|
-
|
|
|
|
216,799
|
|
Stock as Incentive for
Convertible Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,881
|
|
|
|
-
|
|
|
|
11,881
|
|
Stock for Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(352,256
|
)
|
|
|
(352,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,300,000
|
|
|
$
|
10,300
|
|
|
$
|
258,564
|
|
|
$
|
11,881
|
|
|
|
(433,562
|
)
|
|
$
|
(152,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock as Incentive for
Convertible Note
|
|
|
35,294
|
|
|
|
35
|
|
|
|
11,846
|
|
|
|
(11,881
|
)
|
|
|
-
|
|
|
|
-
|
|
Warrants Issued for
Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
58,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,000
|
|
Stock liability assumed by
related party
|
|
|
-
|
|
|
|
-
|
|
|
|
28,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,800
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(234,528
|
)
|
|
|
(234,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,335,294
|
|
|
$
|
10,335
|
|
|
$
|
357,210
|
|
|
$
|
-
|
|
|
|
(668,090
|
)
|
|
$
|
(300,545
|
)
|
See accompanying notes to financial statements