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Drax, Industries Inc. – ‘10-K’ for 12/31/21

On:  Wednesday, 10/26/22, at 4:57pm ET   ·   For:  12/31/21   ·   Accession #:  1079973-22-1353   ·   File #:  333-253043

1 Reference:  To:  Drax, Industries Inc. – ‘S-1’ on 2/12/21

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

10/26/22  Drax, Industries Inc.             10-K       12/31/21   47:2.6M                                   Edgar Tech & Bus… Inc/FA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM  i 10-K

Commission file number:  i 333-253043

 i Drax, Industries Inc.

(Exact name of registrant as specified in its charter)

 i 1385 Park Center Drive

 i Vista,  i California  i 92081

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  i (760)  i 739-0069

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.0001 per share

(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  ☐   i  i 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  ☐   i 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.  i Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  i 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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐  i 0

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   i No ☒

At August 26, 2022 there were  i 7,136,571 shares of the registrant’s Common Stock issued and outstanding.

Drax, Industries Inc.

FORM 10-K

For The Fiscal Year Ended December 31, 2021

Explanatory Note

In this Annual Report on Form 10-K, Drax, Industries Inc. is sometimes referred to as the “Company”, “we”, “our”, “us” or “registrant” and U.S. Securities and Exchange Commission is sometimes referred to as the “SEC”.

PART I

Item 1. Business.

Our Company

DRAX, INDUSTRIES INC. ("the Company", "Drax") was incorporated in the state of Wyoming on March 24, 2020 ("Inception"). The Company is an assembly company that intends to provide one product to consumers: a mobile evaporative cooling trailer that is 83 inches by 16 feet called "R3Cooler"

Our principal executive offices are located at 1385 Park Center Drive, Vista, California 92081. Our telephone number is (760) 739-0069. Our fiscal year end is December 31.

Principal Business

Drax, Industries cooling trailer is self-contained, fully equipped cooling systems that allow people to sit in and escape the outdoor heat by lowering temperatures as much as 30 degrees. The evaporative cooling trailers are designed to aid in the relief of heat stress in outdoor work sites.

The Department of Labor Occupational Safety & Health Administration, OSHA Technical Manual Section III Chapter 4 sets forth Guidelines for Operations conducted outdoors in hot weather. Such as construction, refining, and fire control, especially those that require workers to wear protective clothing. A Cool Box trailer on the job site allows the workers to cool off in compliance with the OSHA regulations.  It is likely that the OSHA requirements will increase in the future increasing the market for cool Box products.

The evaporative cooling trailer have two 3,500 lb. axles, brakes with a breakaway kit, 12,000lb jack, two 5/16 adjustable cast coupler, 3 x 2 Angle cross members, 5" Channel frame and tongue, 5" Boxed flush floor, all lights sealed rubber mounted in frame and 225/75/15 8 ply tires with spare. We purchase trailers for our B-26 from Air-Tow which is located at 1480 Arrow Hwy. La Verne, Ca. 91750.  The system uses an evaporating cooling system and a 325-gallon water tank.

The evaporative cooling trailer will be sold directly to the customers. Drax technology is based on the principles of evaporative cooling which has been around for years.

As water is evaporated, energy is lost from the air, reducing the temperature. Two temperatures are important when dealing with evaporative cooling systems.

Dry Bulb Temperature

Wet Bulb Temperature

When considering water evaporating into air, the wet-bulb temperature, as compared to the air's dry-bulb temperature is a measure of the potential for evaporative cooling. The dry and wet bulb temperature can be used to calculate the relative humidity.

Evaporation will take place when the humidity is below 100% and the air begins to absorb water. Any given volume of air can hold a certain amount of water vapor and the degree of absorption will depend on the amount it is already holding.

The term humidity describes how much water is already in the air; relative to the amount it can hold. Air is saturated when it cannot hold any more water. Imagine it as a sponge: if the sponge held half as much water as it could hold, it would be 50% saturated. In the case of air, we would describe the relative humidity as being 50%.

Energy is required to change water from liquid to vapor. This energy is obtained in an adiabatic process from the air itself. Air entering an evaporative air cooler gives up heat energy to evaporate water. During this process, the dry bulb temperature of the air passing through the cooler is lowered as much as 30 degrees.

Drax has commenced its major operations of selling and then assembling R3Cooler units. The Company has distributed two to date and has orders for another 4 units to date.

Government Regulation

We are subject to government regulations that regulate businesses generally, such as compliance with regulatory requirements of federal, state, and local agencies and authorities, including regulations concerning workplace safety and labor relations. In addition, our operations are affected by federal and state laws relating to marketing practices in the music industry. Environmental laws and regulations do not materially impact our operations.

Research and Development

We have not spent any funds on research and development activities in connection with our business.

Personnel

As of December 31, 2021, we employed one person on a part-time basis. Our employee is not subject to a collective bargaining agreement. We believe that our relationship with our employee is good.

Item 1A. Risk Factors.

Not applicable to smaller reporting companies.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our executive offices are located at 1385 Park Center Drive, Vista California 92081. On January 1, 2022, the Company entered into a new lease at 1385 Park Center Drive in Vista, CA 92081 consisting of approximately 7,500 square feet. of office/warehouse space. The lease is for the 6-month period from January 1, 2022 to June 30, 2022, with options for additional periods, at $12,807 per month. Per the agreement, the months of January, February, and March 2022 are rent-free, with the first least payment due on the 1^st of every month. The existing Security Deposit of $50,366 shall carry over to the new lease. The Company is not responsible for property taxes or repairs. The Company is presently at the same location on a month to month basis at $12,807 per month.

Item 3. Legal Proceedings.

We are not a party to any legal proceedings, nor are we aware of any threatened litigation whatsoever.

Item 4. Mine Safety Disclosures

Not applicable to smaller reporting companies.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

None.

Holders of Record

As of December 31, 2021, and 2020, there were 35 record holders and one as of December 31, 2020, of the Company’s common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our operations, and to expand our business. Subject to the rights of holders of preferred stock, any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements, limitations under Florida law and other factors that our board of directors considers appropriate.

Recent Sales of Registered Securities

The Company filed a General form for registration of securities under the Securities Act of 1933 on February 12, 2021. The registration Statement became effective May 13, 2021. Pursuant to the May 13, 2021, registration Statement the company has sold to 35 investors 3,136,571 shares of the Company’s common stock and received $784,143 cash.

Item 6. Selected Financial Data.

Not applicable to smaller reporting companies.

Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing in this Form 10-K and are hereby referenced. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

The COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business and markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including revenues, expenses, reserves and allowances, fair value measurements and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the pandemic, its severity in our markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers, and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates; and, the continued employment of our key personnel and other risks associated with competition.

Overview

DRAX, INDUSTRIES INC. ("the Company", "Drax") was incorporated in the state of Wyoming on March 24, 2020 ("Inception"). The Company is an assembly company that intends to provide a mobile evaporative cooling trailer that is 83 inches by 16 feet called "R3Cooler”.
 

Plan of Operation

Drax, Industries cooling trailer is self-contained, fully equipped cooling systems that allow people to sit in and escape the outdoor heat by lowering temperatures as much as 30 degrees. The evaporative cooling trailers are designed to aid in the relief of heat stress in outdoor work sites.

The Department of Labor Occupational Safety & Health Administration, OSHA Technical Manual Section III Chapter 4 sets forth Guidelines for Operations conducted outdoors in hot weather. Such as construction, refining, and fire control, especially those that require workers to wear protective clothing. A Cool Box trailer on the job site allows the workers to cool off in compliance with the OSHA regulations.  It is likely that the OSHA requirements will increase in the future increasing the market for cool Box products.

The evaporative cooling trailer have two 3,500 lb. axles, brakes with a breakaway kit, 12,000lb jack, two 5/16 adjustable cast coupler, 3 x 2 Angle cross members, 5" Channel frame and tongue, 5" Boxed flush floor, all lights sealed rubber mounted in frame and 225/75/15 8 ply tires with spare. We purchase the B-26 trailers from Air-Tow which is located at 480 Arrow Hwy. La Verne, Ca. 91750. The system uses an evaporating cooling system and a 325-gallon water tank.

The evaporative cooling trailer will be sold directly to the customers. Drax technology is based on the principles of evaporative cooling which has been around for years.

As water is evaporated, energy is lost from the air, reducing the temperature. Two temperatures are important when dealing with evaporative cooling systems.

Dry Bulb Temperature

Wet Bulb Temperature

When considering water evaporating into air, the wet-bulb temperature, as compared to the air's dry-bulb temperature is a measure of the potential for evaporative cooling. The dry and wet bulb temperature can be used to calculate the relative humidity.

Evaporation will take place when the humidity is below 100% and the air begins to absorb water. Any given volume of air can hold a certain amount of water vapor and the degree of absorption will depend on the amount it is already holding.

The term humidity describes how much water is already in the air; relative to the amount it can hold. Air is saturated when it cannot hold any more water. Imagine it as a sponge: if the sponge held half as much water as it could hold, it would be 50% saturated. In the case of air, we would describe the relative humidity as being 50%.

Energy is required to change water from liquid to vapor. This energy is obtained in an adiabatic process from the air itself. Air entering an evaporative air cooler gives up heat energy to evaporate water. During this process, the dry bulb temperature of the air passing through the cooler is lowered as much as 30 degrees.

Drax has commenced its major operations of selling and then assembling R3Cooler units. The Company has distributed two cooling units to date and has orders for another 4 units to date.

Results of Operations for the Year Ended December 31, 2021, compared to the Year Ended December 31, 2020

Revenues. Revenue for the year ended December 31, 2021, was $31,000 as compared to 0 for the year ended December 31, 2020, Revenue increased due to our sales of cooling units.

General and Administrative Expenses. Selling, general and administrative expenses for the year ended December 31, 2021, were $156,872 as compared to $1,125 for year ended December 31, 2020. General and administrative expenses increased due to expenses related to generating revenue, and the Company incurring more expenses related to being a public reporting company, including service fees and for preparing our SEC reports.

Liquidity and Capital Resources

We measure our liquidity in a number of ways, including the following:

Impact of Inflation

We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.

Net Cash Used in Operating Activities

We experienced negative cash flow from operating activities for the year ended December 31, 2021, in the amount of $645,710) due to cash used to fund a net loss of $201,008 , adjusted for the increase in professional fees to being a public reporting company, plus rent was just under $147,776, setting up the warehouse, the purchase of inventory, and prepaid expenses.

We experienced negative cash flow from operating activities for the period ended December 31, 2020, in the amount of $7,000 due to cash used to fund a net loss of $4,753, adjusted for the increase in accounts payable for legal and accounting services to being a public reporting company.

Net Cash Used in Investing Activities

We experienced negative cash flow from investing activities for the year ended December 31, 2021, in the amount of $111,305 due to costs involved in setting up a physical site and the purchase of furniture, equipment and vehicles and related depreciation. The Company did not have any investing activities in 2020.

Net Cash Provided by Financing Activities

We experienced positive cash flow from financing activities for the year ended December 31, 2021, in the amount of $771,059 due to the sale of common stock and the creation of a line-of-credit loan.

Availability of Additional Funds

Based on our working capital as of December 31, 2021, we will need additional equity and/or debt financing to continue our operations during the next 12 months. See “Description of Business”.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Our significant estimates and assumptions include amortization, the fair value of our stock, and the valuation allowance relating to the Company’s deferred tax assets.

We qualify as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act, which became law in April 2012. Under the JOBS Act, “emerging growth companies”, can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles (U.S. GAAP), which contemplate continuation of the Company as a going concern. However, the Company has not commenced its major operations and has accumulated a capital deficit as of December 31, 2021. The Company currently has limited liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Management has evaluated these factors and has determined that they raise substantial doubt about the Company’s ability to continue as a going concern.

Recently Issued Accounting Pronouncements

Reference is made to the “Organization and Significant Accounting Pronouncements” in Note 1 to our financial statements included elsewhere in this report for information related to new accounting pronouncements.

Material Commitments

Drax, Industries Inc. leased office/warehouse at located at 3151 Scott Street, Vista California 92081 effective December 15, 2020. The lease is for a period of 36 months. The warehouse space consists of 2,500 square feet of warehouse space and 500 feet of office space for a total of 3,000 square feet. Rent for the facility is $-0- per month for the first nine months; and then $3,000 per month thereafter. The Company is not responsible for property taxes or repairs. There are currently no proposed programs for renovation, improvement, or development of the facility.

On July 15, 2021, the above lease was terminated and the Company entered into a new lease at the same address consisting of 22,000 square feet of office/warehouse space. The lease is for the 6-month period from July 15, 2021 to December 31, 2021, at $24,817 per month. The Company is not responsible for property taxes or repairs.

Upon execution of the lease, $100,000 was paid to Optec International for first and last months’ rents at $24,817 each, and $50,366 security deposits as framed out in the lease agreement.

On January 1, 2022, the Company entered into a new lease at 1385 Park Center Drive in Vista, CA 92081 consisting of approximately 7,500 square feet. of office/warehouse space. The lease is for the 6-month period from January 1, 2022 to June 30, 2022, with options for additional periods, at $12,807 per month. Per the agreement, the months of January, February, and March 2022 are rent-free, with the first least payment due on the 1^st of every month. The existing Security Deposit of $50,366 shall carry over to the new lease. The Company is not responsible for property taxes or repairs. The Company is presently at the same location on a month to month basis at $12,807 per month.

Purchase of Furniture and Equipment

As of December 31, 2021, we had $111,305 purchases of furniture and equipment. Purchases include fees related to setting up the warehouse, the purchase of inventory, and prepaid expenses.

The Company recognized interest expense for both loans for the twelve-month period ending December 31, 2021 of $642.

Off-Balance Sheet Arrangements

As of December 31, 2021, 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.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. We have no cash equivalents.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. The billing invoice is prepared at that time.

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606. The underlying principle is that the Company recognize revenue to depict the transfer of promised goods and services to customers in an amount that they expect to be entitled to in the exchange for goods and services provided. A process has been designed for the sale of Cooling Trailers for contracts to keep financial statements focused on this principle.

Revenues from cost-to-cost method is used because management considers it to be the best available measure of progress on these contacts. Revenues from cost-plus-fee contracts are recognized on the basis of costs incurred during the period plus the fee earned, measured on the cost-to-cost method.

Revenues from maintenance service contracts are recognized on a straight-line basis over the life of the contract once the Company has an agreement, service has begun, the price is fixed or determinable and collectability is reasonably assumed.

Cost of revenues include all direct material, sub-contractor, labor and certain other direct costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. Claims for additional contract revenue are recognized when realization of the claim is probable and the amount can be reasonably determined.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Share Based Payments

We recognize compensation cost for stock-based awards to employees in accordance with ASC Topic 718, over the requisite service period for each separately vesting tranche, as if multiple awards were granted. Compensation cost is based on grant-date fair value using quoted market prices for our common stock. We recognize compensation cost for stock-based awards to nonemployees in accordance with ASC Topic 505.

Earnings (Loss) Per Share

The Company computes earnings per share in accordance with ASC 260, “Earnings Per Share”. Under the provisions of ASC 260, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. There were no potentially dilutive common shares outstanding during the period.

Income Taxes

The Company accounts for income taxes as outlined in ASC 740, “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 - Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The carrying values of cash, accounts payable, and accrued liabilities approximate fair value. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Recent Accounting Pronouncements

Reference is made to the “Organization and Significant Accounting Pronouncements” in Note 1 to our financial statements included elsewhere in this report for information related to new accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are not subject to risks related to foreign currency exchange rate fluctuations. Our functional currency is the United States dollar. We do not transact our business in other currencies. As a result, we are not subject to exposure from movements in foreign currency exchange rates. We do not use derivative financial instruments for speculative trading purposes.

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Drax, Industries Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Drax, Industries Inc., Inc. (the Company) as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2021 and for the period from March 24, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and for the period from March 24, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has incurred losses since inception and is currently dependent on stockholders to fund its contemplated operational activities which 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 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Due to a new loss for the year, the Company evaluated the need for a going concern. Auditing management’s evaluation of a going concern can be significant judgement given the fact that the Company uses the management’s estimates on future revenues and expenses which are not able to be substantiated.

As discussed in Note 4, the Company has a going concern due to the net loss during the year ended December 31, 20201. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern.

 i M & K CPAS

 i Houston, Texas

October 26, 2022

 i 2738

We have served as the Company’s auditor since 2020.

DRAX, INDUSTRIES INC.

BALANCE SHEETS

For the year ended December 31, 2021 and 2020

The accompanying notes are an integral part of these financial statements.

DRAX, INDUSTRIES INC.

STATEMENTS OF OPERATIONS

For the year ending December 31, 2021

and the period from March 24, 2020 (date of inception) through December 31, 2020

The accompanying notes are an integral part of these financial statements.

DRAX, INDUSTRIES INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

For the year ended December 31, 2021 and the period from

March 24, 2020 (date of inception) through December 31, 2020

The accompanying notes are an integral part of these financial statements.

DRAX, INDUSTRIES INC.

STATEMENTS OF CASH FLOWS

For the year ending December 31, 2021 and the period from

March 24, 2020 (date of inception) through December 31, 2020

The accompanying notes are an integral part of these financial statements.

DRAX, INDUSTRIES INC.

Notes to the Financial Statements

December 31, 2021 and 2020

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this evaluation, our CEO and CFO concluded that our disclosure controls were not effective as of the end of the period covered by this report.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of October 6, 2022. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer has concluded that the Company’s internal control over financial reporting as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of October 6, 2022 (the “Evaluation Date”), to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Each of the following is deemed a material weakness in our internal control over financial reporting:

•  Limited or no segregation of duties and lack of multiple levels of supervision and review.

•  No independent directors.

•  Ineffective controls over financial reporting.

•  Lack of controls over authorization related party transactions.

In 2022 the Company addressed the weakness in control and reporting and has made appropriate changes to ensure that the Company complies with the financial reporting as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Management believes that the material weaknesses set forth in the four items above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Management's Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have the financial resources to do so:

•  We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to an audit committee resulting in a fully functioning audit committee, which will undertake the oversight in the establishment and monitoring of required internal controls and procedures, such as reviewing and approving estimates and assumptions made by management when funds are available to us.

•  Management believes that the appointment of outside directors to a fully functioning audit committee, would remedy the lack of a functioning audit committee.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This Annual Report does not include an attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Item 9B. Other Information.

None.

CHANGES IN CONTROL OF REGISTRANT

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Our director and executive officer, and his age as of December 31, 2021, are as follows:

The following describes the business experience of each of our directors and executive officers, including other directorships held in public reporting companies, if any:

Set forth below is the biographical information about the director and executive officers:

Virgil Enriquez

January 2020 – Current, Prestige Contracting, Poway CA. Position Senior Estimator.

Responsible for the following, (1)Track bid opportunities and prioritize for estimating staff (2) Perform quantity take offs and prepare estimates using Excel spreadsheet templates, (3)Compose clear, concise, detailed proposals, (4) Obtain and negotiate pricing from vendors and subcontractors, (5) Negotiate contracts and change orders with customers when required, (6) Collect, track and report estimating and cost data, (7) Hire, train and supervise other estimators, (8) Review estimates and proposals prepared by estimating staff, (9) Create processes and procedures to streamline and improve estimating process and (10) Coordinate with Production Team to ensure project parameters and budgets are understood.

JULY 2017 PRESIDENT OF HLLK

November 2007-September 2019 MCV Companies Inc., Escondido, CA

Owned and ran MCV Companies, the company provided Contracting – Consulting – Development. Responsible for (1) Estimating, Daily Operations & Production of MCV’s construction projects, (2) Responsible for the complete startup and closeout of all projects, including submittals, subcontracts & schedules, (3) Established the project’s working budget and ensured that all jobs were completed on budget or better, (4) Project documentation and

November 2006 –November 2007 Highland Fairview – Costa Mesa, CA

Land Development Manager / Purchasing, Responsible for the following.

January 2005- November 2006 Centex Homes-San Diego & Southern CA Costal Division

Land Development Purchasing Manager: Responsible for the following.

2004-2005 Pardee Homes San Diego, CA

Offsite Superintendent: Responsible for the following.

2000-2004 E.V. Constructors Inc. / Dimax Escondido CA

Owner / Contractor: Responsible for the following.

1996-1999 Heffler Company San Diego, CA

Vice President / Project Manager: Responsible for the following.

EDUCATION: 1985-1989 University of San Diego, CA

Term of Office

All of our directors hold office until the next annual meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation, or removal.

Family Relationships

There are no family relationships among any of the Company’s directors and officers.

Board Composition and Committees

The Company’s Board of Directors is currently composed of one member, Virgil Enriquez.

We do not have a standing nominating, compensation, or audit committee. Rather, our full board of directors performs the functions of these committees. Also, we do not have a “audit committee financial expert” on our board of directors as that term is defined by Item 407(d)(5)(ii) of Regulation S-K. We do not believe it is necessary for our board of directors to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making.

Involvement in Certain Legal Proceedings

Mr. Enriquez filed a petition for personal bankruptcy under Chapter 7 of the federal bankruptcy laws, which was subsequently discharged in September 2019.

None of our directors, executive officers or control persons has been involved in any of the events prescribed by Item 401(f) of Regulation S-K during the past ten years, excluding the Chapter 7 bankruptcy referenced above, but including:

Compliance with Section 16(a) of the Act

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent (10%) of our shares of common stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent (10%) stockholders are required by regulations promulgated by the SEC to furnish us with copies of all Section 16(a) forms that they file. With reference to transactions during the fiscal year ended December 31, 2021, to our knowledge, all Section 16(a) forms required to be filed with the SEC were filed.

Item 11. Executive Compensation.

Compensation Discussion and Analysis

Philosophy and objectives

Since our inception, all compensation decisions have been made by our Board of Directors. The primary objective of our compensation policies and programs with respect to executive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified individuals to manage and lead our business. We will focus on providing a competitive compensation package that provides significant short and long-term incentives for the achievement of measurable corporate and individual performance objectives.

Elements of executive compensation

Base salary. We will seek to provide our senior management with a level of base salary in the form of cash compensation appropriate to their roles and responsibilities. Base salaries for our executives will be established based on the executive’s qualifications, experience, scope of responsibilities, future potential and past performance and cash available to pay executive compensation. Base salaries will be reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account an individual's responsibilities, performance, and experience. We will consider four factors in determining the base salaries of our named executive officers. These four factors are, in order of significance, (1) creating an incentive to achieve corporate goals, (2) individual performance, (3) cash available to pay compensation and (4) the total compensation each executive officer previously received while employed with us, if any. We have not paid any executive compensation in the form of base salary to our management during the years ended December 31, 2021, or 2020.

Incentive cash bonuses. Our practice will be to seek to award incentive cash bonuses to our executive officers based upon their individual performance, as well as our overall business and strategic objectives. In determining the amount of cash bonuses paid to our named executive officers, we will consider the same four factors as in determining their base salaries. We expect that our Board of Directors will adopt formal processes for incentive cash bonuses during the next 24 months and will utilize incentive cash bonuses to reward executives for achieving corporate financial and operational goals and for achieving individual performance objectives. To date, we have not paid any incentive cash bonuses to our management.

Long-term equity compensation. We believe that successful long-term performance is achieved through an ownership culture that encourages long-term performance by our executive officers through the use of stock and stock-based awards. We intend to establish equity incentive plans to provide our employees, including our executive officers, with incentives to help align those employees’ interests with the interests of our shareholders.

We expect that our incentive plans will permit the grant of stock options, restricted shares and other stock awards to our executive officers, employees, consultants, and non-employee board members. When we hire executive officers in the future, we expect to grant them stock-based awards that will generally vest over a five-year period. We believe that stock-based awards provide an incentive for these officers to continue their employment with us, provide our executive officers with an opportunity to obtain an ownership interest in our company and encourage them to focus on our long-term profitable growth. We believe that the use of long-term equity compensation will promote our overall executive compensation objectives and expect that equity incentives will be an important source of compensation for our executives. In determining amounts awarded to our executive officers under our incentive plans, we will consider the same four factors (and use the same method of measurement) as in determining base salary. The third factor (cash available) has an indirect effect when determining long-term equity compensation. Specifically, to the extent that this factor causes us not to pay base salary or cash bonuses, it points toward providing long-term equity compensation. We have not issued any long-term equity compensation to our management during the years ended December 31, 2021, or 2020.

Other compensation. When we hire executive officers, our executive officers will be eligible to receive the same benefits, including non-cash group life and health benefits that are available to all employees. We may offer a 401(k) plan to our employees, including our executive officers. This plan will permit employees to make contributions up to a statutory maximum and will permit us to make matching or profit-sharing contributions. To date, we have not offered to our employees any benefit plans, including but not limited a 401(k) plan or made, or committed to make, any matching or profit-sharing contributions under a 401(k) plan.

Policies related to compensation

Guidelines for equity awards. We have not formalized a policy as to the amount or timing of equity grants to our executive officers. We expect, however, that our board of directors will approve and adopt guidelines for equity awards. Among other things, we expect that the guidelines will specify procedures for equity awards to be made under various circumstances, address the timing of equity awards in relation to the availability of information about us and provide procedures for grant information to be communicated to and tracked by our finance department. As of the date of this report, we have not established a finance department. We anticipate that the guidelines will require that any stock options or stock appreciation rights have an exercise or strike price not less than the fair market value of our common stock on the date of the grant.

Stock ownership guidelines. As of the date of this report, we have not established stock ownership guidelines for our executive officers or the Board of Directors.

Compliance with Sections 162(m) and 409A of the Internal Revenue Code

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to certain executive officers, unless such compensation qualifies as performance-based compensation. Among other things, in order to be deemed performance-based compensation for Section 162(m) purposes, the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. At least for the next several years, we expect the cash compensation paid to our executive officers to be below the threshold for non-deductibility provided in Section 162(m), and our equity incentive plans will afford our board of directors with the flexibility to make a variety of types of equity awards to our executive officers, the deductibility of which will not be limited under Section 162(m). However, our board of directors will fashion our future equity compensation awards. However, we do not now know whether any such awards will satisfy the requirements for deductibility under Section 162(m).

We also currently intend for our executive compensation program to satisfy the requirements of Internal Revenue Code Section 409A, which addresses the tax treatment of certain nonqualified deferred compensation benefits.

Executive Compensation

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by, or paid to the Company’s officer during the years ended December 31, 2021, and 2020 for services to the Company.