SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549D.C.20549
FORM 10-Q10-Q/A
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30,January 31, 2016
OR
o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 333-185928
ARAX HOLDINGS CORP.
(Exact Name of Registrant as Specified in Its Charter)
Nevada | 99-0376721 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) |
2329 N. Career Avenue
Suite 317
Sioux Falls, SD 57107
(Address of Principal Executive Offices)
(605) 553-2238
(Registrant’s Telephone Number, Including Area Code)
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.90days.
Yes ☒xNoo ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒xNoo ☐
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer | Smaller reporting company | ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒xNooNo☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class | Outstanding as of | |
Common Stock: |
Arax Holdings Corp.
Form 10-Q
Index
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Page | ||
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Certifications | 26 |
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 This 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. Additional asset acquisitions and transfers may occur. 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. The Company’s status as a “shell company” as of the date of this report remains unchanged. NOTE 2–GOING CONCERN Management anticipates that the Company will be dependent, for the near future, 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. NOTE Basis of Presentation The Company has adopted an October 31 fiscal year end. The accompanying unaudited financial statements have been prepared in accordance with the instructions from Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period, and to make the financial statements not misleading, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim period are not necessarily indicative of operations for a full year. The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities” and among the additional disclosures required as a development stage company that its financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of its Inception (February 23, 2012) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations. Revenue Recognition The Company will recognize revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” (“ASC- 605”), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Advertising Basic Income (Loss) Per Share Recent AccountingPronouncements The Company has reviewed all the recent accounting pronouncements issued to date of the issuance of these financial statements, and does not believe any of these pronouncements will have a material impact on the company NOTE 4 – STOCKHOLDERS’DEFICIT Common Stock The Company is authorized to issue 75,000,000 shares of common stock with a par value of $0.001 per share. The Company had Additional Paid in Capital NOTE 5 – In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note. NOTE 6–INCOME TAXES Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. NOTE 7 – COMMITMENTS AND CONTINGENCIES The following table summarizes the changes in options outstanding of the Company during the The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the This Quarterly Report on Form 10-Q (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 Annual report on Form 10K filed with the SEC on February 13, 2015 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 unaudited consolidated financial statements and related notes included in this Report, as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 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. That has now changed and is discussed further below. Following the changes in control and management of the Company related to the Acquisition, we have been reevaluating our business plan. As of the filing of the 10K for last year, the Company stated that 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 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. This new business model could entail 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. Additional asset acquisitions and transfers may occur. The Company may establish a presence on other markets as part of the restructuring. Results of Operations Revenue No Liquidity and Capital Resources Cash Flow for the Operating Activities Investing Activities Financing Activities Historically, we have funded working capital requirements primarily through the proceeds of the private placement of equity instruments and loans from related parties. We expect that working capital requirements will be funded through advances from Thru Pharma, and through further issuances of our securities. We have no lines of credit or other bank financing arrangements. Additional issuances of equity or issuances of convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan. Going Concern Qualification Off-Balance Sheet Arrangements As of the date of this 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. As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. Evaluation of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and its Principal Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of Management’s Annual Report on Internal Control over Financial Reporting. Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Accordingly, the Company concluded these control deficiencies resulted in a possibility that a material misstatement of the unaudited financial statements will not be prevented or detected on a timely basis by the Company’s internal controls. As a result of the weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of This Form 10-Q does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Changes in Internal Control over Financial Reporting. During the most recently completed fiscal quarter, there has been improvement in our internal control over financial reporting. Management plans to routinely assess its internal control over financial reporting against appropriate standards, and to make changes as determined necessary and according to the scope of business operations. See Exhibit Index immediately following the signature page. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 3*Denotes a loss of less than $(0.01) per share January 31, 2016 October 31, 2015 (Restated) (Restated) ASSETS - - Current assets - - Total current assets - - TOTAL ASSETS - - LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loans from related party 109,482 37,682
respectively 35,135 69,312 Accrued Interest Payable 2,832 1,923 Derivative Liability 797 5,500 Total current liabilities 148,246 114,417 Total liabilities 148,246 114,417 Stockholders' deficit: Common stock, $0.001 par value; 75,000,000 shares authorized; 10,300,000 shares issued and outstanding 10,300 10,300 Additional paid-in capital 258,564 258,564 Stock Subscription Payable 62,281 50,281 Accumulated deficit (479,391 ) (433,562 ) Total stockholders' deficit (144,991 ) (114,417 ) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY - - statements
statements.4
Month
Month Period Ended Period Ended January 31, 2016 January 31, 2015 REVENUE - - OPERATING EXPENESES Net loss for the period - 7,557 Professional Fees 18,800 - TOTAL OPERATING EXPENSES 18,800 7,557 NET LOSS FROM OPERATIONS (18,800 ) (7,557 ) OTHER INCOME (EXPENSES) Interest Expense (31,732 ) - Change in Fair Value of Derivative 4,703 - TOTAL OTHER INCOME (27,029 ) - NET LOSS BEFORE INCOME TAXES (45,829 ) (7,557 ) Provision for Income Taxes - - NET LOSS (45,829 ) (7,557 ) NET LOSS PER SHARE: BASIC AND DILUTED $ (0.00 )* $ (0.00 )*
OUTSTANDING: BASIC AND DILUTED 10,300,000 10,300,000 *Denotes a loss of less than $(0.01) per share statements
statements.56 Common Stock
Paid In
Subscription
Accumulated
Stockholders' Shares Amount Capital Payable Deficit Deficit
2014 10,300,000 $ 10,300 $ 25,548 $ 0 (81,306 ) (45,458 )
Convertible Note - - - 11,881 - 11,881 Stock for Compensation - - - 38,400 - 38,400
Compensation - - 16,217 - 16,217
Compensation - - 216,799 - - 216,799 Net loss for the period - - - - (352,256 ) (352,256 )
2015 (Restated) 10,300,000 $ 10,300 $ 258,564 $ 50,281 (433,562 ) (114,417 ) Stock for Compensation - - - 12,000 - 12,000 Net loss for the period - - - - (45,829 ) (42,574 )
2016 (Unaudited) 10,300,000 $ 10,300 $ 258,564 $ 62,281 (479,391 ) (144,991 ) For the Three Month For the Three Month Period Ended Period Ended January 31, 2016 January 31, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss for the period $ (45,829 ) $ (7,557 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock for Compensation 12,000 - Change in Fair Value of Derivative (4,703 ) - Amortization of debt discount 30,823 - Related Party Payable for Services 3,500 - Changes in Assets and Liabilities: Accrued Interest Payable 909 - Prepaid Expenses - (2,000 ) NET CASH USED IN OPERATING ACTIVITIES (3,300 ) (9,557 ) CASH FLOWS FROM INVESTING ACTIVITIES: - - NET CASH FLOWS FROM INVESTING ACTIVITIES: - - CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from related party 3,300 9,557 NET CASH FLOWS FROM FINANCING ACTIVITIES: 3,300 9,557
EQUIVALENTS - - CASH, BEGINNING OF PERIOD - - CASH, END OF PERIOD $ - $ -
INFORMATION: Interest paid $ - $ - Income taxes paid $ - $ - SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Disposal of Equipment without cash proceeds $ - $ - Foregiveness of loan from related party $ - $ - TOTAL NON-CASH INVESTING AND FINANCING ACTIVITIES $ - $ -
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE SIXTHREE MONTH PERIODSPERIOD ENDED APRIL 30,April 30, 2016 NOTE 1–ORGANIZATION AND NATURE OF BUSINESS10K10 K for last year, the Company stated that 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 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.4: Stockholders' Deficit and Note 5: Related party transactions.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 nin 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.7April 30, 2016.July 31, 2015. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $531,948$479,391 as of April 30,January 31, 2016 and stockholders’ deficit of $189,303.$148,246. The Company currently has a working capital deficit, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.3–3–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDeveloDevelopment Stage Companypment Stage Company8•·Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. •·Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. •·Level 3 - Unobservable inputs reflecting the Company’sCompany's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.Company’sCompany's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. “Derivatives"Derivatives and Hedging”Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt"Debt with Conversion and Other Options”Options" for consideration of any beneficial conversion feature. debt. debtTaxes.Taxes”. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and State jurisdictions.9sixthree and nine months ended April 30, 2016.January 31, 2016 and 2015.and nine month periods ending April 30, 2016.January 31, 2016 and 2015.company.NOTE 4–STOCKHOLDERS’ DEFICIT. 35,294sixthree month periodperiods ended April 30, 2016. The shares were issued as part of an incentive to enter into convertible notes that were owed as of OctoberJanuary 31, 2015 with a relative fair value of $11,881.2016 or 2015.10,335,29410,300,000 shares of common stock issued and outstanding as of April 30,January 31, 2016.sixthree months ended April 30,January 31, 2016, the Company owed 40,00030,000 stock subscription payable for compensation to a consultant for work performed with ThruPharma,Thru Pharma, a related party, for a value of $23,500$15,500 and recorded as a related party expense.10–RELATED PARTY TRANSACTIONSis owed by its principal shareholder, Thru Pharma, a total of $54,872$44,482 as of April 30,January 31, 2016, in the form of a related partyan intercompany payable. It is due on demand and is non-interest bearing.April 30,January 31, 2016, the Company had a net operating loss carry-forward of approximately $531,948$479,391 that may be used to offset future taxable income and begins to expire in 2031. Because of the change in ownership that occurred on January 16, 2014, net operating loss carry forwards could be limited as to use in future years.Thru Pharma,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,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. Accordingly, the Company did not recognize a liability in connection with the claim.Thru Pharma,THRU PHARMA, LLC. On January 8, 2016, Thru PharmaTHRU PHARMA and AMERIFINANCIAL, INC. reached settlement of the dispute. Subsequently this case was dismissed.60% of the last equity transaction completed by the Company as part of a subscription agreement,, whichever is lower.lower. The note has a maturity date of nine months after funding and also includes a fifty percent premium which is added on 90 days after funding. The note is to be paid off in installments of $19,453 for the six months after the ninety day period. On November 30, 2015, a related party made payments on the convertible note. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures using a multinomial lattice model as of April 30,January 31, 2016 and October 31, 2015.lossgain of $10,344$4,703 and derivative expense of $0 during the sixthree months ended April 30, 2016.January 31, 2015. As of April 30,January 31, 2016, the fair market value of the derivatives aggregated $15,844$797 using the following assumptions: estimated 0.18 to 1-year term, estimated volatility of 162.21% to 164.20%, and a discount rate of 0.22% to 0.56%.56%.11$19,93419,934 and derivative expense of $25,434$0 during the year ended October 31, 2015. As of October 31, 2015, the fair market value of the derivatives aggregated $5,500 using the following assumptions: estimated 0.42 to 0.75-year term, estimated volatility of 133.49% to 243.69%, and a discount rate of 0.21% to 0.23%.23%.April 30,January 31, 2016 and October 31, 2015 consisted of the following: Fair Value Measurements Using Description
Fair
Value at
January
31, 2016
Prices in
Active
Markets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
(Level 3)
liability $ $ 797 $ - $ 797 $ - Fair Value Measurements Using Fair Value Measurements Using Description Total Fair
Value at
April 30, 2016 Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Value at
October 31,
2015
Prices in
Active
Markets
(Level 1)
Other
Observable
Inputs (Level 2)
Unobservable
Inputs (Level 3) Derivative liability $ 15,844 $ — $ 15,844 $ — $ $ 5,500 $ - $ 5,500 $ - Fair Value Measurements Using Description Total Fair
Value at
October 31, 2015 Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Derivative liability $ 5,500 $ — $ 5,500 $ — sixthree months ended April 30,January 31, 2016, the Company did not issue options.optionswarrants in conjunction with a consulting agreement entered into in February 2015. According to the consulting agreement, the Company is to issue either 5,000 common shares or 7,50012,500 options per month during the duration of their agreement.agreements. The options were valued using the multinomial lattice pricing model under the assumptions noted below.sixthree months ended April 30,January 31, 2016, the Company did not issuestock purchase options. SixThree Months Ended April 30,January 31, 2016 Year ended October 31, 2015 Expected volatility N/A 202-213%202-213%Expected dividends N/A 0%0%Expected term N/A 3 Years Risk-free interest rate N/A 0.80-1.09%0.80-1.09%12sixthree months ended April 30,January 31, 2016.Date Issued Number
of
Options Weighted
Average
Exercise
Price Weighted
Average
Grant Date
Fair Value Expiration
Date (yrs) Value if
Exercised Balance as of October 31, 2015 37,500 $ 0.80 $ 0.43 2.47 $ 30,000 Granted — — — — — Exercised — — — — — Cancelled/Expired — — — — — Outstanding as of April 30, 2016 37,500 $ 0.80 $ 0.33 2.34 $ 30,000
Issued
Options
Average
Exercise Price
Average Grant
Date Fair
Value
Date (yrs)
Exercised
as of
October
31, 2015 37,500 $ 0.80 $ 0.43 2.47 $ 30,000 Granted - - - - - Exercised - - - - -
/Expired - - - - -
January
31, 2016 37,500 $ 0.80 $ 0.33 2.41 $ 30,000
Issued
Options
Average
Exercise Price
Average Grant
Date Fair
Value
Date (yrs)
Exercised
as of
October
31, 2014 - $ - $ - - $ - Granted 37,500 0.80 0.41 2.64 30,000 Exercised - - - - -
/Expired - - - - -
October
31, 2015 37,500 $ 0.80 $ 0.43 2.47 $ 30,000 Date Issued Number
of
Options Weighted
Average
Exercise
Price Weighted
Average
Grant Date
Fair Value Expiration
Date (yrs) Value if
Exercised Balance as of October 31, 2014 — $ — $ — — $ — Granted 37,500 0.80 0.41 2.64 30,000 Exercised — — — — — Cancelled/Expired — — — — — Outstanding as of October 31, 2015 37,500 $ 0.80 $ 0.43 2.47 $ 30,000 600,000 shares.600,000. The Company issued 600,000 warrants in conjunction withto a consulting agreement entered into in July 2015. The warrants were valued using the multinomial lattice pricing model under the assumptions noted below.sixthree months ended April 30,January 31, 2016,, the Company did not issue any stock purchase warrants. SixThree Months Ended April 30, 2016 Year ended October 31, 2015 Expected volatility N/A 212%212%Expected dividends N/A 0%0%Expected term N/A 3 Years Risk-free interest rate N/A 1.08%1.08%13sixthree months ended April 30, 2016.January 31, 2016. Number
of
Warrants Weighted
Average
Exercise
Price Weighted
Average
Grant Date
Fair Value Expiration
Date (yrs) Value if
Exercised Outstanding as of October 31, 2015 600,000 $ 0.80 $ 0.36 2.73 $ 480,000 Granted — — — — — Exercised — — — — — Cancelled/Expired — — — — — Outstanding as of April 30, 2016 600,000 $ 0.80 $ 0.36 2.23 $ 480,000
Warrants
Average
Exercise
Price
Average
Grant Date
Fair Value
(yrs)
Exercised
October 31, 2015 600,000 $ 0.80 $ 0.36 2.73 $ 480,000 Granted - - - - - Exercised - - - - - Cancelled/Expired - - - - -
January 31, 2016 600,000 $ 0.80 $ 0.36 2.47 $ 480,000 Number
of
Warrants Weighted
Average
Exercise
Price Weighted
Average
Grant Date
Fair Value Expiration
Date (yrs) Value if
Exercised
of
Warrants
Average
Exercise
Price
Average
Grant Date
Fair Value
(yrs)
Exercised Outstanding as of October 31, 2014 — $ — $ — — $ — - $ - $ - - $ - Granted 600,000 0.80 0.36 2.73 480,000 600,000 0.80 0.36 2.73 480,000 Exercised — — — — — - - - - - Cancelled/Expired — — — — — - - - - - Outstanding as of October 31, 2015 600,000 $ 0.80 $ 0.36 2.73 $ 480,000 600,000 $ 0.80 $ 0.36 2.73 $ 480,000 April 30,January 31, 2016 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.and related quarterly interim periods,to record related party payable due to two consultants related to consulting agreements with Thru Pharma to be paid with 7,500 options for the first consultant on a monthly basis convertible at $.80 per share entered into in February 2015 and the other to be paid in 10,000 common shares as stock payable. The Company issued 600,000 warrants on September 22, 2015 as payment for legal expenses that had not been recorded. The Company also entered into a convertible note agreement that previously had not been recorded that is considered a derivative or contain embedded features subject to derivative accounting related to a revolving convertible note where the Company can borrow up to $200,000, which includes a 10% OID. The Company issued the first tranche of the convertible note totaling $75,000, of which $65,000 was paid in cash, $2,500 was paid for legal fees, and an OID of $7,500, which included a ratchet provision in the conversion price of $.95 or a price equal to 60% of the last equity transaction completed by the Company as part of a subscription agreement. On November 30, 2015, a related party made a payment on the convertible note. The note has a maturity date of nine months after funding and also includes a fifty percent premium totaling $37,500 which is added on 90 days after funding. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $19,93419,934 and derivative expense of $25,434$0 during the year ended October 31, 2015. As of October 31, 2015, the fair market value of the derivatives aggregated $5,500 using the following assumptions: estimated 0.42 to 0.75-year term, estimated volatility of 133.49%133.49 to 243.69%, and a discount rate of 0.21%0.21 to 0.23%.23%.14 Current Liabilities Loans from related party 78,532 30,950 109,482
respectively - 35,135 35,135 Accrued Interest Payable - 2,832 2,832 Derivative Liability - 797 797 Total current liabilities 78,532 69,714 148,246 Total liabilities 55,015 93,231 148,246 Common Stock 10,300 - 10,300 Additional Paid-In Capital 25,548 233,016 258,564 Stock Subscription Payable - 62,281 62,281 Accumulated deficit (114,380 ) (365,011 ) (479,391 ) Total stockholders' deficit (78,532 ) (69,714 ) (148,246 ) Professional Fees 3,300 15,500 18,800 TOTAL OPERATING EXPENSES 3,300 15,500 18,800 NET LOSS FROM OPERATIONS (3,300 ) (15,500 ) (18,800 ) Interest Expense - (31,732 ) (31,732 ) Change in Fair Value of Derivative - 4,703 4,703 TOTAL OTHER INCOME - (27,029 ) (27,029 ) NET LOSS BEFORE INCOME TAXES (3,300 ) (42,529 ) (45,829 ) NET LOSS (3,300 ) (42,529 ) (45,829 ) NET LOSS PER SHARE: BASIC AND DILUTED $ (0.00 ) $ - $ (0.00 ) Common Stock
Paid In
Subscription
Accumulated
Stockholders' Shares Amount Capital Payable Deficit Deficit 10,300,000 10,300 25,548 - (111,080 ) (75,232 )
Compensation - - - -
period - - (3,300 ) (3,300 )
31., 2016 $ 10,300,000 $ 10,300 $ 25,548 - (114,380 ) (78,532 ) - - 233,016 50,281 (322,482 ) (39,185 )
Compensation - - - 12,000 - 12,000
period - - - - (39,274 ) (39,274 )
31., 2016 $ 233,016 $ 62,281 (365,011 ) (69,714 ) 10,300,000 10,300 258,564 50,281 (433,562 ) (114,417 )
Compensation - 12,000 - 12,000
period - - (42,574 ) (42,574 ) $ 10,300,000 $ 10,300 $ 258,564 $ 62,281 (479,391 ) (148,246 ) Net loss for the period $ (3,300 ) $ (42,529 ) $ (45,829 ) Stock For Compensation - 12,000 12,000 Related party payable for services - 3,500 3,500 Change in Fair Value of Derivative - (4,703 ) (4,703 ) Amortization of debt discount $ - $ 30,823 $ 30,823 Accrued Interest Payable - 909 909 Loans from related party - 3,300 3,300
ACTIVITIES $ - $ - $ - ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOF OPERATIONS2015.2014.and Six monthMonth Period Ended April 30,January 31, 2016 Compared to the Three and Six monthMonth Period Ended April 30,January 31, 2015Revenuesixthree month period ended April 30,January 31, 2016. Operations have not yet commenced.and six month periodsperiod ended April 30,January 31, 2016, our operating expenses were $21,890 and $40,690.$18,800. There was a decreaseincrease of $6,980 and $18,087$11,243 compared to the operating expenses of $28,870 and $58,777$7,557 incurred during the three and six monthsmonth period ended April 30,January 31, 2015 due to decreasesincreases in professional fees as compared to prior periods.15and six month periodsperiod ended April 30,January 31, 2016, our other income (expenses) were $33,922 and $57,696$(31,732) compared to $0 during the three and six month period ended April 30, 2015. During the three and six month period ended April 30,January 31, 2016, our other income (expenses) comprised of interest expense of $19,912$909 and $47,352$30,823 from accrued interest on convertible notes and from the amortization of debt discount and OID, and $14,010 and $10,344$4,703 in change in fair value of derivative. By comparison, during the three and six month periodsperiod ended April 30,January 31, 2015 other income (expenses) were $0.and six month period ended April 30,January 31, 2016 was $55,812 and $98,386$45,829 compared to $28,870 and $58,777$7,557 for the three and six monthsmonth period ended April 30,January 31, 2015, is due to the factors discussed above.April 30,January 31, 2016 we had $0 in total assets and $189,303$148,246 of current liabilities compared to $0 in total assets and $114,417 of current liabilities at October 31, 2015. The increase in our working capital deficit for the sixthree months ended April 30,January 31, 2016 is principally due to the operating losses we incurred in the period.Six monthThree Month Period Ended April 30,January 31, 2016 Compared to Six monthThree Month Period Ended April 30,January 31, 2015sixthree months ended April 30,January 31, 2016 we used $16,940$3,300 for operating activities compared to $14,677$9,557 used in operating activities during the sixthree months ended April 30,January 31, 2015. The increasedecrease in funds used in operating activities between the two periods related was due primarily to an increasea decrease in legalprofessional fees.16flowsflow from investingoperating activities during the sixthree month periods ended April 30,January 31, 2016 or 2015.Financing Activitiessixthree months ended April 30,January 31, 2016 we received $16,940$3,300 in loans from Thru Pharma to fund our working capital requirements for a total balance of $54,872$109,482 from related parties. In the sixthree months ended April 30,January 31, 2015, Thru Pharma advanced the Company $14,677.$9,557.ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17ITEM 4. CONTROLS AND PROCEDURES April 30,January 31, 2016. Based upon this evaluation, our management concluded that the Company’s disclosure controls and procedures were not effective as of April 30,January 31, 2016.April 30,January 31, 2016, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.1. We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. 2. We improved cash controls – As of April 30,January 31, 2016, the Company has segregated cash handling and accounting functions. Management also requires segregated review of all disbursements. Any effects of previous period poor cash controls were mitigated by the fact the Company had limited transactions in their bank accounts.April 30,January 31, 2016 based on criteria established in Internal Control — Integrated Framework issued by COSO.Form 10-Q.Form10-Q.18PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Thru Pharma,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,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. Accordingly, the Company did not recognize a liability in connection with the claim.Thru Pharma,THRU PHARMA, LLC. On January 8, 2016, Thru PharmaTHRU PHARMA and AMERIFINANCIAL, INC. reached settlement of the dispute. Subsequently this case was dismissed.ITEM 2. EXHIBITSEXHIBITS.19 ARAX HOLDINGS CORP. Date: July12, 2016 March 3. 2017By: /s/ Steven J. Keough Name: Steven J. Keough Title: ( (PrincipalExecutiveFinancial Officer, PrincipalFinancial Officer, and2031.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934.of1934.32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 15d-14(b) of thethe Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.of2002.101.INS XBRL Instance Document (furnished herewith)*101.SCH XBRL Taxonomy Extension Schema Document (furnished herewith)*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)*101.DEF XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)*101.LAB XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)*21