U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended:
OR
For the transition period from _______to _______
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction
of Incorporation or organization) |
(IRS Employer Identification No.) |
(Issuer’s telephone number including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name
of each exchange on which registered | ||
| None | N/A | N/A |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting
company | |
| Emerging growth
company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date. As of April 19, 2024, there were common shares outstanding.
Arax Holdings Corp.
CONTENTS
2
ARAX HOLDINGS CORP.
CONDENSED BALANCE SHEETS
| January
31, 2024 |
October
31, 2023 |
|||||||
| ASSETS | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable | ||||||||
| Total current assets | ||||||||
| Fixed assets | ||||||||
| Software development | ||||||||
| Long-term investments | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred Stock Series A, par value $, shares authorized, and - shares issued and outstanding as of January 31, 2024 and 2023, respectively | ||||||||
| Common stock, Par Value $, shares authorized, and issued and outstanding as of January 31, 2024 and 2023 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total stockholders’ equity (deficit) | ||||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ARAX HOLDINGS CORP.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended January 31 |
||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses: | ||||||||
| Administrative expenses | ||||||||
| Administrative expenses -other | ||||||||
| Total operating expenses | ||||||||
| Gain or (Loss) from operations | ||||||||
| Other expense | ||||||||
| Other (expense) net | ||||||||
| Gain or (Loss) before provision for income taxes | ( |
) | ( |
) | ||||
| Provision for income taxes | ||||||||
| Net Gain or (loss) | $ | $ | ( |
) | ||||
| Basic and diluted loss per common share | $ | $ | ( |
) | ||||
| Weighted average number of shares outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ARAX HOLDINGS CORP.
CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED JANUARY 31, 2024 AND 2023
(unaudited)
| Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity(Deficit) | ||||||||||||||||||||||
| Balance, October 31, 2023 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Net Gain | — | — | ||||||||||||||||||||||||||
| Balance, January 31, 2024 (unaudited) | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Balance, October 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, January 31, 2023 (unaudited) | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ARAX HOLDINGS CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended January 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | $ | ( |
) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Accounts receivable and prepaid expenses | ( |
|||||||
| Expenses paid directly by related party | ||||||||
| Increase in operating liabilities: | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Derivative liabilities increase | ||||||||
| Change in derivative interest | ||||||||
| Cash used in operating activities | ( |
|||||||
| Cash flows from investing activities: | ||||||||
R&D Software Capitalization |
( |
) | ||||||
| Cash used in investing activities | ( |
) | ||||||
| Cash flows from financing activities: | ||||||||
| Conversion of related party payable | ||||||||
| Proceeds from convertible notes | ||||||||
| Cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( |
) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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ARAX HOLDINGS CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2024 AND 2023
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Arax
Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the
laws of the State of
The Company has expanded operations in the blockchain logistics and software design industries. The Company has entered into consulting and design agreements from continuing business and is in the process of completing an acquisition of certain software technologies. The Company currently has revenue from continuing operations and expects to increase these revenues.
Management intends to explore and identify business opportunities within the U.S. and other countries, including a acquisition of an operating entities through a share swap, asset purchase or similar transaction. Our executives have experience in business consulting, although no assurances can be given that they can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and presented in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The accompanying balance sheet at October 31, 2023, has been derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements as of January 31, 2024 and for the three months ended January 31, 2024 and 2023 have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2023 as filed with the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the condensed financial statements. The condensed financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three months ended January 31, 2024 are not necessarily indicative of the results that may be expected for the year ending October 31, 2024 or any future periods.
Going Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following
the date of these financial statements. The Company has incurred operating losses since its inception. As of January 31, 2024,
the Company had a working capital equity of $
Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing including convertible debt financing. The Company will be required to continue to rely on various debt financing until its operations become profitable.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Cash and cash equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
The Company has
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
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Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. The Company has and shares issuable upon the conversion of preferred stock that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the three months ended January 31, 2024 and 2023, respectively.
NOTE 3 – EQUITY
The Company has authorized shares of $ par value, preferred stock. As of January 31, 2024 and October 31, 2023 there were shares of preferred stock issued and outstanding.
The Company has authorized shares of $ par value, common stock. As of January 31, 2024 and October 31, 2023 there were shares of common stock issued and outstanding.
The Company did not issue any equity securities during either of the three month periods ended January 31, 2024 and 2023.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
The Company did have any contractual commitments of January 31, 2024 and October 31, 2023.
NOTE 5 – ADVANCES FROM RELATED PARTY
An
entity controlled by the Company’s Chairman has advanced an aggregate of $
NOTE 6 – SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to January 31, 2024, to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.
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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012. Our financial statements accompanying this Report have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We have a minimal operating history and no revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues for the immediate future.
Plan of Operation
The Company has expanded operations in the blockchain logistics and software design industries. The Company has entered into consulting and design agreements from continuing business and is in the process of completing an acquisition of certain software technologies. The Company currently has revenue from continuing operations and expects to increase these revenues as of the date of this Report.
Management intends to explore and identify business opportunities within the U.S. and other countries, including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our Chief Executive Officer has experience in business consulting, although no assurances can be given that he can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies.
During the next 12-month period we anticipate incurring costs in connection with investigating, evaluating, and negotiating potential business combinations, filing SEC reports, and consummating an acquisition of an operating business.
Given our limited capital resources, we may consider a business combination with an entity which has recently commenced operations, is a developing company or is otherwise in need of additional funds for the development of new products or services or expansion into new markets or is an established business experiencing financial or operating difficulties and is in need of additional capital. Alternatively, a business combination may involve the acquisition of, or merger with, an entity which desires access to the U.S. capital markets.
As of the date of this Report, our management has continued to complete the acquisition of certain technologies and software businesses including the Core Business Holdings Group. This business and technology and any other target business that is selected may be financially unstable or in the early stages of development. In such event, we expect to be subject to numerous risks inherent in the business and operations of a financially unstable or early-stage entity. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk or in which our management has limited experience, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Our management anticipates that we will likely only be able to effect one business combination due to our limited capital. This lack of diversification will likely pose a substantial risk in investing in the Company for the indefinite future because it will not permit us to offset potential losses from one venture or operating territory against gains from another. The risks we face will likely be heightened to the extent we acquire a business operating in a single industry or geographical region.
We anticipate that the selection of a business combination will be a complex and risk-prone process. Because of general economic conditions, including unfavorable conditions caused by the coronavirus pandemic, rapid technological advances being made in some industries and shortages of available capital, management believes that there are a number of firms seeking business opportunities at this time at discounted rates with which we will compete. We expect that any potentially available business combinations may appear in a variety of different industries or regions and at various stages of development, all of which will likely render the task of comparative investigation and analysis of such business opportunities extremely difficult and complicated. Once we have developed and begun to implement our business plan, management intends to fund our working capital requirements through a combination of our existing funds and future issuances of debt or equity securities. Our working capital requirements are expected to increase in line with the implementation of a business plan and commencement of operations.
We anticipate that we will incur operating losses in the next 12 months, principally costs related to our being obligated to file reports with the SEC. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model, recognition of revenue sources, and the management of growth. To address these risks, we must, among other things, develop, implement, and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition, and results of operations.
Limited Operating History; Need for Additional Capital
We cannot guarantee we will be successful in our business operations. We have generated minimal revenue since inception. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.
If we are unable to meet our needs for cash from either our operations or possible alternative sources, then we may be unable to develop our operations.
Off-Balance Sheet Arrangements
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 is material to investors.
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Going Concern
The independent registered public accounting firm auditors’ report on our October 31, 2023 financial statements expressed an opinion that our capital resources as of the date of their Audit Report were not sufficient to sustain operations or complete our planned activities for the upcoming year. Our current lack of cash and limited resources raise substantial doubt about our ability to continue as a going concern. If we do not obtain additional funds, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment.
Critical Accounting Principles
The preparation of consolidated financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. We have not identified any critical accounting policies.
Related Party Transaction
In December 2022, Arax Holdings Corp. completed the acquisition of Core Business Holdings for a total consideration of $18,000,000. This transaction is classified as an asset acquisition rather than a business combination in accordance with ASC Topic 805-50, due to the nature of the acquired assets being solely intellectual properties (IP) without substantive processes or outputs necessary to meet the definition of a business under ASC 805-10-55
The intellectual properties, valued at $18,000,000, represent developed software on an emerging blockchain technology platform. These assets are recognized at cost, as there were no processes or outputs to suggest a valuation above the direct costs incurred. Consequently, no goodwill or additional value was recognized in this transaction.
Related Party Transaction Disclosure
This transaction was between related parties and, as required by ASC 850, all relevant details of the transaction have been fully
disclosed. The acquisition was conducted at fair value, which coincides with the direct costs associated with the development of
the acquired software IP. Such transactions were scrutinized to ensure they reflect terms that are consistent with market practices
and did not result from motivations that would detract from the interests of the shareholders
Impairment Consideration
Impairment Review and Measurement: Consistent with IAS 36 on Impairment of Assets, and in compliance with GAAP accounting standards on impairment of assets, ARAX Holdings Corp. conducts periodic reviews of asset values to ensure they are not recorded at more than their recoverable amount. Consistent with these principles, an impairment loss was recognized for the recently acquired assets from the related party transaction involving Core Business Holdings.
Reason for Impairment: The impairment was necessitated by the related party nature of the transaction, which requires a cautious approach to valuation until a formal, independent valuation is available. As of the reporting date, the impairment recognized amounted to $18,550,285, reflecting the difference between the asset's carrying value at acquisition and its fair value, adjusted for this impairment.
Basis of Impairment Calculation: The recoverable amount of the assets was determined based on the higher of the fair value less costs of disposal or the value in use at the time of impairment testing. This approach ensures that the assets are measured fairly and conservatively, reflecting their current economic worth to the company.
Financial Statement Representation: ARAX Holdings Corp. asserts that these financial statements accurately reflect the comprehensive details of the acquisition and subsequent impairment. This disclosure is intended to provide stakeholders with clear and reliable information regarding the financial implications and the nature of the transaction, maintaining transparency and adherence to regulatory requirements.
This format adheres to SEC and GAAP guidelines, ensuring that all necessary details concerning the impairment and the related party transaction are comprehensively and transparently reported..
Result of Operations
Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023
We reported $226,886 and $226,886 in revenue during the three months ending January 31, 2024 and 2023. We anticipate generating growth in revenues during the current fiscal year ending October 31, 2024. Our net losses for the three-month periods ended January 31, 2024 and 2023 were $1,229,252 and $23,616 respectively.
Our general and administrative expenses consist of professional fees and other costs incurred in connection with maintaining the Company’s filings with the Securities and Exchange Commission and the payment of vendors associated with the issuance and trading of the Company’s securities, such as transfer agent fees. There were development costs of $ 1,265,120 and $ 0 for the three months ended January 31, 2024 and January 31, 2023 that are anticipated to be capitalized as software development for the year ending October 31, 2024. There were general expenses of $189,868 and $1,033,333 for the three months ended January 31, 2023 and 2022, respectively.
Liquidity and Capital Resources
Based upon our current operations, we do not have sufficient working capital to fund our operations over the next 12 months. If we are able to complete the acquisition of Core Business Holdings Group, it is likely we will need capital as a condition of closing that acquisition. Because of the uncertainties, we cannot be certain as to how much capital we need to raise or the type of securities we will be required to issue. In connection with an acquisition, we will be required to issue a controlling block of our securities to the target’s shareholders which will be very dilutive.
Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences, or privileges senior to our Common Stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the sensitivity of income or loss to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. We are not presently engaged in any substantive commercial business. Accordingly, the risks associated with foreign exchange rates, commodity prices, and equity prices are not significant. Our debt obligations contain interest rates that are fixed and we do not enter into derivatives or other financial instruments for trading or speculative purposes.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures
As of January 31, 2024 being the end of the period covered by this Report, we carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Quarterly Report.
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”), pursuant to Rule 13a- 15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in our reports 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 management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, due to material weaknesses in our control environment and financial reporting process.
Our management, including our principal executive officer and principal financial officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision- making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
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The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
(b) Management’s Quarterly Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit the 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 the our management and directors; and (c) 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.
Based on our evaluation under the framework described above, as of January 31, 2023, our management concluded that we had “material weaknesses” (as such term is defined below) in our control environment and financial reporting process consisting of the following as of the Evaluation Date:
1) The Company does not have sufficient segregation of duties within accounting functions due to its limited staff and limited resources;
2) The Company does not have an independent board of directors or an audit committee;
3) The Company does not have written documentation of our internal control policies and procedures; and
4) All of the Company’s financial reporting is conducted by a financial consultant.
A “material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
We plan to rectify these weaknesses by implementing an independent board of directors, establishing written policies and procedures for our internal control of financial reporting, and hiring additional accounting personnel at such time as we complete a reverse merger or similar business acquisition.
(c) Change in Internal Control over Financial Reporting
There were no significant changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our first fiscal quarter that could materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1a. Risk Factors
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
In the three months ended January 31, 2024 and January 31, 2023 the company issued $ 0 and $221,780 in two year convertible notes with a 10% interest and a variable conversion factor. These notes were converted into restricted shares of common stock of the Company in the prior fiscal year ending October 31, 2023.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Arax Holdings Corp | ||
| (Registrant) | ||
| Date: May 2, 2024 | By: | /s/ Michael Loubser |
Michael Loubser, Chief Executive Officer (Principal Executive Officer)
| ||
| By: | /s/ Christopher Strachan | |
| Christopher Strachan, Chief Financial Officer (Principal Financial Officer) | ||
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