FRQN 10-Q
Frequency Holdings, Inc (FRQN)
UNITED STATES
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) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: None
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.
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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 ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of as of September 9, 2021, there were shares of common stock outstanding.
TABLE OF CONTENTS
| Page No. | ||
| PART I. - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements. | ii |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operations. | 10 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 14 |
| Item 4 | Controls and Procedures. | 14 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 15 |
| Item 1A. | Risk Factors. | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 15 |
| Item 3. | Defaults Upon Senior Securities. | 15 |
| Item 4. | Mine Safety Disclosures. | 15 |
| Item 5. | Other Information. | 15 |
| Item 6. | Exhibits. | 15 |
| Signatures | 16 | |
| i |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUREUS, INC.
| ii |
AUREUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| July 31, 2021 | October 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Accounts receivable | ||||||||
| Total Current Assets | ||||||||
| Other Assets: | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Due to related party | ||||||||
| Notes payable | ||||||||
| Loans payable | ||||||||
| Line of credit | ||||||||
| Total Current Liabilities | ||||||||
| Loans payable, net of current portion | ||||||||
| Line of credit, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock: par value $; shares authorized, and shares issued and outstanding, respectively | ||||||||
| Common stock: $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Discount to common stock | ( | ) | ( | ) | ||||
| Preferred stock to be issued | ||||||||
| Common stock to be issued | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 1 |
AUREUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended July 31, | For the Nine Months Ended July 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross margin | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Consulting – related party | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Gain on sale of asset | ||||||||||||||||
| Gain (loss) on disposal of fixed assets | ( | ) | ( | ) | ||||||||||||
| Gain on forgiveness of debt | ||||||||||||||||
| Loss on conversion of debt | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted income (loss) per share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average shares | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
AUREUS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2020 AND 2021
(Unaudited)
| Common Stock | Discount to Common | Preferred Stock | Additional Paid in | Preferred Stock To Be | Common Stock To Be | Accumulated | Total | |||||||||||||||||||||||||||||||||
| Shares | Amount | Stock | Shares | Amount | Capital | Issued | Issued | Deficit | Equity | |||||||||||||||||||||||||||||||
| Balance October 31, 2019 (restated) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||
| Stock issued for conversion of debt | ( | ) | – | |||||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance January 31, 2020 (Revised) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for conversion of debt | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued for cash | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued to subsidiary | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance April 30, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for conversion of debt | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | ||||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance July 31, 2020 | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common Stock | Discount to Common | Preferred Stock | Additional Paid in | Preferred Stock To Be | Common Stock To Be | Accumulated | Total | |||||||||||||||||||||||||||||||||
| Shares | Amount | Stock | Shares | Amount | Capital | Issued | Issued | Deficit | Equity | |||||||||||||||||||||||||||||||
| Balance October 31, 2020 (Revised) | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Stock issued for conversion of debt | ( | ) | – | |||||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | ||||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance January 31, 2021 (Revised) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | ||||||||||||||||||||||||||||||||||||||
| Stock issued for conversion of debt | ( | ) | – | |||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance April 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | ||||||||||||||||||||||||||||||||||||||
| Adjustment for contributed capital | – | – | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | – | – | ||||||||||||||||||||||||||||||||||||||
| Balance July 31, 2021 | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
AUREUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| July 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Gain on extinguishment of debt | ||||||||
| Loss on conversion of debt | ||||||||
| Gain on forgiveness of debt | ( | ) | ||||||
| Loss on disposal of fixed assets | ||||||||
| Gain on sale of fixed asset | ( | ) | ||||||
| Stock issued to subsidiary | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from the sales of property and equipment | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable | ||||||||
| Net payments (proceeds) from the sale of preferred stock | ( | ) | ||||||
| Sale of common stock | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Proceeds – related party loans | ||||||||
| Payments – related party loan | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Activity: | ||||||||
| Conversion of principal and interest into common stock | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 4 |
AUREUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS
Aureus Incorporated (the “Company”) was incorporated in the state of Nevada on April 19, 2013. The Company was organized to develop and explore mineral properties in the state of Nevada. The Company is currently in active status in the state of Nevada.
We are a food brand development company that builds and represents popular food concepts throughout the United States and international markets. Management is highly experienced at business integration and re-branding potential. With little territory available for the older brands, we intend to bring to our customers fresh innovative brands that have great potential. All of our brands will be unique in nature as we focus on niche markets that are still in need of development.
We operate two lines of business. Through our subsidiary, YIC Acquisitions Corp. (“YICA”), we acquired the assets of Yuengling’s Ice Cream in June 2019. YICA produces and sells high-quality ice cream without artificial colors, flavoring, or preservatives and no added hormones. In September 2020, we entered into the micro market segment and launched our second business line, Aureus Micro Markets (“AMM”). Closely tied to the vending machine industry, Micro Markets look and feel like modern convenience stores while functioning with the ease and efficiency of vending foodservice and refreshment services. They provide an improved customer experience and greater product variety, with a proven track record of increasing sales at vending locations while keeping labor costs down and improving operating efficiencies. Micro markets are a hybrid form of vending, food service, coffee service, and convenience stores that provide an improved customer experience, exponentially greater product variety, and increased sales within a single location while keeping labor costs down and improving operational efficiencies. The expanded product variety, open flow, and cashless payment options mean that consumers spend less time in line fumbling with cash/change, can purchase multiple items with one transaction, and buy more items per transaction than with cash transactions.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending October 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s financial statements for the year ended October 31, 2020.
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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
| 5 |
Restricted Cash
The Company has an obligation to transfer $
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the condensed consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has an accumulated deficit of $
NOTE 4 - PROPERTY & EQUIPMENT
Property and Equipment are first recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and five years.
Long lived assets, including property and equipment, to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Property and equipment stated at cost, less accumulated depreciation consisted of the following:
| July 31, 2021 | October 31, 2020 | |||||||
| Property and equipment | $ | $ | ||||||
| Less: accumulated depreciation | ||||||||
| Property and equipment, net | $ | $ | ||||||
Depreciation Expense
Depreciation expense
for the nine months ended July 31, 2021 and fiscal year ended October 31, 2020 was $
| 6 |
NOTE 5 – NOTES PAYABLE
On
On
On
On
On
On
On
On
On
As of July 31, 2021, the Company was also indebted
to two other third parties for a total of $
| 7 |
NOTE 6 – LOANS PAYABLE
YIC Acquisition assumed two loans that the Company
still has. The first loan was an SBA loan with a balance of $
During the nine months ended July 31, 2021, the
Mid Penn Bank made several of the Company’s loan payments as part of the CARES Act. This amount has been recognized as a gain on
forgiveness of debt of $
On August 31, 2020, the Company received a
Paycheck Protection Program loan under the CARES Act for $83,300 (the “PPP Loan”). The
Paycheck Protection Program provides that the use of PPP Loan proceeds are limited to certain qualifying expenses and
may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The Company currently intends to
use the PPP Loan for permitted uses, although no assurance can be given that the Company will obtain forgiveness of all or any
portion of amounts due under the PPP Loan. During the nine months ended July 31, 2021, this loan was forgiven per the
terms of the PPP loan. This amount has been recognized as a gain on forgiveness of debt of $
On March 16, 2021, the Company received a Paycheck
Protection Program loan under the CARES Act for $
NOTE 7 – RELATED PARTY TRANSACTIONS
As of July 31, 2021 and October 31, 2020 the Company
owes its officers $
During the nine months ended July 31, 2021, the
Company paid Everett Dickson, CEO, $
During the nine months ended July 31, 2021, the
Company paid Robert Bohorad, YICA’s Chief Operating Officer, $
NOTE 8 – COMMON STOCK
On December 10, 2020, the Company amended its Articles of Incorporation increased its authorized common stock to 1.5 billion (1,500,000,000) shares.
During the year ended October 31, 2020,
the Company sold shares of common stock for cash proceeds of $
During the year ended October 31, 2020,
the Company issued shares of common stock for conversion of $
During the nine months ended July 31, 2021,
the Company issued shares of common stock for conversion of $
| 8 |
NOTE 9 – PREFERRED STOCK
Series A Preferred
The Company has designated Ten Million (10,000,000) shares of Preferred Stock the Series A Convertible Preferred Stock with a par and stated value of $0.001 per share. The holders of the Series A Convertible Preferred Stock are not entitled to receive any dividends.
Except as otherwise required by law or by the Articles of Incorporation and except as set forth below, the outstanding shares of Series A Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Corporation as a single class and, regardless of the number of shares of Series A Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Convertible Preferred Stock is outstanding shall represent Sixty Six and Two Thirds Percent (66 2/3%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Corporation or action by written consent of shareholders. Each outstanding share of the Series A Convertible Preferred Stock shall represent its proportionate share of the 66 2/3% which is allocated to the outstanding shares of Series A Convertible Preferred Stock.
The entirety of the shares of Series A Convertible Preferred Stock outstanding as such time shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into two thirds of the after conversion outstanding fully paid and non-assessable shares of Common Stock. Each individual share of Series A Convertible Preferred Stock shall be convertible into Common Stock at a ratio determined by dividing the number of shares of Series A Convertible Stock to be converted by the number of shares of outstanding pre-conversion Series A Convertible Preferred Stock. Such initial Conversion Ratio, and the rate at which shares of Series A Convertible Preferred Stock may be converted into shares of Common Stock. As of July 31, 2021, there are 5,000,000 shares of Series A preferred stock owned by the CEO.
As of July 31, 2021 and October 31, 2020, the
Company has preferred stock to be issued in the amount of $
Series B Preferred
The Series B preferred stock is convertible into shares of common stock at the option of the holder at a 35% discount to the lowest closing price for the thirty days prior to conversion.
On August 21, 2020, the Company entered into a
Stock Purchased Agreement with Kanno Group Holdings II Ltd.(“KGH”), in which KGH purchased $
NOTE 10 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the following.
Subsequent to July 31, 2021, the Company entered into a convertible promissory note with Geneva Roth Remark Holdings, Inc for $45,000.
Subsequent to July 31, 2021, Device Corp agreed to return 40,000,000 shares of common stock that has been previously issued.
Subsequent to July 31, 2021, the Company sold 180,000,000 shares of common stock for total cash proceeds of $180,000.
| 9 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.
Forward-looking Statements
There are “forward-looking statements” contained in this quarterly report. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to conform forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:
| · | Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; |
| · | Our failure to earn revenues or profits; |
| · | Inadequate capital to continue business; |
| · | Volatility or decline of our stock price; |
| · | Potential fluctuation in quarterly results; |
| · | Rapid and significant changes in markets; |
| · | Litigation with or legal claims and allegations by outside parties; and |
| · | Insufficient revenues to cover operating costs. |
The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.
Overview
Aureus, Inc. (“Aureus,” “ARSN,” “we,” “us,” or the “Company”) was incorporated in Nevada on April 19, 2013. Our offices are located at One Glenlake Parkway #650, Atlanta, GA 30328. Our telephone number is (404) 885-6045, and our email address is [email protected]. Our website is www.aureusnow.com. We do not incorporate the information on or accessible through our website into this Registration Statement, and you should not consider any information on, or that can be accessed through, our website a part of this Registration Statement.
| 10 |
We are a food brand development company that builds and represents popular food concepts throughout the United States and international markets. Management is highly experienced at business integration and re-branding potential. With little territory available for the older brands, we intend to bring fresh, innovative brands with great potential. Our brands will be unique as we focus on niche markets that are still in need of development.
We operate two lines of business. Through our subsidiary, YIC Acquisitions Corp. (“YICA”), we acquired the assets of Yuengling’s Ice Cream (“YIC” or “Yuengling’s”) in June 2019. Yuengling’s sells high-quality ice cream without artificial colors, flavoring, or preservatives and no added hormones. Yuengling’s is currently sold in select retailers and convenience stores in eastern Pennsylvania. In September 2020, we entered into the micro-market segment and launched our second business line, Aureus Micro-Markets (“AMM”). Closely tied to the vending machine industry, micro-markets look and feel like modern convenience stores while functioning with the ease and efficiency of vending food service and refreshment services. They provide an improved customer experience and greater product variety, with a proven track record of increasing sales at vending locations while keeping labor costs down and improving operating efficiencies. Micro-markets are a hybrid form of vending, food service, coffee service, and convenience stores that provide an improved customer experience, exponentially greater product variety, and increased sales within a single location while keeping labor costs down and improving operational efficiencies. The expanded product variety, open flow, and cashless payment options mean that consumers spend less time in line fumbling with cash/change, can purchase multiple items with one transaction, and buy more items per transaction than with cash transactions.
Results of Operations
The three months ended July 31, 2021 compared to the three months ended July 31, 2020
Revenue
We had $0 in revenue for the three months ended July 31, 2021, compared to $1,134 for the three months ended July 31, 2020. The
decrease in revenue is due to a loss in retail food service customers.
Cost of Goods Sold
We incurred $0 in costs of goods sold for the three months ended July 31, 2021, compared to $85,098 for the three months ended July 31, 2020. In the prior period we had large a write down of our inventory due to expired or goods sold below cost.
General and administrative expenses
We had $16,713 of general and administrative expenses (“G&A”) for the three months ended July 31, 2021, compared to $41,127 for the three months ended July 31, 2020, a decrease of $24,414 or 59.4%. The decrease is due to decreased spending on investor relations and marketing during the current three-month period compared to the prior period.
Professional fees
We incurred $37,735 of professional fees for the three months ended July 31, 2021, compared to $3,500 for the three months ended July 31, 2020, an increase of $34,235 or 978%. Professional fees generally consist of audit, legal and accounting fees. The increase is due to an increase of audit, legal and accounting fees related to the filing of our Form 1-A and Form 10.
Other income (expense)
For the three months ended July 31, 2021, we had total other income of $67,422, compared to total other expense of $186,748 for the three months ended July 31, 2020. In the current period we incurred $15,878 of interest expense and recognized a gain on forgiveness of debt of $83,300. In the prior period we recognized other income of $6,944, a gain on the sale of an asset of $16,000 and a loss on conversion of debt of $208,500.
Net loss
We incurred a net income of $12,794 for the three months ended July 31, 2021, compared to a net loss of $315,339 for the three months ended July 31, 2020.
| 11 |
The nine months ended July 31, 2021 compared to the nine months ended July 31, 2020
Revenue
We had $3,568 in revenues for the nine months ended July 31, 2021, compared to $54,231 for the nine months ended July 31, 2020,
a decrease of $50,663 or 93.4%. The large decrease in revenue is due to a loss in retail food service customers.
Cost of Goods Sold
We incurred $53,051 in costs of goods sold for the nine months ended July 31, 2021, compared to $124,879 for the nine months ended July 31, 2020, a decrease of $71,828 or 57.5%. Of the $53,051, approximately $47,500, was a write down of our inventory due to expired or goods sold below cost.
General and administrative expenses
We had $106,696 of G&A expense for the nine months ended July 31, 2021, compared to $178,117 for the nine months ended July 31, 2020, a decrease of $71,421 or 40.1%. The decrease is due to decreased spending on investor relations and marketing during the current period compared to the prior period.
Consulting – related party
We had $85,000 of related party consulting expenses for the nine months ended July 31, 2021, compared to $0 for the nine months ended July 31, 2020. In the current period we made a payment of $40,000 to our CEO and two payments totaling $45,000 to Robert Bohorad, YICA’s Chief Operating Officer.
Professional fees
We incurred $61,935 of professional fees for the nine months ended July 31, 2021, compared to $43,440 for the nine months ended July 31, 2020, an increase of $18,495 or 42.6%. Professional fees generally consist of audit, legal and accounting fees. The increase is due to increased legal fees during the period.
Other income (expense)
For the nine months ended July 31, 2021, we had total other income of $40,298, compared to total other expense of $278,767 for the nine months ended July 31, 2020. In the current period we incurred $51,910 of interest expense, earned $372 of interest income, recognized a gain on forgiveness of debt of $118,836 and a loss on conversion of debt of $26,000. In the prior period we incurred $71,404 of interest expense, earned $1,037 of interest income and recognized a loss on conversion of debt of $208,500.
Net loss
We incurred a net loss of $262,816 for the nine months ended July 31, 2021, compared to $570,972 for the nine months ended July 31, 2020.
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the nine months ended July 31, 2021 was $291,396 compared to $80,673 of cash used in operating activities for the nine months ended July 31, 2020.
Cash Flows from Investing
Cash used in investing activities for the purchase of equipment for the nine months ended July 31, 2021 was $1,000 compared to $0 of cash used in investing activities for the nine months ended July 31, 2020.
Cash Flows from Financing
For the nine months ended July 31, 2021, we received $284,627 from financing activities. $114,582 from proceeds from notes payable, $198,600 from the sale of preferred stock and $28,545 from related party loans. We repaid $57,100 of a notes payable during the same period. For the nine months ended July 31, 2020, we netted $11,314 from financing activities, mostly from $35,000 from proceeds from notes payable, $77,500 from the sale of common stock and repayments of $94,536 of notes payable.
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Going Concern
As of July 31, 2021, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our operations.
We have suffered recurring losses from operations and have not yet generated any revenue. As a result of these and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Management’s plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing our plan of operation to generate sales. Our continued existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.
Off Balance Sheet Arrangements
We have no 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
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 2 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Recent Accounting Pronouncements
We have reviewed other recently issued accounting pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption of any other pronouncements to have an impact on our results of operations or financial position.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Each of our principal executive and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on their evaluation, each such person concluded that our disclosure controls and procedures were not effective as of July 31, 2021 due to a lack of segregation of duties and the absence of an independent audit committee.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, 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.
Changes in Internal Control over Financial Reporting.
Our management has evaluated whether any change in our internal control over financial reporting occurred during the last fiscal quarter. Based on that evaluation, management concluded that there has been no change in our internal control over financial reporting during the relevant period that has materially affected, or is 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 as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the nine months ended July 31, 2021, the Company issued 450,000,000 shares of common stock for conversion of $45,000 of principal and interest.
For each of the above-referenced issuances, the Company relied upon the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(a)(2) promulgated thereunder due to the fact that each was an isolated issuance to an accredited investor and did not involve a public offering of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Documents furnished as exhibits hereto:
| Exhibit No. | Description | |
| 31.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AUREUS, INC. | ||
| Date: September 17, 2021 | By: | /s/ Everett M. Dickson |
| Everett M. Dickson | ||
| Chief Executive Officer/Interim Chief Financial Officer (Principal Executive, Principal Financial and Accounting Officer) | ||
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