NRHI 10-K
Natural Resource Holdings, Inc. (NRHI)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Mark One
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______
Commission File No.
(Exact name of registrant as specified in its charter) |
| 5960 |
| ||
(State or Other Jurisdiction of Incorporation or Organization) |
| (Primary Standard Industrial Classification Number) |
| (IRS Employer Identification Number) |
+
(Address and telephone number of principal executive offices)
Indicate by checkmark whether the issuer: (1) has 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 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).
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. (Check one)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a 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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐
The aggregate market value of Common Stock held by non-affiliates of the Registrant on October 31, 2021, was $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
TABLE OF CONTENTS
| 2 |
| Table of Contents |
PART I
Item 1. Description of Business
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
We were incorporated in the State of Nevada on April 16, 2018. We were engaged in the business of selling beauty sample subscriptions. In December 2020, we acquired several gold mining claims in Canada as we have switched our focus to the mining industry. We planned to begin exploration on the properties. Due to Covid and economic downturn , we were unable to proceed with the mining property exploration. Upon the expiration of the two years term of the property mining rights, we decided not to extend beyond the original term of the mining rights and was fully impaired through year ended April 30, 2022. We are currently in negotiations to acquire other mining rights.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
At present, we have no employees other than our officer and director. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any officers, directors or employees.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Description of Property
We do not own any real estate or other properties.
Item 3. Legal Proceedings
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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| Table of Contents |
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
There is a limited public market for our common shares. Our common shares are not quoted on the OTC Bulletin Board at this time. Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange. As of April 30, 2022, no shares of our common stock have traded.
Number of Holders
As of August 9, 2022, the 4,190,000 issued and outstanding shares of common stock were held by a total of 7 shareholder of record.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal years ended April 30, 2022 and 2021. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Purchase of our Equity Securities by Officers and Directors
None.
Other Stockholder Matters
None.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
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| Table of Contents |
The following summary of our operations should be read in conjunction with our audited financial statements for the years ended April 30, 2022 and 2021, which are included herein:
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| April 30, |
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Operating Expenses |
| $ | (29,838 | ) |
| $ | (27,647 | ) |
| $ | (2,191 | ) |
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| 8 | % |
Other Income (Expenses) |
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| (240,656 | ) |
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| 33,449 |
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| (274,105 | ) |
| (819%) |
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Net Income (Loss) |
| $ | (270,494 | ) |
| $ | 5,802 |
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| $ | (276,296 | ) |
| (4762%) |
| |
During the year ended April 30, 2022 and 2021, the Company did not earn any revenue.
Net loss for the year ended April 30, 2022 was $270,494 compared to net income of $5,802 for the year ended April 30, 2021. The increase in net loss during the year ended April 30, 2022 was due to an increase in other expenses of $240,656 in relation to impairment of property mining rights of $125,000, interest expense on loans of $4,000 and interest and penalty on non-filing on previous years’ income tax returns of $ 125,000.
Liquidity and Capital Resources
Working Capital
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Current Assets |
| $ | - |
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| $ | - |
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| $ | - |
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| - |
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Current Liabilities |
| $ | 175,450 |
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| $ | 195,113 |
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| $ | (19,663 | ) |
| (10%) |
| |
Working Capital Deficiency |
| $ | (175,450 | ) |
| $ | (195,113 | ) |
| $ | 19,663 |
|
| (10%) |
| |
Our total current liabilities as of April 30, 2022 were $175,450 as compared to total current liabilities of $195,113 as of April 30, 2021. The decrease was primarily due to the sale of the director loan which is due on demand to an unaffiliated party under convertible note with expiry term went beyond one year.
Our working capital deficiency as of April 30, 2022 was $175,450 as compared to our working capital deficiency of $195,113 as of April 30, 2021. The decrease in working capital deficiency was mainly due to the sale of the director loan which is due on demand to an unaffiliated party under convertible note with expiry term went beyond one year.
Cash Flows
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Cash flows used in operating activities |
| $ | (23,793 | ) |
| $ | (28,913 | ) |
| $ | 5,120 |
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| (18%) |
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Cash flows used in investing activities |
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| - |
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| (125,000 | ) |
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| 125,000 |
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| (100%) |
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Cash flows provided by financing activities |
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| 23,793 |
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| 153,913 |
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| (130,120 | ) |
| (85%) |
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Net changes in cash |
| $ | - |
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| $ | - |
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| $ | - |
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| - |
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| 5 |
| Table of Contents |
Cash Flows from Operating Activities
Net cash used in operating activities was $23,793 for the year ended April 30, 2022 compared with $28,913 used in operating activities during the year ended April 30, 2021.
During the year ended April 30, 2022, the net cash of $23,793 used in operating activities was attributed to net loss of $270,494, increased by gain on note extinguishment of $13,344, decreased by impairment on property mining rights of $ 125,000, amortization of note discount of $795 and net changes in operating assets and liabilities of $134,250.
During the year ended April 30, 2021, the net cash of $28,913 used in operating activities was attributed to net income of $5,802, decreased by gain on note extinguishment of $34,114 and net changes in operating assets and liabilities of $601.
Cash Flows from Investing Activities
We had no investing activities during the year ended April 30, 2022.
Net cash used in investing activities for the year ended April 30, 2021 was $125,000 for acquisition of mining property rights.
Cash Flows from Financing Activities
During the year ended April 30, 2022 and 2021, net cash from financing activities was $23,793 and $153,913, respectively.
During the year ended April 30, 2022, we received $2,500 through issuance of promissory note from an unaffiliated party and $21,293 from director’s advancement.
During the year ended April 30, 2021, we received $153,913 through director’s advancement.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of software; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. 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.
Going Concern
The independent auditors’ report accompanying our April 30, 2022 and April 30, 2021 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
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| Table of Contents |
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
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 is material to stockholders.
Critical Accounting Policies
The preparation of financial statements in 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 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. A change in managements’ estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued. Our company’s management believes that these recent pronouncements will not have a material effect on our financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to smaller reporting companies.
| 7 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
BOXXY INC.
TABLE OF CONTENTS
| 8 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To: | The Board of Directors and Stockholders of |
| Boxxy Inc. |
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Boxxy Inc. (the Company) as of April 30, 2022 and 2021, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended April 30, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended April 30, 2022.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had incurred substantial losses during the year, and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The Critical Audit Matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. We determined that there are no critical audit matters.
/s/
JLKZ CPA LLP.
August 9, 2022
We have served as the Company’s auditor since May 12, 2016
| 9 |
| Table of Contents |
BOXXY INC.
BALANCE SHEETS
AS OF APRIL 30, 2022 AND 2021
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ASSETS |
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Current Assets |
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Total Current Assets |
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Non-current Assets |
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Mining Property Rights |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Loan payable - related party |
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Income tax Interest and penalty payable |
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Total Current Liabilities |
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Non-current Liabilities |
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Convertible note payable, net of note discount of $ |
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Loan payable |
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Total Liabilities |
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Stockholders’ Deficit |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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The accompanying notes are an integral part of these audited financial statements.
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BOXXY INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2022 AND 2020
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OPERATING EXPENSES |
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General and administrative expenses |
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Total Operating Expenses |
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Loss from operations |
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OTHER INCOME (EXPENSES) |
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Interest expense |
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Interest expense - related party |
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Gain on note extinguishment |
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Gain on extinguishment of debt |
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Impairment on property mining rights |
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Income tax interest and penalty |
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Other income (expense), net |
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Income (Loss) before income taxes |
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Provision for income taxes |
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NET INCOME (LOSS) |
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NET INCOME (LOSS) PER SHARE: BASIC AND DILUTED |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
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The accompanying notes are an integral part of these audited financial statements.
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BOXXY INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEAR ENDED APRIL 30, 2022 AND 2021
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Balance - April 30, 2020 |
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Net income |
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Balance - April 30, 2021 |
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Net loss |
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Balance - April 30, 2022 |
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The accompanying notes are an integral part of these audited financial statements.
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BOXXY INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED APRIL 30, 2022 AND 2021
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) |
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Adjustments to reconcile net loss to net cash from operating activities: |
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Impairment on property mining rights |
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Gain on note extinguishment |
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Gain on extinguishment of debt |
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Changes in operating assets and liabilities: |
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Accounts payable and accrued liabilities |
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Accrued interest - related party |
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Accrued interest |
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Income tax Interest and penalty payable |
|
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| ||
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|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
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|
CASH FLOWS FROM INVESTING ACTIVITIES |
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|
Acquisition of mining property rights |
|
|
|
|
| ( | ) | |
|
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|
Net cash used in investing activities |
|
|
|
|
| ( | ) | |
|
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|
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|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
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|
Proceeds from issuance of promissory note from unaffiliated party |
|
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| |
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|
Proceeds from issuance of promissory note from director |
|
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| ||
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|
Net cash provided by financing activities |
|
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| ||
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|
Net change in cash and cash equivalents |
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| ||
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|
Cash and cash equivalents - beginning of period |
|
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| ||
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|
Cash and cash equivalents - end of period |
| $ |
|
| $ |
| ||
|
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|
|
|
|
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|
Supplemental Cash Flow Disclosures |
|
|
|
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|
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|
Cash paid for interest |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
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|
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
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|
Supplemental Disclosures of Non-Cash Investing and Financing Activities |
|
|
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|
|
|
Sale of promissory note and accrued interest from related party to unaffiliated party |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Issuance of promissory note - related party |
| $ |
|
| $ |
| ||
|
|
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|
|
|
|
|
|
Forgiveness of loans |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Forgiveness of related party loan |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these audited financial statements.
| 13 |
| Table of Contents |
BOXXY INC.
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2022
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Boxxy Inc. (the “Company”) was incorporated in Nevada on April 19, 2016. We were a development stage company that intended to develop an online beauty sample subscription service.
On November 26, 2020, the Company completed an acquisition of working interests in certain mining properties as discussed in Note 4 below.
We are currently focusing on mining business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s year-end is April 30.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
Fair Value of Financial Instruments
ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
Level 1: defined as observable inputs such as quoted prices in active markets;
Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The carrying value of accounts payable and accrued liabilities, accrued interest, current portion of long-term debt, other party loan and loan from director approximates its fair value due to their short-term maturity.
Mining Property
Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.
| 14 |
| Table of Contents |
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.
ASC 930-805, “Extractive Activities-Mining: Business Combinations” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
(a) The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining the fair value of the assets.
(b) The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants.
Impairment
The Company assesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of long-lived assets”, and evaluates its carrying value under ASC 930-360, “Extractive Activities - Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.
Based on the Company’s evaluation, the mining property right was fully impaired during the year ended April 30, 2022.
Revenue Recognition
The Company recognized revenue from the sales of mineral products produced from mining operations in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties or when the invoice has been generated and provided to the customer
Step 2: The performance obligations are stated or implied in the contract or invoice
Step 3: The transaction price has been identified in the contract or invoice
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract or invoice
Step 5: The Company satisfied the performance obligations when the mineral products delivered to the purchaser
The Company recognized revenue from the royalty revenue in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties for royalty fees
Step 2: The performance obligations are stated or implied in the contract
Step 3: The transaction price has been identified in the contract
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract
Step 5: The Company has satisfied the performance obligations at the same period as the sales that generate the royalty payment
| 15 |
| Table of Contents |
Asset Retirement Obligations
The Company records a liability for asset retirement obligations (“ARO”) associated with its mining properties when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of mining properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the mining property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Income Tax
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the 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 carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented. (See Note 9)
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (See Note 5)
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
As of April 30, 2022 and April 30, 2021, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive:
|
| April 30, |
|
| April 30, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
| (Shares) |
|
| (Shares) |
| ||
Convertible note payable |
|
|
|
|
|
| ||
As of April 30, 2022, the convertible shares from the convertible note issued to an unaffiliated party on February 4, 2022 with a convertible rate of $
| 16 |
| Table of Contents |
Recent accounting pronouncements
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt-Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging-Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature (“CCF”) and (2) convertible instruments with a beneficial conversion feature (“BCF”). With the adoption of ASU2020-06, entities will not separately present in equity an embedded conversion feature these debts. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has chosen to early adopt this standard on its year ended April 30, 2022 financial statements and did not record BCF on the issuance of convertible notes with conversion rate below the Company’s market stock price on the date of note issuance.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 - GOING CONCERN
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements, the Company had an accumulated deficit of $
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 - MINING PROPERTY
On November 26, 2020, the Company entered into an Asset Purchase Agreement with a vendor to acquire undivided
| 17 |
| Table of Contents |
NOTE 5 - RELATED PARTY TRANSACTIONS
On July 1, 2021, the Company issued a promissory note of $
On July 31, 2021, the Company issued a promissory note of $
On October 31, 2021, the Company issued a promissory note of $
On January 31, 2022, the Company issued a promissory note of $
On February 4, 2022, the Company’s director sold the promissory notes with aggregate principal of $
NOTE 6 – CONVERTIBLE NOTE PAYABLE
|
|
|
| April 30, |
|
| April 30, |
| ||
|
| Expiry Date |
| 2022 |
|
| 2021 |
| ||
Convertible Note - February 2022 |
|
| $ |
|
| $ |
| |||
Convertible Note - April 2022 |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| ||
Less debt discount |
|
|
|
| ( | ) |
|
|
| |
|
|
|
| $ |
|
| $ |
| ||
On February 11, 2022, the Company entered into an agreement with the unaffiliated note holder of the promissory note of $
On April 30, 2022, the Company issued a convertible note of $
During the year ended April 30, 2022, amortization on note discount of $
As of April 30, 2022 and 2021, the convertible notes payable, net of note discount of $
| 18 |
| Table of Contents |
NOTE 7 - LOAN PAYABLE
The Company has outstanding long-term loan payable of $
Interest expense was $
NOTE 8 - STOCKHOLDER’S EQUITY
The Company has
As of April 30, 2022 and April 30, 2021, the Company had
NOTE 9 – INCOME TAX
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of April 30, 2022 and 2021, are as follows:
|
| April 30, |
|
| April 30, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Net operating loss carryforward |
| $ | ( | ) |
| $ | ( | ) |
Statutory tax rate |
|
| % |
|
| % | ||
Deferred tax asset |
|
| ( | ) |
|
| ( | ) |
Less: Valuation allowance |
|
|
|
|
|
| ||
Net deferred asset |
| $ |
|
| $ |
| ||
As of April 30, 2022, the Company had approximately $
NOTE 10 - RISK AND UNCERTAINTIES
In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no retroactive material adverse impacts on the Company’s results of operations and financial position at April 30, 2022. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional information is obtained.
NOTE 11 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to April 30, 2022 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.
19 |
| Table of Contents |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T). Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s 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 accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2022 using the criteria established in “ Internal Control - Integrated Framework “ issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of April 30, 2022, 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 did not maintain appropriate cash controls – As of April 30, 2022, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts. |
|
|
|
| 3. | We did not implement appropriate information technology controls – As at April 30, 2022, the Company retains copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors. |
| 20 |
| Table of Contents |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of April 30, 2022 based on criteria established in Internal Control—Integrated Framework issued by COSO.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of April 30, 2022, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
| 21 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Company
DIRECTORS AND EXECUTIVE OFFICERS
The name, address and position of our present officers and directors are set forth below:
Name and Address of Executive Officer and/or Director |
| Age |
| Position |
| ||||
Lian Yao Bin |
| 55 |
| Director, President, Chief Financial Officer, Chief Operating Officer, Secretary, Treasurer |
569 South Xizang Road, Shanghai, China 200010 |
|
|
|
|
Biographical Information and Background of officer and director
Lian Yao Bin was appointed as a director of our Company to replace Andrejs Bekess, our former director on September 29, 2020. Mr. Lian received a Bachelor in Business Administration from the Shanghai University of International Business and Economics in 1994. He has significant experience in marketing and sales management, having held varying management positions in Shanghai Yongqiao Plastics, Feizhou Electric Power Equipment and Lijiu Machinery Manufacturing Limited amongst others in the last 2 decades.
AUDIT COMMITTEE
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
SIGNIFICANT EMPLOYEES
We have no employees other than our Treasurer and a sole director, Lian Yao Bin; he currently devotes approximately twenty hours per week to company matters. We intend to hire employees on an as needed basis.
| 22 |
| Table of Contents |
Item 11. Executive Compensation
The following tables set forth certain information about compensation paid, earned or accrued for services by our President, and Secretary and all other executive officers (collectively, the “Named Executive Officers”) for the year ended April 30, 2022 and April 30, 2021.
Name and Principal Position |
| Year |
| Salary (US$) |
|
| Bonus (US$) |
|
| Stock Awards (US$) |
|
| Option Awards (US$) |
|
| Non-Equity Incentive Plan Compensation (US$) |
|
| Nonqualified Deferred Compensation Earnings (US$) |
|
| All Other Compensation (US$) |
|
| Total (US$) |
| ||||||||
Lian Yao Bin(1) |
| 2022 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
President |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrejs Bekess(2) |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Mr. Lian was appointed as President, Chief Executive Officer, Chief Financial Officer and a Director on September 29, 2020. |
(2) | Mr. Bekees was resigned as President, Chief Executive Officer, Chief Financial Officer and a Director on September 29, 2020. |
SUMMARY COMPENSATION TABLE
There are no current employment agreements between the company and its sole officer. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
CHANGE OF CONTROL
As of April 30, 2022, we had no pension plans or compensatory plans or other arrangements that provide compensation in the event of a termination of employment or a change in our control.
| 23 |
| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of August 9, 2022 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) members of our Board of Directors, and or (iii) our executive officers. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown.
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership |
| Percentage of Class(1) |
| |
Principal Stockholders Skycrest Holdings Limited Suite 1, 2nd Floor Sound & Vision House, Francis Rachel Str., Victoria, Mahe, Seychelles |
| 3,000,000 Shares of Common Stock |
|
| 71.60 | % |
Directors and Executive Officers as a Group |
| 3,000,000 Shares of Common Stock |
|
| 71.60 | % |
_________________
(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on May 26, 2022. As of May 26, 2022, there were 4,190,000 shares of our company’s common stock issued and outstanding. |
Item 13. Certain Relationships and Related Transactions
No director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended April 30, 2022, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
Item 14. Principal Accountant Fees and Services
We incurred approximately $12,600 for the year ended April 30, 2022 and $15,500 for the year ended April 30, 2021 in fees to our principal independent accountants for professional services rendered in connection with the audit of our financial statements and for the reviews of our financial statements.
| 24 |
| Table of Contents |
Item 15. Exhibits
The following exhibits are filed as part of this Annual Report.
Exhibits: |
|
|
|
|
|
| Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act | |
|
|
|
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act |
|
|
|
|
| 25 |
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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.
BOXXY INC. |
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Dated: August 9, 2022 | By: | /s/ Lian Yao Bin |
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| Lian Yao Bin, President and Chief Executive Officer and Chief Financial Officer |
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