Arax Holdings Corp - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission File No. 333-185928

(Exact name of registrant as specified in its charter)

2329 N. Career Avenue

Suite 317

Sioux Falls, SD 57107

(605) 553 2238

(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o

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 shorter period that the registrant as required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x*

*The registrant has filed all Exchange Act reports for the preceding 12 months.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes x No o

As of February 12, 2016, the registrant had 10,300,000 shares of common stock issued and outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant at April 30, 2015 (the last business day of the registrant’s second fiscal quarter) was approximately $920,000. The aggregate market value was computed based upon 2,300,000 shares of common stock held by non-affiliates as of April 30, 2015 and a $0.40 closing price of the common stock as reported on the OTC QB Market on April 30, 2015. The closing price for the common stock on April 30, 2015 was used because the OTC QB Market reported no trades on that date and there was no active trading market for the registrant’s common stock in the subsequent two fiscal quarters.

ARAX HOLDINGS CORP.

FORM 10K

OCTOBER 31, 2015

TABLE OF CONTENTS 

PART I

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.

Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last year, the Company stated that it was re-evaluating its business plan.

It was further indicated as possible that a new business model could be related to a new business sector other than the food sector, and that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2015, and as of the date of this filing, Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and possibly internationally. We will continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.

Pursuant to a revision to a certain Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014, on or about February 9, 2015, and most recently on October 20, 2015, with full effect as of April 1, 2015 (the “Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma n the event that a PUBCO M&A transaction did not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of Arax Holdings would equal 3% of Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.

In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of the common stock in the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.

As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms.

Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.

Effective July 1, 2015, Thru Pharma and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the “Catalyst Note”) and a Securities Purchase Agreement (the “Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to multi-year auditing of Thru Pharma financials. The total available funds are $200,000, and Thru Pharma has only drawn $75,000. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction.

The Company’s status as a “shell company” as of the date of this report remains unchanged.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not generated any revenues as of October 31, 2015. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $111,080 as of October 31, 2015 and further losses are anticipated in the development of its business. The Company currently has no cash balance, a working capital and stockholders’ deficit of $75,232 and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

The Company is dependent on additional investment capital to fund operating expenses. The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

We do not own any real estate or other properties.

On June 4, 2014, we were named as a defendant in a lawsuit filed by AMERIFINANCIAL, INC. (“AMERIFINANCIAL”), of Houston, Texas. The action related primarily to a contract dispute between AMERIFINANCIAL and our majority shareholder, THRU PHARMA, LLC. The dispute did not allege any actions or inactions by our officers or representatives acting on our behalf. Counsel for THRU PHARMA, LLC, requested that we be dismissed from this lawsuit, as we were not party to the disputed contract, and there was no legal basis for the Company being a part of the lawsuit. The Company did not recognize a liability in connection with it.

On August 31, 2015, the Judge in this Harris County, Texas, case ruled that the only remaining Defendant was THRU PHARMA, LLC. Subsequent to our year end, on January 8, 2016, THRU PHARMA and AMERIFINANCIAL, INC. reached settlement of the dispute.

Not applicable to our Company.

PART II

Market Information

Our shares of common stock are traded on the OTCBB under the symbol “ARAT.” 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.

The following table sets forth the high and low trade information for our common stock for each quarter of the fiscal year ended October 31, 2015. As of October 31, 2014, the common stock was at $0.62. The first trade of our common stock this fiscal year was on November 3, 2014. No shares were traded during the fiscal quarters ended July 31, 2015 and October 31, 2015.

No shares traded during Q3 and Q4. Bid price remained at $0.40.

Number of Holders

As of October 31, 2015, the 10,300,000 issued and outstanding shares of common stock were held by 37 total shareholders of record.

Dividends

No cash dividends were paid on our shares of common stock during the fiscal years ended October 31, 2015, 2014 and 2013. 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

No sales of unregistered securities were completed in the twelve months ended October 31, 2015.

Purchase of our Equity Securities by Officers and Directors

No purchase of equity securities took place in the twelve months ended October 31, 2015.

Other Stockholder Matters

None

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements which reflect management’s expectation or belief concerning future events that involve risks and uncertainties. Our actions, results and performance could differ materially from what is contemplated by the forward-looking statements contained in this Report. Factors that might cause differences from the forward-looking statements include those referred to or identified in our Registration Statement on Form S-1 filed with the SEC on April 25, 2013 and other factors that may be identified elsewhere in this Report. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements.

The following is management’s discussion and analysis of the financial condition and results of operations of the Company, as well as our liquidity and capital resources. The discussion, including known trends and uncertainties identified by management, should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in this Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Overview

Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last year, the Company stated that it was re-evaluating its business plan.

It was further indicated as possible that a new business model could be related to a new business sector other than the food sector, and that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2015, and as of the date of this filing, Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and possibly internationally. We will continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.

Pursuant to a revision to a certain Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014, on or about February 9, 2015, and most recently on October 20, 2015, with full effect as of April 1, 2015 (the “Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma in the event that a PUBCO M&A transaction did not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of Arax Holdings would equal 3% of Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.

In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of the common stock in the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.

As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms. Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.

Effective July 1, 2015, Thru Pharma and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the “Catalyst Note”) and a Securities Purchase Agreement (the “Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to multi-year auditing of Thru Pharma financials. The total available funds are $200,000, and Thru Pharma has only drawn $75,000. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction. In the event that Thru Pharma is unable to timely make payments under this Agreement, Catalyst has the option of gaining control of the Thru Pharma shares in the Company.

The Company’s status as a “shell company” as of the date of this report remains unchanged.

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 will require additional capital to meet our operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.

FISCAL YEAR ENDED OCTOBER 31, 2015 COMPARED TO FISCAL YEAR ENDED OCTOBER 31, 2014.

Revenue

We recognized no revenue during the twelve months ended October 31, 2014 and 2013 as we have not commenced revenue generating operations as yet.

Operating Expenses

During the fiscal year ended October 31, 2015, our operating expenses were $29,774 compared to $50,294 during the prior fiscal year. During the twelve months ended October 31, 2015, our operating expenses comprised professional fees of $29,774. By comparison, for the twelve months ended October 31, 2014, our operating expenses comprised professional fees of $49,813, bank service charges of $24, loss on disposal of an asset of $428 and depreciation expense of $29. Expenses incurred during the fiscal year ended October 31, 2015 compared to fiscal year ended October 31, 2014 decreased primarily due to lack of any change in control. Professional fees generally include financial and administrative contracted services.

Net Loss

Our net loss for the fiscal year ended October 31, 2015 was $29,774 compared to a net loss of $50,294 during the fiscal year ended October 31, 2014 due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 2015, we had no assets and $75,232 of current liabilities comprised of a payments on our behalf by a related party. As of October 31, 2015, our total assets were $0 and our total liabilities were $75,232 comprised of payables to a related party.

FISCAL YEAR ENDED OCTOBER 31, 2015 COMPARED TO FISCAL YEAR ENDED OCTOBER 31, 2014.

Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities. During the fiscal year ended October 31, 2015, we used $29,774 in operating activities compared to $50,294 during the fiscal year ended October 31, 2014. The decrease between the two periods related primarily to the decrease in the loss due to professional fees as compared to the prior fiscal year.

Cash Flows from Investing Activities

We neither used nor generated cash flow from investing activities during the fiscal years ended October 31, 2015 or 2014.

Cash Flows from Financing Activities

During the fiscal year ended October 31, 2015, we received $29,774 by way of payments on our behalf by a related party to fund our working capital requirements. During the fiscal year ended October 31, 2014, we received $50,294 by way of payments on our behalf by our then principal shareholder.

PLAN OF OPERATION AND FUNDING

Historically, we have funded working capital requirements primarily through the proceeds of the private placement of equity instruments and by way of loans from related parties. Our working capital requirements are expected to increase as our business grows. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) personnel; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We expect that working capital requirements will be funded through advances or payables on our behalf from Thru Pharma, and through further issuances of our securities.

We have no lines of credit or other bank financing arrangements. Additional issuances of equity or issuances of convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan.

MATERIAL COMMITMENTS

As of the date of this Annual Report, we do not have any material commitments.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

GOING CONCERN

The independent auditors’ report accompanying our October 31, 2015 and October 31, 2014 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.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

INDEX TO FINANCIAL STATEMENTS

TABLE OF CONTENTS

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2014 AND 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Arax Holdings Corp.

2329 N. Career Avenue, Suite 317
Sioux Falls, South Dakota, 57107

We have audited the accompanying balance sheets of Arax Holdings Corp. as of October 31, 2014 and the related statement of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arax Holdings Corp. as of October 31, 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company has suffered losses from operations since Inception (February 23, 2012) and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cutler & Co., LLC

Wheat Ridge, formerly Denver, Colorado

February 13, 2015

9605 West 49^th Ave. Suite 200 Wheat Ridge, Colorado 80033      ~     Phone 303-968-3281     ~      Fax 303.456.7488   www.cutlercpas.com

Pritchett, Siler & Hardy, P.C.

Certified Public Accountants

1438 N Highway 89, Suite 130

Farmington, UT 84025

Office: (801)447-9572 Fax: (801)447-9578

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Arax Holdings Corp.

2329 N. Career Avenue, Suite 317

Sioux Falls, South Dakota, 57107 

We have audited the accompanying balance sheets of Arax Holdings Corp. as of October 31, 2015 and the related statements of operations, changes in stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arax Holdings Corp. as of October 31, 2015 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered continuing losses and has yet to establish a reliable, consistent and proven source of revenue to meet its operating costs on an ongoing basis and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  

/s/ Pritchett, Siler and Hardy PC

Pritchett, Siler and Hardy PC

Farmington Utah

February 16, 2016

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Arax Holdings Corp

Balance Sheets 

See accompanying notes to financial statements.

Arax Holdings Corp

Statements of Operations

See accompanying notes to financial statements.

Arax Holdings Corp

Statement of Changes in Stockholders’ Deficit

See accompanying notes to financial statements.

Arax Holdings Corp

Statements of Cash Flows    

See accompanying notes to financial statements.

ARAX HOLDINGS CORP.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2015 AND 2014

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last year, the Company stated that it was re-evaluating its business plan.

It was further indicated as possible that a new business model could be related to a new business sector other than the food sector, and that any new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. At October 31, 2015, and as of the date of this filing, Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and possibly internationally. We will continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.

Pursuant to a revision to a certain Consulting Agreement dated as of October 8, 2013, by and between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014, on or about February 9, 2015, and most recently on October 20, 2015, with full effect as of April 1, 2015 (the “Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma n the event that a PUBCO M&A transaction di not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of Arax Holdings would equal 3% of Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.

In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of the common stock in the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.

As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms.

Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.

Effective July 1, 2015, Thru Pharma and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the “Catalyst Note”) and a Securities Purchase Agreement (the “Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to multi-year auditing of Thru Pharma financials. The total potentially available funds are $200,000, and Thru Pharma has only drawn $75,000. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction. In the event that Thru Pharma is unable to timely make payments under this Agreement, Catalyst has the option of gaining control of the Thru Pharma shares in the Company.

The Company’s status as a “shell company” as of the date of this report remains unchanged.

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not generated any revenues as of October 31, 2015. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $111,080 as of October 31, 2015 and further losses are anticipated in the development of its business. The Company currently has no cash balance, a working capital and stockholders’ deficit of $75,232 and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

The Company is dependent on additional investment capital to fund operating expenses. The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

NOTE 3 – 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 United States of America and are presented in US dollars. The Company has adopted an October 31 fiscal year end.

Development Stage Company

The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities” and among the additional disclosures required as a development stage company are that its financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of its Inception (February 23, 2012) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are now fully included.

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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The fair values of the Company’s accrued expenses and other current liabilities approximate their carrying values due to the relatively short maturities of these instruments. The carrying value of the Company’s short and long term debt approximates fair value based on management’s best estimate of the interest rates that would be available for similar debt obligations having similar terms at the balance sheet date.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes”. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and state jurisdictions.

The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no such common stock equivalents outstanding during the years ending October 31, 2014 and 2013.

Recent Accounting Pronouncements

The Company has reviewed all the recent accounting pronouncements issued to date of the issuance of these financial statements, and does not believe any of these pronouncements will have a material impact on the company.

NOTE 4 – STOCKHOLDERS’ DEFICIT

Common Stock

The Company is authorized to issue 75,000,000 shares of common stock with a par value of $0.001 per share.

The Company had 10,300,000 shares of common stock issued and outstanding as of October 31, 2015.

Additional Paid in Capital

None

NOTE 5 – RELATED PARTY TRANSACTION

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.

The Company owed its majority shareholder, Thru Pharma, a total of $75,232 as of October 31, 2015, in the form of a related party payable. It is due on demand and is non-interest bearing.

NOTE 6 – INCOME TAXES

Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

As of July 31, 2014, the Company had a net operating loss carry-forward of approximately $81,306 that may be used to offset future taxable income and begins to expire in 2031. Because of the change in ownership that occurred on January 16, 2014, net operating loss carry forwards could be limited as to use in future years.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Legal

On June 4, 2014, we were named as a defendant in a lawsuit filed by AMERIFINANCIAL, INC. (“AMERIFINANCIAL”), of Houston, Texas. The action related primarily to a contract dispute between AMERIFINANCIAL and our majority shareholder, THRU PHARMA, LLC. The dispute did not allege any actions or inactions by our officers or representatives acting on our behalf. Counsel for THRU PHARMA, LLC, requested that we be dismissed from this lawsuit, as we were not party to the disputed contract, and there was no legal basis for the Company being a part of the lawsuit. The Company did not recognize a liability in connection with it.

On August 31, 2015, the Judge in this Harris County, Texas, case ruled that the only remaining Defendant was THRU PHARMA, LLC. Subsequent to our year end, on January 8, 2016, THRU PHARMA and AMERIFINANCIAL, INC. reached settlement of the dispute.

NOTE 8 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, “Subsequent Events” the Company has analyzed its operations subsequent to October 31, 2014 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.

None.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of October 31, 2015. Based upon this evaluation, our management concluded that the Company’s disclosure controls and procedures were not effective as of October 31, 2015.

Management’s Annual Report on Internal Control over Financial Reporting.

Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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 October 31, 2015, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

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 October 31, 2015 based on criteria established in Internal Control — Integrated Framework issued by COSO.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting.

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting. Management plans to routinely assess its internal control over financial reporting against appropriate standards, and to make changes as determined necessary and according to the scope of business operations.

PART III

DIRECTORS AND EXECUTIVE OFFICERS

The name, address and position of our present officers and directors are set forth below:

Mr. Keough is the Chairman and Chief Executive Officer of THRU PHARMA, LLC, a related party to the Company. He received his Bachelor of Science degree from the U.S. Naval Academy (Annapolis, MD), his Master of Arts degree from the Catholic University of America (Washington, D.C.) and his Juris Doctorate degree from Boston College Law School (Newton, MA.). He is the recipient of a financial management certificate from the University of Chicago Graduate School of Business. Mr. Keough was Senior Vice President of a NASDAQ-listed company, SurModics, during a vibrant growth period of that company. He may only be devoting limited time to our operations, and our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could result in a lack of revenues and a cessation of operations.

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 sole director, Steven Keough who currently devotes minimal time per week to company matters. We intend to hire employees on an as-needed basis.

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 years ended October 31, 2014 and 2015.

SUMMARY COMPENSATION TABLE

As of October 31, 2015, 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.

The following table provides certain information regarding the ownership of our common stock, as of October 31, 2015 and as of the date of the filing of this annual report by:

The percent of class is based on 10,300,000 shares of common stock issued and outstanding as of the date of this annual report.

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.

During the year ended October 31, 2015, we borrowed $29,960 from our shareholder, Thru Pharma, in the form of a related party payable. It is due on demand and is non-interest bearing.

During fiscal year ended October 31, 2015, we incurred approximately $8,950 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 for the quarters ended January 31, 2015, April 30, 2015 and July 31, 2015. This compares to approximately $7,750 in fees during fiscal year ended October 31, 2014 in connection with the audit of our financial statements and for the reviews of our financial statements for the quarters ended January 31, 2014, April 30, 2014, and July 31, 2014.

The following exhibits are filed as part of this Annual Report.

Exhibits:

101.INS XBRL Instance Document (furnished herewith)*

101.SCH XBRL Taxonomy Extension Schema Document (furnished herewith)*

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)*

101.LAB XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)*

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)*

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.