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ARTELO BIOSCIENCES, INC. - Quarter Report: 2017 February (Form 10-Q)

knkx_10q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: February 28, 2017

 

or

 

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

 

For the transition period from _________ to _________

 

Commission File Number: 333-199213

 

REACTIVE MEDICAL INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

33-1220924

(State or other jurisdiction
of incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

29 Fitzwiliam Street Upper, Dublin 2 Ireland

 

 

(Address of principal executive offices)

 

(Zip Code)

 

+353 (1) 443 4604

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x  YES   o  NO 

 

  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). x YES   o NO 

 

  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

   

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

 

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.   

 

9,800,000 common shares issued and outstanding as of April 14, 2017 

 

 
 
 
 

 

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

9

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

13

 

Item 4.

Controls and Procedures

 

 

13

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

 

14

 

Item 1A.

Risk Factors

 

 

14

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

14

 

Item 3.

Defaults Upon Senior Securities

 

 

14

 

Item 4.

Mine Safety Disclosures

 

 

14

 

Item 5.

Other Information

 

 

14

 

Item 6.

Exhibits

 

 

15

 

 

 

 

 

 

 

SIGNATURES

 

 

16

 

 

 
2
 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our unaudited interim financial statements for the six month period ended February 28, 2017 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

 
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REACTIVE MEDICAL INC.

(Formerly KNIGHT KNOX DEVELOPMENT CORP.)

Balance Sheets

 

 

 

February 28,

 

 

August 31,

 

 

 

2017

 

 

2016

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

ASSETS

Current Assets

 

 

 

 

 

 

Cash

 

$ 10,897

 

 

$ 3,590

 

Prepaid expense

 

 

2,560

 

 

 

-

 

Total current assets

 

 

13,457

 

 

 

3,590

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 13,457

 

 

$ 3,590

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 2,413

 

 

$ 12,940

 

Accrued interest

 

 

847

 

 

 

-

 

Due to related party

 

 

100

 

 

 

4,450

 

Note payable, net of discount of $431

 

 

29,569

 

 

 

-

 

Total current liabilities

 

 

32,929

 

 

 

17,390

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

$ 32,929

 

 

$ 17,390

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding

 

 

 -

 

 

 

 -

 

Common stock, $0.001 par value; 150,000,000 shares authorized; 7,640,000 issued and outstanding, respectively

 

 

7,640

 

 

 

7,640

 

Additional paid-in capital

 

 

55,616

 

 

 

38,760

 

Accumulated deficit

 

 

(82,728 )

 

 

(60,200 )

Total stockholders' equity (Deficit)

 

 

(19,472 )

 

 

(13,800 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity (Deficit)

 

$ 13,457

 

 

$ 3,590

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 
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REACTIVE MEDICAL INC.

(Formerly KNIGHT KNOX DEVELOPMENT CORP.)

Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

February 29,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

 

3,803

 

 

 

-

 

 

 

4,116

 

 

 

609

 

Professional fees

 

 

8,192

 

 

 

5,090

 

 

 

17,396

 

 

 

19,700

 

Total Operating Expenses

 

 

11,995

 

 

 

5,090

 

 

 

21,512

 

 

 

20,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(11,995 )

 

 

(5,090 )

 

 

(21,512 )

 

 

(20,309 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,016 )

 

 

-

 

 

 

(1,016 )

 

 

-

 

Total other income (expense), net

 

 

(1,016 )

 

 

-

 

 

 

(1,016 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (13,011 )

 

$ (5,090 )

 

$ (22,528 )

 

$ (20,309 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted-average common shares outstanding

 

 

7,640,000

 

 

 

7,640,000

 

 

 

7,640,000

 

 

 

7,640,000

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 
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REACTIVE MEDICAL INC.

(Formerly KNIGHT KNOX DEVELOPMENT CORP.)

Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

 

 

 

February 28,

 

 

February 29,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$ (22,528 )

 

$ (20,309 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

169

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(2,560 )

 

 

-

 

Accounts payable and accrued liabilities

 

 

(10,527 )

 

 

5,670

 

Accrued interest

 

 

847

 

 

 

-

 

Due to related party

 

 

12,406

 

 

 

-

 

Net cash used in operating activities

 

 

(22,193 )

 

 

(14,639 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Collection from share subscription receivable

 

 

-

 

 

 

600

 

Advance from shareholder

 

 

100

 

 

 

600

 

Proceeds from issuance of note payable

 

 

29,400

 

 

 

-

 

Net cash provided by financing activities

 

 

29,500

 

 

 

1,200

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

7,307

 

 

 

(13,439 )

Cash and cash equivalents at beginning of period

 

 

3,590

 

 

 

17,029

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$ 10,897

 

 

$ 3,590

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$ -

 

 

$ -

 

Cash paid during the period for tax

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash financing and investing activities:

 

 

 

 

 

 

 

 

Loan forgiven by previous shareholder

 

$ 16,856

 

 

$ -

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 
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REACTIVE MEDICAL INC.

(Formerly KNIGHT KNOX DEVELOPMENT CORP.)

Notes to the Financial Statements

For the Six Months Ended February 28, 2017

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

KNIGHT KNOX DEVELOPMENT CORP. (the "Company") is a Nevada corporation incorporated on May 2, 2011. It is based in Dublin, Ireland. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company's fiscal year end is August 31.

 

Effective on February 10, 2017, the Company changed its name from "KNIGHT KNOX DEVELOPMENT CORP.," to "REACTIVE MEDICAL INC."

 

The Company intends to license, develop and commercialize novel cannabinoid therapeutic treatments. To date, the Company's activities have been limited to its formation and the raising of equity capital.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission ("SEC") and accounting principles generally accepted ("GAAP") in the United States of America. The accompanying interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2017 are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended August 31, 2016 contained in the Company's Form 10-K filed on November 29, 2016.

 

NOTE 3 - GOING CONCERN

 

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the six months ended February 28, 2017, the Company has a net loss of $22,528. As at February 28, 2017, the Company had an accumulated deficit of $82,728 and has earned no revenues. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for future periods.

 

 
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NOTE 4 - RELATED PARTY TRANSACTIONS

 

During the six months ended February 28, 2017, the former President, who is currently the Senior Vice President of European Operations, advanced the Company cash of $100. As of February 28, 2017, the amount owed to the individual for advances was $100. The advance is non-interest bearing, and has no terms of repayment.

 

During the six months ended February 28, 2017, the Company borrowed an additional $12,406 from the previous majority shareholder; the amount borrowed was non-interest bearing and due on-demand loan. On November 18, 2016, the loan with the previous majority shareholder was forgiven for the total loan amount of $16,856.

 

On November 18, 2016, the previous majority shareholder sold all of the 6,000,000 shares that they held to the current President of the Company in a private transaction.

 

The Company does not own or lease property or lease office space. 

 

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

 

NOTE 5 – NOTE PAYABLE

 

On November 18, 2016, the Company issued a Promissory Note of $30,000. The note bears interest at a rate of 10% per annum and is due on November 18, 2017. The Company also recognized financing cost of $600 as debt discount.

 

During the six months ended February 28, 2017, the Company recorded interest expense of $847 and amortization expense related to financing cost of $169.

 

NOTE 6 - EQUITY

 

Authorized Stock

 

On January 19, 2017, a majority of stockholders of our company and our board of directors approved a change of name of our company from Knight Knox Development Corp. to Reactive Medical Inc. and an increase to our authorized capital from 75,000,000 shares of common stock, par value $0.001 to 150,000,000 shares of common stock, par value $0.001 and 50,000,000 shares of preferred stock, par value $0.001.

 

Preferred shares

 

The Company has authorized 50,000,000 shares of preferred stock with a par value of $0.001.

 

During the six months ended February 28, 2017, there were no issuances of preferred stock.

 

Common Shares

 

The Company has authorized 150,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

During the six months ended February 28, 2017, there were no issuances of common stock.

 

NOTE 7 – SUBSEQUENT EVENTS

 

In March 2017, the Company entered into an engagement agreement with a law firm to provide it with legal services related to the Company’s potential intellectual property. In connection with this agreement on April 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold 400,000 common shares for an aggregate price of $400, $0.001 per share to a member of the firm, which has been paid in full. The agreement contains a clawback provision requiring the individual to sell back a portion of the shares through the fourth anniversary of the law firm’s appointment.

 

Effective March 22, 2017, the Company entered into an agreement with a consultant to provide services to the Company in connection with the development of technology and intellectual property for developing a leading position for plant and synthetic derived cannabinoid therapeutics for human clinic trials.

 

On April 3, 2017, the Company appointed a new President, Chief Executive Officer and Director. In connection with the appointment, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold 1,760,000 common shares for an aggregate price of $1,760, $0.001 per share to the individual, which has been paid in full. The agreement contains a clawback provision requiring the individual to sell back a portion of the shares through the fourth anniversary of his appointment.

  

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly 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. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (GAAP).

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Reactive Medical Inc., unless otherwise indicated.

 

Overview

 

We were incorporated under the laws of the State of Nevada on May 2, 2011 under the name Knight Knox Development Corp. Our address is, 29 Fitzwilliam Street, Upper, Dublin 2 Ireland. Our telephone number is +353 (1) 443 4604.

 

From inception to January 2017 our business plan was that of a development stage e-commerce company with the intention of operating a fully functional auction site where customers would register for an account and sell and purchase goods and services. As of April 2017, we are focused on becoming a specialty biopharmaceutical company that intends to license, develop and commercialize novel cannabinoid therapeutic treatments; at this time, we do not have any licenses and are not yet developing any such treatments.

 

On January 19, 2017, a majority of our stockholders and our board of directors approved a name change from Knight Knox Development Corp. to Reactive Medical Inc., to better reflect a change of direction of our business. In addition, the majority stockholder and our board of directors approved an increase to our authorized capital from 75,000,000 shares of common stock, par value $0.001 to 150,000,000 shares of common stock, par value $0.001 and 50,000,000 shares of preferred stock, par value $0.001.

 

The change of name became effective with the OTC Markets at the opening of trading on February 10, 2017 under the symbol “RMED”. Our CUSIP number is 75524H101.

 

On March 30, 2017, Peter O'Brien resigned his positions as President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the company and was appointed Senior Vice President of European Operations. On April 3, 2017, Mr. Gregory Gorgas was appointed President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a member of our board of directors.

 

 
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We are a development stage company and have commenced only minimal business operations and have not generated any revenues. We have been issued a "going concern" opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our current operations.

 

We do not have any subsidiaries.

 

We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.

 

Our Current Business

 

We are focused on becoming a specialty biopharmaceutical company that intends to license, develop and commercialize novel cannabinoid therapeutic treatments for unmet medical needs. We plan to achieve our objectives by sourcing programs from existing research outside our company combined with developing our own novel research strategies.

 

We expect to create new intellectual property in the course of our business by leveraging our knowledge, insight and research relationships. We intend to develop our own drugs and delivery methods by conducting clinical efforts through existing and new contracted research collaborations. Our pathway to commercialization will be in alignment with regulatory authorities in the markets we intend to sell products, specifically Europe and North America.

 

At this time we do not have any licenses in place nor have we located any specific treatments that we may develop. There is no guarantee that we will be able to license or develop any potential treatments.

 

Results of Operations

 

The following summary of our results of operations, for the six months ended February 28, 2017 and February 29, 2016, should be read in conjunction with our interim financial statements, as included in this Form 10-Q and our audited financial statements for the year ended August 31, 2016, as included in Form 10-K filed with the SEC on November 29, 2016.

 

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, but we cannot guarantee that we will be able to achieve same. We do not have any agreements or understandings with any person as to additional financing.

 

The following table provides selected financial data about our company as of February 28, 2017 and August 31, 2016.

 

Balance Sheet Data

 

 

 

February 28

 

 

August 31,

 

 

 

2017

 

 

2016

 

Cash

 

$ 10,897

 

 

$ 3,590

 

Total Assets

 

$ 13,457

 

 

$ 3,590

 

Total Liabilities

 

$ 32,929

 

 

$ 17,390

 

Stockholders' Equity (Deficit)

 

$ (19,472 )

 

$ (13,800 )

 

We have not generated any revenues since inception through February 28, 2017. The increase in cash was primarily due to $29,400 cash received from the issuance of a note payable.

 

 
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For the Three Months Ended February 28, 2017 Compared to the Three Months Ended February 29, 2016.

 

 

Three Months Ended

 

February 28
2017

 

February 29
2016

 

Operating Expenses

 

General and administrative expenses

 

$

3,803

 

$

-

 

Professional fees

 

8,192

 

5,090

 

Total Operating Expenses

 

11,995

 

5,090

 

Loss from Operations

 

(11,955

)

 

(5,090

)

Interest expense

 

(1,016)

 

-

 

Provision for income taxes

 

-

 

-

 

Net Loss

 

$

(13,011

)

 

$

(5,090

)

 

Our operating expenses, for the three months ended February 28, 2017 were $11,955 compared to $5,090 for the same period in 2016. The increase in operating expenses during the three months ended February 28, 2017 was primarily related to accounting and audit fees. Net loss for the three months ended February 28, 2017 was $13,011, compared to $5,090 for the three months ended February 29, 2016.

 

For the Six Months Ended February 28, 2017 Compared to the Six Months Ended February 29, 2016.

 

 

Six Months Ended

 

February 28
2017

 

February 29
2016

 

Operating Expenses

 

General and administrative expenses

 

$

4,116

 

$

609

 

Professional fees

 

17,396

 

19,700

 

Total Operating Expenses

 

21,512

 

20,309

 

Loss from Operations

 

(21,512

)

 

(20,309

)

Interest expense

 

(1,016)

 

-

 

Provision for income taxes

 

-

 

-

 

Net Loss

 

$

(22,528

)

 

$

(20,309

)

 

Our operating expenses, for the six months ended February 28, 2017 were $21,512 compared to $20,309 for the same period in 2016. The increase in operating expenses during the six months ended February 28, 2017 was primarily related to travel expenses, and business license fees.  Net loss for the six months ended February 28, 2017 was $22,528, compared to $20,309 for the six months ended February 29, 2016.

 

Liquidity and Capital Resources

 

Working Capital

 

 

February 28

 

August 31,

 

2017

 

2016

 

Current Assets

 

$

13,457

 

$

3,590

 

Current Liabilities

 

32,929

 

17,390

 

Working Capital (Deficit)

 

$

(19,472

)

 

$

(13,800

)

 

Cash Flows

 

 

Six Months Ended

 

February 28,
2017

 

February 29,
2016

 

Cash Flows used in operating activities

 

$

(22,193

)

 

$

(14,639

)

Cash Flows used in investing activities

 

-

 

-

 

Cash Flows provided by financing activities

 

29,500

 

1,200

 

Net increase (decrease) in cash during period

 

$

7,307

 

$

(13,439

)

 

 
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Cash Flow from Operating Activities

 

During the six months ended February 28, 2017, cash used in operating activities was $22,193 compared to cash used in operating activities of $14,639 during the six months ended February 29, 2016. The cash used from operating activities was attributed to net loss of $22,528, prepaid expenses of $2,560, accounts payable and accrued liabilities of $10,527, offset by amortization of debt discount of $169, accrued interest of $847, and due to related party of $12,406.

 

Cash Flow from Investing Activities

 

The company did not use any funds for investing activities in the six months ended February 28, 2017 and February 29, 2016.

 

Cash Flow from Financing Activities

 

During the six months ended February 28, 2017, advances from shareholder was $100, and proceeds from issuance of note payable was $29,400.

 

Going Concern

 

Our auditors issued a going concern opinion on our financial statements as of and for the period ended August 31, 2016. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses. This is because we have not generated sufficient revenues to cover operating costs or raised enough funds. There is no assurance we will ever reach this point. Accordingly, we must raise sufficient capital from outside sources to stay in business. In response to these problems, management intends to raise additional funds through public or private placement offerings. At this time, however, the company does not have plans or intentions to raise additional funds by way of the sale of additional securities.

 

Off-Balance Sheet Arrangements

 

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

 

Critical Accounting Policies and Estimates

 

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

As of February 28, 2017, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013), and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

  

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management dominated by a single individual without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of February 28, 2017.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Changes in Internal Control Over Financial Reporting

 

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

In March 2017, the Company entered into an engagement agreement with a law firm to provide it with legal services related to the Company’s potential intellectual property. In connection with this agreement on April 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold 400,000 common shares for an aggregate price of $400, $0.001 per share to a member of the firm, which has been paid in full. The agreement contains a clawback provision requiring the individual to sell back a portion of the shares through the fourth anniversary of the law firm’s appointment.

 

On April 3, 2017, the Company appointed a new President, Chief Executive Officer and Director. In connection with the appointment, the Company entered into a Securities Purchase Agreement to which the Company sold 1,760,000 common shares for an aggregate price of $1,760, par value $0.001 per share to the individual which has been paid in full. The agreement is contingent on the individual completing requirements in their employment agreement.

 

The sales of the shares described above have been conducted in reliance from exemptions from the registration requirements afforded by, among others, Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. The Company intends to use the proceeds from the sale of the shares for general working purposes.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 
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Item 6. Exhibits

 

Exhibit Number

 

Description

(31)

 

Rule 13a-14 (d)/15d-14d) Certifications

31.1*

 

Section 302 Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

(32)

 

Section 1350 Certifications

32.1*

 

Section 906 Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

101

 

Interactive Data File

101.INS**

 

XBRL Instance Document

101.SCH**

 

XBRL Taxonomy Extension Schema Document

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

REACTIVE MEDICAL INC.

 

(Registrant)

 

 

Dated: April 14, 2017

By:

/s/ Greg Gorgas

 

 

Greg Gorgas

 

 

President, Chief Executive Officer,
Chief Financial Officer,
Secretary, Treasurer and Director

 

 

(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

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