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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Neutra Corporation (PK) | USOTC:NTRR | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0002 | 0.0002 | 0.0003 | 0.00 | 14:30:00 |
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2023
or
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-55077
NEUTRA CORP.
(Exact name of registrant as specified in its charter)
| Wyoming | 27-4505461 | |
| (State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification Number) | |
|
54 Sugar Creek Center Blvd., Suite 200 Sugar Land, Texas |
77478 | |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: 702-793-4121
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class | Name of Each Exchange on which Registered | |
| Common stock $0.001 par value | OTC Markets QB |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [_] 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 [_] No [X]
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.
Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).
Yes [X] No [_]
Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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 [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 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 | [_] | Accelerated filer | [_] | |
| Non-accelerated filer | [X] | Smaller reporting company | [X] | |
| (Do not check is smaller reporting company) | Emerging growth company | [_] | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes [_] No [X]
The Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, July 31, 2022 was $2,052,646.
There were shares of the Registrant’s common stock outstanding as of June 6, 2023.
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NEUTRA CORP.
TABLE OF CONTENTS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
OTHER PERTINENT INFORMATION
When used in this report, the terms, “we,” the “Company,” “NTRR,” “our,” and “us” refers to Neutra Corp., a Wyoming corporation.
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PART I
ITEM 1. BUSINESS
Overview
Neutra Corp. was incorporated in Nevada on January 11, 2011 to market and participate in the nutraceutical space by bringing products derived from all natural and organic origins. On August 16, 2019, Neutra Corp. reincorporated in Wyoming.
Along with participating in the actual nutraceutical products, we plan to research and bring new technology to the nutraceutical space. Nutraceutical natural medicine is an alternative system that focuses on natural remedies and the body’s vital ability to heal and maintain itself. One of the nutraceutical sub-markets is the new thriving medical cannabis market, in which we intend to participate. We intend to entrust the manufacturing to a nutraceutical contractor to private label all of our products and to sell them under our unique brand. We have established a fiscal year end of January 31.
As the global cannabis market grows exponentially, it is constantly in need of better technologies and products to be more efficient in how it grows, what it grows and how it consumes cannabis and its related products. From lighting to dosage devices, from pesticide replacements to plant enhancers, Neutra Corp. is constantly combing the industry for the latest and greatest to test, prove and bring to market.
On January 23, 2018, we entered into an agreement with Artillery Labs to sell and market natural nutraceuticals online. The objective of this agreement is for the Company to have its own line of all natural and legal CBD products for sale through Artillery Labs’ online sales infrastructure. Under the terms of the agreement, Artillery Labs will be paid $25,000 upon the successful marketing launch of a product.
On August 30, 2019, we purchased all of the outstanding stock of Vivis Corporation, a Wyoming corporation, (“Vivis”) from Sydney Jim, our CEO. The purchase price for Vivis is $35,000 cash and a royalty of 40 percent of gross revenue until $100,000 is paid declining to 25 percent until an additional $100,000 has been paid. There will be a 10 percent royalty in perpetuity.
We have generated limited revenues to date and our activities have been primarily limited to developing our business plan and research and development of products. We will not have the necessary capital to fully develop or execute our business plan until we are able to secure additional financing. There can be no assurance that such financing will be available on suitable terms. We need to raise additional funds in order to implement our business plan. Our current cash on hand is insufficient to commercialize our products or fully develop our business strategy. If we are unable to raise adequate additional funds or if those funds are not available on terms that are acceptable to us, we will not be able to execute our business plan and we may cease operations.
Government Laws and Regulations
Neutra primarily sells hemp-derived products, including products containing delta-8-THC and other cannabinoids. Neutra is attempting to only conduct business to the extent permitted under applicable laws and regulations.
While Neutra is optimistic regarding the future of its business selling hemp-derived products and psychoactive products, and potentially products that contain nicotine, the manufacture and sale of these products involve significant risks associated with federal, state and local laws and regulations, and regulatory agencies, that have the potential to bankrupt Neutra and the Company, or at least to negatively impact the trading price of our common stock.
In regard to the sale of hemp-derived products in the United States, despite cannabis having been legalized at the state level for medical use in many states and for adult recreational use in a number of states, cannabis, other than plants of the same genus that meet the definition of industrial hemp, continues to be categorized as a Schedule I controlled substance under the federal Controlled Substances Act (“CSA”), and subject to the Controlled Substances Import and Export Act (“CSIEA”). As of December 20, 2018, the 2018 Farm Bill, formally known as the Agriculture Improvement Act of 2018 (the “Farm Bill”), has reclassified hemp for commercial use by removing it from its Schedule I Status under the CSA, and Neutra seeks to operate in compliance with the legislation. However:
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(a) FDA: The US Food and Drug Administration (“FDA”) has stated that although hemp is no longer an illegal substance under the Farm Bill, the FDA continues to regulate cannabis products under the Food, Drug, and Cosmetic Act (“FD&C Act”) and Section 351 of the Public Health Service Act. The health and safety impacts of delta-8-THC and other cannabinoids have not yet been established via traditional scientific and/or clinical studies. The FDA appears to believe that CBD, delta-8-THC and other hemp-derived cannabinoids may or could have significant adverse health impacts upon human beings, especially in regard to potential liver toxicity or liver damage. Furthermore, the FDA sometimes appears to believe that certain cannabinoids are drugs, and that the sale of certain cannabinoid-infused products without FDA approval is illegal. In deference to the FDA’s position, various states and municipalities have similarly declared that the sale of certain hemp-derived cannabinoid-infused products such as delta-8-THC is illegal, or have imposed restrictions or prohibitions upon the sale of certain hemp-derived products. The FDA may in the future impose significant licensing or other requirements, regulations, restrictions and/or prohibitions on the sale of hemp-derived products, which could have a material adverse effect upon Neutra’s business and the trading price of our common stock;
(b) DEA: The US Drug Enforcement Agency (“DEA”) has stated that although hemp is no longer an illegal substance under the Farm Bill, the FDA continues to pursue Schedule I controlled substances as well as certain synthetic substances. In particular:
(i) Hemp and hemp-derived cannabinoid-infused products which exceed a delta-9-THC concentration of 0.3% by dry weight are illegal under the Farm Bill. Any failure to keep the delta-9-THC concentration in Neutra’s hemp-derived or cannabinoid-infused products below 0.3% by dry weight could subject us to action by the DEA or other regulatory authorities and/or to lawsuits by consumers, which could have a material adverse effect upon our Company’s business and the trading price of our common stock. In addition, certain hemp-derived products may, over time, gradually increase their delta-9-THC concentration, and this may ultimately cause such products to exceed the 0.3% delta-9-THC by dry weight concentration level, making such products illegal in certain jurisdictions. If this happens, we could be subject to regulatory action that could have a material adverse effect upon our Company and the trading price of our common stock. In addition, the approval of medical and recreational marijuana by many states has created a situation in which it may be difficult or impossible for regulators and courts to determine whether the THC levels reflected in consumers’ blood tests are the result of legal hemp-derived products or marijuana-infused products. This may result in regulatory actions or lawsuits against the Company;
(ii) The DEA has issued a statement that some have interpreted as making hemp-derived delta-8-THC illegal. In deference to the DEA, certain state and local governments have imposed restrictions or prohibitions upon the sale of certain products containing delta-8-THC. Neutra sells significant quantities of products containing hemp-derived delta-8-THC, and any crackdown by the DEA or other regulatory authorities on products containing delta-8-THC may have a material adverse effect upon Neutra’s business and the trading price of our common stock; and
(iii) The DEA has sent a letter saying that delta-9-THCO and delta-8-THCO “do not occur naturally in the cannabis plant and can only be obtained synthetically, and therefore do not fall under the definition of hemp.” Any crackdown by the DEA or other regulatory authorities on products containing delta-9-THCO and/or delta-8-THCO may have a material adverse effect upon Neutra’s business and the trading price of our common stock.
(c) Amended PACT act: The recently amended federal PACT act makes the online sale of certain of Neutra’s products to end users difficult or impossible. The amended federal PACT act may have a material adverse effect upon Neutra’s business and the trading price of our common stock.
Furthermore, the regulation of hemp-derived, psychoactive and nicotine products is evolving. Neutra may become subject to new laws, rules, regulations, moratoriums, prohibitions, or other restrictions or impediments cannabis derived products for companies imposed by the U.S. President pursuant to executive orders, by the U.S. Congress in laws, by U.S. federal agencies such as the FDA and/or the DEA, and/or by state and local governments. For example, Neutra’s business may be impacted by any language relating to hemp-derived or psychoactive products that might be contained in any bill that might federally legalize marijuana, or that might be contained in the next so-called “Farm Bill”, or that might be contained in other legislation at the federal or state level. Without limiting the generality of the foregoing, governmental laws, rules and regulations may impose significant new rules, restrictions, limitations, prohibitions and/or taxes on when, where, how and to whom Neutra may sell its products, and these new rules, restrictions, limitations, prohibitions and/or taxes may have a material adverse effect on Neutra’s business and the trading price of our common stock.
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Neutra’s sales are partially dependent upon the sale of products containing hemp-derived delta-8-THC. The FDA, the DEA and other federal, state and local governments and agencies may impose laws, rules, regulations and executive orders that effectively prohibit Neutra from selling products containing delta-8-THC or certain other cannabinoids. For example, the DEA has sent a letter saying that delta-9-THCO and delta-8-THCO “do not occur naturally in the cannabis plant and can only be obtained synthetically, and therefore do not fall under the definition of hemp”, and any crackdown by the DEA or other regulatory authorities on products containing delta-9-THCO and/or delta-8-THCO may have a material adverse effect upon Neutra’s business and the trading price of our common stock. Consequently, Neutra’s future financial prospects are uncertain, and no guarantee or assurance whatsoever can be made that Neutra will be able to continue to pay their financial obligations when they become due and payable in the future. This risk may have a material adverse effect on our Company and the trading price of our common stock.
Neutra is subject to the risks of investigations and/or enforcement actions by the DEA, the FDA, Federal Trade Commission (“FTC”), state attorneys general and/or other government and/or quasi-governmental agencies relating to the advertising, marketing, promotion, ingredients, usage and/or sale of their products. If an inquiry by the DEA, the FDA, FTC, a state attorney general or other government or quasi-government agency finds that Neutra’s products and/or the advertising, marketing, promotion, ingredients, usage and/or sale of such products are not in compliance with applicable laws or regulations, or that they are misleading, untruthful or unsubstantiated, Neutra may become subject to fines, product reformulations, container changes, changes in the usage or sale of Neutra’s products, changes in their advertising, marketing and promotion practices, and/or injunctions on the sale of the products, each of which may have a material adverse effect on our business, financial condition or results of operations and on the trading price of our common stock.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 2. PROPERTIES
We maintain our corporate offices at 54 Sugar Creek Center Blvd., Suite 200 Sugar Land, Texas 77478. Our telephone number is 702-793-4121. Our manufacturing facility is located in Katy, Texas.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock began trading on the “Over the Counter” Bulletin Board (“OTC”) under the symbol “NTRR” in October 2011.
Holders
As of the date of this filing, there were 11 holders of record of our common stock.
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Dividends
To date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by our Board of Directors.
Common Stock
We are authorized to issue unlimited shares of common stock, with a par value of $0.001. The closing price of our common stock on June 1, 2023, as quoted by OTC Markets Group, Inc., was $0.0003. There were 2,743,575,314 shares of common stock issued and outstanding as of January 31, 2023. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of the Company’s assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.
Our Articles of Incorporation, our Bylaws, and the applicable statutes of the state of Wyoming contain a more complete description of the rights and liabilities of holders of our securities.
During the year ended January 31, 2023, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
Non-cumulative voting
Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
Securities Authorized for Issuance under Equity Compensation Plans
The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance as of January 31, 2023.
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | |||
| Equity compensation plans approved by security holders. | — | — | — | |||
| Equity compensation plans not approved by security holders. | — | — | — | |||
| Total | — | — | — |
Preferred Stock
Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value preferred stock. The Board of Directors is authorized to designate any series of preferred stock. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.
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Series A Preferred Stock. In January 2020, our board of directors designated 50,000 shares of our preferred stock as Series A Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series A Preferred Stock has a stated value of $5 per share. The Series A Preferred Stock is entitled to receive dividends of 10% of the net profit of VIVIS Corporation. The holders of the Series A Preferred Stock have the option to convert each share into 800 shares of common stock of the Company. As of January 31, 2023, there are 50,000 shares of Series A Preferred Stock outstanding.
Series B Preferred Stock. In July 2020, our board of directors designated 10,000 shares of our preferred stock as Series B Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series B Preferred Stock has a stated value of $5 per share. The Series B Preferred Stock is entitled to receive dividends of 0.4% of the net profit of VIVIS Corporation. Holders of the Series B Preferred Stock have the option to convert each share into 800 shares of common stock. As of January 31, 2023, there are 10,000 shares of Series B Preferred Stock outstanding.
Series C Preferred Stock. In November 2020, our board of directors designated 40,000 shares of our preferred stock as Series C Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series C Preferred Stock has a stated value of $5 per share. The Series C Preferred Stock is entitled to receive dividends of 10% of the net profit of VIVIS Corporation. After the Series C Preferred Stock has received cumulative dividends of $500,000, the dividend rate will reduce to 1%. Holders of the Series C Preferred Stock have the option to convert each share into 38 shares of common stock. As of January 31, 2023, there are 40,000 shares of Series C Preferred Stock outstanding.
Series E Preferred Stock. On November 13, 2015, our board of directors designated 1,000,000 shares of our preferred stock as Series E Preferred Stock. The Series E Preferred Stock is subordinated to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock has 2 votes for each outstanding share of common stock in the company. As of the date of this report, there are 1,000,000 shares Series E Preferred Stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.
Series F Preferred Stock. On March 15, 2019, our board of directors designated 1,000,000 shares of our preferred stock as Series F Preferred Stock. The Series F Preferred Stock is subordinated to our common stock and superior to all shares of Preferred Stock. It does not receive dividends and does not participate in equity distributions. The Series F Preferred stock retains 2/3 of the voting rights in the company. During the year ended January 31, 2021, the Company issued 1,000,000 shares of Series F Preferred Stock to Sydney Jim, our CEO, in exchange for services. As of the date of this report, there are 1,000,000 shares Series F Preferred Stock outstanding.
Series G Preferred Stock. During the year ended January 31 2021, our board of directors designated 1,000,000 shares of our preferred stock as Series G Preferred Stock. The Series G convertible preferred stock has a stated value of $1.00 per share, carries no voting rights and earns dividends of 8% per annum on the stated value of the stock. Dividends are payable on liquidation, redemption or conversion. The Series G convertible preferred stock is redeemable at the option of the Company during the first nine months it is outstanding at a premium of between 3% and 33% depending on the date of redemption. After the stock has been outstanding for nine months, it is convertible into common stock of the Company at a 29% discount to the market value of the common stock. During the year ended January 31, 2022, we issued 514,000 shares of Series G convertible preferred stock for cash proceeds of $426,250, and 420,300 shares were converted into 289,308,377 shares of common stock. During the year ended January 31, 2023, we issued 60,200 shares of Series G convertible preferred stock for cash proceeds of $50,000, and 275,000 shares and $11,000 of accrued dividends were converted into 611,501,515 shares of common stock. As of January 31, 2023, there were 35,200 shares of Series G convertible stock outstanding and $2,061 of accrued dividends payable.
Recent Sales of Unregistered Securities
During the quarter ended January 31, 2023, the Company issued shares of common stock as a result of the conversion of Series G Convertible Preferred Stock, as detailed in the following table:
| Date | Shares Converted | Number of Shares Issued | |||
| January 20, 2023 | 25,000 | 92,857,143 | |||
| Total | 25,400 | 92,857,143 | |||
The above transactions were exempt from registration per SEC Rule 144(a)(3).
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the information required by this item.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
Background of our Company
Neutra Corp. was incorporated in Florida on January 11, 2011. On October 5, 2015, we reincorporated from Florida to Nevada. On August 16, 2019, Neutra Corp. reincorporated from Nevada to Wyoming. The reincorporation was approved by our board of directors and by a majority of the holders of voting rights in our stock. Our authorized shares increased to unlimited shares of common stock and 20,000,000 shares of preferred stock.
We have established a fiscal year end of January 31.
As the global cannabis market grows exponentially, it is constantly in need of better technologies and products to be more efficient in how it grows, what it grows and how it consumes cannabis and its related products. From lighting to dosage devices, from pesticide replacements to plant enhancers, Neutra Corp. is constantly combing the industry for the latest and greatest to test, prove and bring to market.
Neutra primarily sells hemp-derived products, including products containing delta-8-THC and other cannabinoids. Neutra is attempting to only conduct business to the extent permitted under applicable laws and regulations. While Neutra is optimistic regarding the future of its business selling hemp-derived products and psychoactive products, and potentially products that contain nicotine, the manufacture and sale of these products involve significant risks associated with federal, state and local laws and regulations, and regulatory agencies, that have the potential to bankrupt Neutra and the Company, or at least to negatively impact the trading price of our common stock.
We have generated limited revenues to date and our activities have been limited primarily to developing our business plan and research and development of products. We will not have the necessary capital to fully develop or execute our business plan until we are able to secure additional financing. There can be no assurance that such financing will be available on suitable terms. We need to raise additional funds in order to implement our business plan. Our current cash on hand is insufficient to commercialize our products or fully develop our business strategy. If we are unable to raise adequate additional funds or if those funds are not available on terms that are acceptable to us, we will not be able to execute our business plan and we may cease operations.
Plan of Operations
We believe we do not have adequate funds to fully execute our business plan for the next twelve months unless we obtain additional funding. However, should we not raise this capital, we will allocate our funding to first assure that all State, Federal and SEC requirements are met.
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As of January 31, 2023, we had cash on hand of $1,969.
We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.
Results of Operations
We had net loss of $561,417 for the year ended January 31, 2023. We had a working capital deficit of $733,824 as of January 31, 2023. We do not anticipate having positive net income in the immediate future. Net cash used by operating activities for the year ended January 31, 2023 was $153,243.
We continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such advances available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.
Fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022.
Revenue
We recognized revenue of $67,996 and $92,014 for the years ended January 31, 2023 and 2022, respectively. Revenue was generated from the sale of our CBD sports creams, Delta-8 THC products and other products.
Cost of Goods Sold
We incurred cost of goods sold of $32,690 and $60,853 for the years ended January 31, 2023 and 2022, respectively.
Depreciation
We recognized depreciation of $78,906 and $77,785 for the years ended January 31, 2023 and 2022, respectively, as a result of the acquisition of property and equipment during the prior period.
General and Administrative Expenses and Sales Commissions
We recognized general and administrative expenses in the amount of $227,974 and $508,482 for the years ended January 31, 2023 and 2022, respectively. The decrease is primarily related to the decrease in consulting fees and marketing expense and related to the receipt of employee retention tax credits which offset labor costs during the current period.
Interest Expense
Interest expense increased from $60,606 for the year ended January 31, 2022 to $62,063 for the year ended January 31, 2023 as a result of outstanding convertible and other notes payable.
Income Tax Expense
Income tax expense was $3,523 for the year ended January 31, 2023 as a result of Section 280E of the Internal Revenue Code which prohibits the deduction of certain ordinary business expenses related to cannabis operations. There was no income tax provision in the year ended January 31, 2022 due to the Company’s net operating losses.
Net Loss
We had a net loss of $561,417 for the year ended January 31, 2023 as compared to net loss of $632,926 for the comparable period of 2022. The change in the net loss was primarily the result of lower general and administrative expense as discussed above.
Liquidity and Capital Resources
As of the date of this filing, we had yet to generate significant revenues from our business operations.
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We anticipate needing additional financing to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status, we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
We raised the cash amounts to be used in these activities from issuances of our Series G Preferred Stock during the year ended January 31, 2023. We currently have negative working capital of $733,824.
As of January 31, 2023, we had $1,969 of cash on hand. This amount of cash will be adequate to fund our operations for less than twelve months.
We have no known demands or commitments and are not aware of any events or uncertainties as of January 31, 2023 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Capital Resources
We had no material commitments for capital expenditures as of January 31, 2023 and 2022. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financing in addition to what is required to fund our present operation.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
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 assumptions 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; actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.
USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
GOING CONCERN - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended January 31, 2023, the Company had a net loss of $561,417 and generated negative cash flow from operations in the amount of $153,243. In view of these matters, the Company’s ability to continue as a going concern is dependent upon its ability to achieve a level of profitability or to obtain additional capital to finance its operations. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
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New Accounting Pronouncements
For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Significant Accounting Polices: Recently Issued Accounting Pronouncements” in Part II, Item 8 of this Form 10-K.
ITEM 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Neutra Corp.
Consolidated Financial Statements
January 31, 2023
Contents
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Neutra Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Neutra Corp. (the Company) as of January 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ deficit, changes in mezzanine equity, and cash flows for each of the years in the two-year period ended January 31, 2023, 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 January 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended January 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
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 suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated 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 audits to obtain reasonable assurance about whether the consolidated 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, audits 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 consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion.
Critical Audit Matters
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) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of a critical audit matter 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 separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
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Convertible Preferred Stock
As discussed in Note 10 to the financial statements, the Company had complex financing transactions due to the issuance of multiple series of preferred stock during the year, attached dividends, and differing terms on each class of stock, resulting in multiple placements of the different series throughout the balance sheet.
Auditing management’s evaluation of these transactions can be complex due to the unusual nature of these transactions.
To evaluate the appropriateness of the instrument’s classification, we examined and evaluated the agreement along with management’s evaluation of the key terms and management’s disclosure of the transactions.
/s/ M&K CPAS, PLLC
M&K CPAS, PLLC
We have served as the Company’s auditor since 2014.
Houston, TX
June 9, 2023
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NEUTRA CORP.
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements.
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NEUTRA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year ended January 31, |
||||||
| 2023 | 2022 | |||||
| REVENUE | $ | 67,996 | $ | 92,014 | ||
| COST OF GOODS SOLD | 32,690 | 60,853 | ||||
| GROSS MARGIN | 35,306 | 31,161 | ||||
| OPERATING EXPENSES | ||||||
| Depreciation | 78,906 | 77,785 | ||||
| Sales commissions | 26,101 | 28,476 | ||||
| General and administrative expenses | 227,974 | 508,482 | ||||
| Total operating expenses | 332,981 | 614,743 | ||||
| LOSS FROM OPERATIONS | (297,675 | ) | (583,582 | ) | ||
| OTHER INCOME (EXPENSE) | ||||||
| Interest expense | (62,063 | ) | (60,606 | ) | ||
| Gain on forgiveness of debt | 11,262 | |||||
| Loss on settlement of liabilities | (198,156 | ) | ||||
| Total other income (expense) | (260,219 | ) | (49,344 | ) | ||
| Net loss before income taxes | (557,894 | ) | (632,926 | ) | ||
| Provision for income taxes | (3,523 | ) | ||||
| NET LOSS | $ | (561,417 | ) | $ | (632,926 | ) |
| Dividends on Series G convertible preferred stock | (5,245 | ) | (21,512 | ) | ||
| Deemed dividend on preferred stock | (10,200 | ) | (87,750 | ) | ||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (576,862 | ) | $ | (742,188 | ) |
| NET LOSS PER COMMON SHARE – Basic and fully diluted | $ | (0.00 | ) | $ | (0.00 | ) |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – Basic and fully diluted | 2,230,594,112 | 1,599,716,616 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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NEUTRA CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
| Series A | Stock | ||||||||||||||||||||||||||||||||||||||||||
| Convertible | Series B | Series C | Series E | Series F | Additional | subscribed | Total | ||||||||||||||||||||||||||||||||||||
| Common stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | paid-in | Accumulated | but not | Equity | ||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | Shares | Par | Shares | Par | Shares | Par | capital | Deficit | issued | (Deficit) | ||||||||||||||||||||||||||||
| Balance, January 31, 2021 | 1,492,765,422 | $ | 1,492,765 | 50,000 | $ | 50 | $ | $ | 1,000,000 | $ | 1,000 | 1,000,000 | $ | 1,000 | $ | 7,427,709 | $ | (10,140,000 | ) | $ | 250,000 | $ | (967,476 | ) | |||||||||||||||||||
| Common stock issued for preferred stock conversions | 289,308,377 | 289,309 | — | — | — | — | — | 147,323 | 436,632 | ||||||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock | — | — | 10,000 | 10 | — | — | — | 49,990 | (50,000 | ) | |||||||||||||||||||||||||||||||||
| Issuance of Series C preferred stock | — | — | — | 40,000 | 40 | — | — | 199,960 | (200,000 | ) | |||||||||||||||||||||||||||||||||
| Dividends on Series G preferred stock | — | — | — | — | — | — | (21,512 | ) | (21,512 | ) | |||||||||||||||||||||||||||||||||
| Deemed dividend on Series G preferred stock | — | — | — | — | — | — | (87,750 | ) | (87,750 | ) | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (632,926 | ) | (632,926 | ) | |||||||||||||||||||||||||||||||||
| Balance, January 31, 2022 | 1,782,073,799 | 1,782,074 | 50,000 | 50 | 10,000 | 10 | 40,000 | 40 | 1,000,000 | 1,000 | 1,000,000 | 1,000 | 7,824,982 | (10,882,188 | ) | (1,273,032 | ) | ||||||||||||||||||||||||||
| Common stock issued for preferred stock conversions | 611,501,515 | 611,501 | — | — | — | — | — | (325,502 | ) | 285,999 | |||||||||||||||||||||||||||||||||
| Common stock issued for conversion of debt | 350,000,000 | 350,000 | — | — | — | — | — | 390,075 | 740,075 | ||||||||||||||||||||||||||||||||||
| Preferred stock subscribed but not issued | — | — | — | — | — | — | 50,000 | 50,000 | |||||||||||||||||||||||||||||||||||
| Dividends on Series G preferred stock | — | — | — | — | — | — | (5,245 | ) | (5,245 | ) | |||||||||||||||||||||||||||||||||
| Deemed dividend on Series G preferred stock | — | — | — | — | — | — | (10,200 | ) | (10,200 | ) | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (561,417 | ) | (561,417 | ) | |||||||||||||||||||||||||||||||||
| Balance, January 31, 2023 | 2,743,575,314 | $ | 2,743,575 | 50,000 | $ | 50 | 10,000 | $ | 10 | 40,000 | $ | 40 | 1,000,000 | $ | 1,000 | 1,000,000 | $ | 1,000 | $ | 7,889,555 | $ | (11,459,050 | ) | $ | 50,000 | $ | (773,820 | ) | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NEUTRA CORP.
CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE EQUITY
| Series G Preferred Stock | ||||||
| Shares | Amount | |||||
| Balance, January 31, 2021 | 156,300 | $ | 156,300 | |||
| Series G preferred stock issued for cash | 514,000 | 514,000 | ||||
| Series G preferred stock converted to common stock | (420,300 | ) | (420,300 | ) | ||
| Balance, January 31, 2022 | 250,000 | 250,000 | ||||
| Series G preferred stock issued for cash | 60,200 | 60,200 | ||||
| Series G preferred stock converted to common stock | (275,000 | ) | (275,000 | ) | ||
| Balance, January 31, 2023 | 35,200 | $ | 35,200 | |||
The accompanying notes are an integral part of these consolidated financial statements.
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NEUTRA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year ended January 31, | |||||||
| 2023 | 2022 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net loss | $ | (561,417) | $ | (632,926 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation | 78,906 | 77,785 | |||||
| Gain on forgiveness of debt | (11,262 | ) | |||||
| Loss on settlement of liabilities | 198,156 | ||||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 25 | ||||||
| Deposits | 1,610 | ||||||
| Inventory | (23,846 | ) | |||||
| Accounts payable and accrued liabilities | (9,748 | ) | 100,158 | ||||
| Accounts payable to related parties | 101,332 | ||||||
| Accrued interest payable | 61,764 | 60,605 | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (153,243 | ) | (405,615 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Purchases of property and equipment | (40,227 | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (40,227 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
| Repayments of advance from related party | (17,422 | ) | |||||
| Proceeds from sale of Series G convertible preferred stock | 50,000 | 426,250 | |||||
| Stock subscriptions received | 50,000 | ||||||
| Repayments of notes payable, related party | (5,844 | ) | |||||
| Proceeds from issuance of note payable | 11,262 | ||||||
| Proceeds from issuance of note payable, related | 60,000 | ||||||
| Proceeds from advance from related party | 3,500 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 154,156 | 423,590 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 913 | (22,252 | ) | ||||
| CASH, at the beginning of the period | 1,056 | 23,308 | |||||
| CASH, at the end of the period | $ | 1,969 | $ | 1,056 | |||
| Supplemental Disclosures of Cash Flow Information: | |||||||
| Cash paid during the period for: | |||||||
| Interest | $ | $ | |||||
| Taxes | $ | $ | |||||
| Noncash investing and financing transaction: | |||||||
| Conversion of Series G preferred stock | $ | 285,999 | $ | 420,300 | |||
| Deemed dividend on Series G preferred stock | $ | 10,200 | $ | 87,750 | |||
| Conversion of note payable and accrued interest | $ | 541,919 | $ | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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NEUTRA CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2023
Note 1. Background Information
Neutra Corp. was incorporated in Nevada on January 11, 2011 to market and participate in the nutraceutical space by bringing products derived from all natural and organic origins. Along with participating in the actual nutraceutical products, we plan to research and bring new technology to the nutraceutical space. Nutraceutical natural medicine is an alternative system that focuses on natural remedies and the body’s vital ability to heal and maintain itself. One of the nutraceutical sub-markets is the new thriving medical cannabis market, in which we intend to participate. We intend to entrust the manufacturing to a nutraceutical contractor to private label all of our products and to sell them under our unique brand. We have established a fiscal year end of January 31.
As the global cannabis market grows exponentially, it is constantly in need of better technologies and products to be more efficient in how it grows, what it grows and how it consumes cannabis and its related products. From lighting to dosage devices, from pesticide replacements to plant enhancers, Neutra Corp. is constantly combing the industry for the latest and greatest to test, prove and bring to market.
Note 2. Going Concern
For the fiscal year ended January 31, 2023, the Company had a net loss of $ and negative cash flow from operations of $. As of January 31, 2023, the Company has negative working capital of $733,824. The Company has a history of recurring net losses and negative cash flows from operations. We have generated limited revenues to date and our activities have been primarily limited to developing our business plan and research and development of products. We will not have the necessary capital to fully develop or execute our business plan until we are able to secure additional financing. There can be no assurance that such financing will be available on suitable terms. We need to raise additional funds in order to implement our business plan. Our current cash on hand is insufficient to commercialize our products or fully develop our business strategy. If we are unable to raise adequate additional funds or if those funds are not available on terms that are acceptable to us, we will not be able to execute our business plan and we may cease operations.
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
Note 3. Significant Accounting Policies
The significant accounting policies that the Company follows are:
Basis of Presentation
The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The consolidated financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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Consolidated Financial Statements
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Diamond Anvil Designs, LLC, Deity Corporation and Vivis Corporation, from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
All cash, other than held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents. Cash and cash equivalents were $1,969 and $1,056 at January 31, 2023 and 2022, respectively.
Cash Flow Reporting
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
Deposits
Deposits represent cash on deposit with the Company’s attorney.
Inventory
Inventory is comprised of packaging and supplies and at times raw materials. Inventory is valued at cost, based on the average cost method, unless and until the net realizable value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to the net realizable value. As of January 31, 2023 and 2022, market values of all of our inventory were greater than cost, and accordingly, no such valuation allowance was recognized.
Property and Equipment, net
Property and equipment consist of equipment used to manufacture the Company’s products and is presented at cost. Depreciation is recognized over the useful life of the equipment on a straight-line basis over years beginning when the asset is put in service.
Impairment of long-lived assets
Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value. The Company determined that there was no impairment of long-lived assets during the years ended January 31, 2023 and 2022.
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Common stock
The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.
Mezzanine equity
Where ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary equity). The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
| • | Identification of the contract with a customer |
| • | Identification of the performance obligations in the contract |
| • | Determination of the transaction price |
| • | Allocation of the transaction price to the performance obligations in the contract |
| • | Recognition of revenue when, or as, the Company satisfies a performance obligation |
Product sales are recognized all of the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. Payment is received before shipment of the product. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns. Shipping charges billed to customers are included in net sales. Various taxes on the sale of products to customers are collected by the Company as an agent and remitted to the respective taxing authority. These taxes are presented on a net basis and recorded as a liability until remitted to the respective taxing authority. The Company allows for customers to return unopened products within 10 days in certain limited circumstances. During the years ended January 31, 2023 and 2022, there were a no refunds processed for returned product.
For the years ended January 31, 2023 and 2022, revenue from contracts with customers was $67,996 and $92,014, respectively. For the year ended January 31, 2023, the Company had two customers that accounted for 57 and 16% of total revenue. For the year ended January 31, 2022, the Company had two customers that accounted for 30% and 17% of total revenue, respectively.
Contract Costs
Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.
Cost of Sales
Cost of sales includes all of the costs to purchase and assemble the Company’s products. Products are manufactured for the Company by third-party contractors, such costs represent the amounts invoiced by the contractors. Additionally, shipping costs are included in Cost of Sales in the Statements of Operations.
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Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 the enactment occurs. 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. No deferred tax assets or liabilities were recognized as of January 31, 2023 and 2022, respectively.
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS has issued a clarification allowing the deduction of certain expenses, the bulk of operating costs and general administrative costs are generally not permitted to be deducted. The operations of certain of the Company’s subsidiaries are subject to Section 280E. This results in permanent differences between ordinary and necessary business expenses deemed non-deductible under IRC Section 280E. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.
The Company recorded a provision for income taxes in the amount of $3,523 during the year ended December 31, 2021 compared to $0 during the year ended December 31, 2020. Although we have net operating losses that we believe are available to us to offset this entire tax liability, which arises under Section 280E of the Code because we are a cannabis company, as a conservative measure, we have accrued this liability.
We compute basic and diluted earnings per common share amounts in accordance with ASC Topic 260, Earnings per Share. The basic earnings (loss) per common share are calculated by dividing our net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per common share are calculated by dividing our net income (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 as of the first of the year for any potentially dilutive debt or equity. There are no dilutive shares outstanding for any periods reported.
Financial Instruments
The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.
FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| Level 1 - | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| Level 2 - | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| Level 3 - | Inputs that are both significant to the fair value measurement and unobservable. |
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Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of January 31, 2023 and 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.
Commitments and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. On December 14, 2022, the Company entered into a settlement agreement with a former customer who filed lawsuit against the Company for medical issues after consuming a product sold by the Company agreed to pay $10,000 for full settlement of the customer’s claims, which was paid subsequent to January 341, 2023. There were no other known commitments or contingencies as of January 31, 2023 and January 31, 2022.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Reclassification
Certain reclassifications have been made to our prior year’s financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
Recently Adopted Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Note 4. Deposits
Deposits represent cash on deposit with the Company’s attorney. As of January 31, 2023 and 2022, the Company had amounts on deposit with its attorney in the amount of $0 and $1,610, respectively.
Note 5. Property and equipment, net
Property and equipment consist of the following:
| January 31, 2023 | January 31, 2022 | ||||||
| Equipment | $ | 236,717 | $ | 236,717 | |||
| Total property and equipment | 236,717 | 236,717 | |||||
| Less: accumulated depreciation | (187,357 | ) | (108,451 | ) | |||
| Property and equipment, net | $ | 49,360 | $ | 128,266 | |||
For the years ended January 31, 2023 and 2022, the Company recognized depreciation expense of $78,906 and $77,785, respectively.
Note 6. Related Party Transactions
During the years ended January 31, 2023 and 2022, we incurred and paid salary expense of $105,649 and $97,834 to our CEO, Sydney Jim. In addition, we incurred commission expense of $26,101 and $26,824 payable to Mr. Jim and owed $101,332 and $31,334 in unpaid compensation as of January 31, 2023 and 2022, respectively. The commissions were not paid during the period. During the year ended January 31, 2022, the Company repaid advances of $17,422 owed to Mr. Jim.
As of January 31, 2023 and 2022, we owe Mr. Jim, or entities controlled by him, $233,087 and $131,755, respectively, which is recorded on the balance sheet in “Accounts Payable – Related Party” and $2,314 in “Advances payable to related party” related to the items discussed above.
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On March 11, 2022, the Company entered into a loan agreement for $60,000 of proceeds with the holder of the Company’s Series A and B preferred stock. The loan is unsecured and bears interest at 6%. The Company will make monthly payments of $4,240 per month beginning in April 2022 through the maturity at June 18, 2023. As of January 31, 2023, the note principal balance was $54,156 and accrued interest was $1,836. The Company has not made all required monthly payments under the note agreement to date.
During the year ended January 31, 2022, the Company acquired the assets of Deity Corporation, a Texas corporation which the Sydney Jim, the Company’s CEO, had a controlling interest in that will produce hemp and cannabis products. The transaction was considered an asset acquisition, as there were no operations of Deity Corporation prior to the transaction. The Company received the formulas for certain hemp and cannabis-based products and a website to market the products that will be produced. In exchange, the Company will pay to Mr. Jim 60% of the revenue from Deity Corporation sales until a total of $ is reached, at which point the Company will pay 20% of Deity Corporation revenue to Mr. Jim.
Note 7. Advances and Notes Payable
As of January 31, 2023 and 2022, we had amounts due under advances of $3,450 at each period. These advances are not collateralized, non-interest bearing and are due on demand.
During the three months ended April 30, 2021, the Company received $11,262 from the United States Small Business Administration Paycheck Protection Program. The loan bears interest at 1% annually and matures in April 2026. The loan was forgiven in full during the three months ended October 31, 2021, and the Company recorded a gain on debt forgiveness.
Note 8. Income Taxes
There is no current or deferred income tax expense or benefit for the years ended January 31, 2023 and 2022.
The statutory tax rate for the years ended January 31, 2023 and 2022 was 21%. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference for the periods ended January 31, 2023 and 2022 are as follows.
Schedule of provision for income taxes
| 2023 | 2022 | |||||||
| Tax benefit (provision) at U.S. statutory rate | $ | 117,158 | $ | 132,914 | ||||
| less: amortization of beneficial conversion feature | ||||||||
| Plus: permanent differences for nondeductible items | (41,613 | ) | ||||||
| Plus: Section 280E adjustment | 3,523 | |||||||
| Plus: Gain on settlement of debt and PPP loan forgiveness | 2,365 | |||||||
| less: change in valuation allowance | (75,545 | ) | (135,279 | ) | ||||
| Tax provision, net | $ | 3,523 | $ | |||||
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
We recorded a provision for income taxes in the amount of $3,523 during the year ended January 31, 2023 compared to $0 during the year ended January 31, 2022. Although the Company has net operating losses that it believes are available to offset this entire tax liability, which arises under Section 280E of the Code because we are a cannabis company, as a conservative measure, the Company has accrued this liability.
The Company’s deferred tax asset as of January 31, 2023 and 2022 consisted of the following:
| 2023 | 2022 | |||||||
| Net operating loss carryforward | $ | 966,187 | $ | 894,164 | ||||
| Valuation allowance | (966,187 | ) | (894,164 | ) | ||||
| Deferred tax asset, net | $ | $ | ||||||
We have net operating loss carryforwards of approximately $4,600,889 and $4,257,926 as of January 31, 2023 and 2022, respectively.
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Note 9. Convertible Notes Payable
Convertible notes payable consists of the following as of January 31, 2023 and 2022:
| January 31, 2023 | January 31, 2022 | ||||||
| Convertible note, dated October 31, 2015, bearing interest at 10% per annum, bearing default interest at 25% per annum, matured on October 31, 2018 and convertible into shares of common stock at $0.50 per share, in default | 156,976 | ||||||
| Convertible note, dated January 31, 2016, bearing interest at 10% per annum, bearing default interest at 25% per annum, matured on January 31, 2020 and convertible into shares of common stock at a 60% discount to the market price, in default | 82,735 | ||||||
| Total convertible notes payable | $ | $ | 239,711 | ||||
| Less: convertible notes payable, in default | (239,711 | ) | |||||
| Current convertible notes payable, net of discount | $ | $ | |||||
Settlement of Convertible Note Payable
On December 2, 2022, the Company entered into a convertible note exchange agreement with Lead Enterprises, Inc. Per the agreement, the Company issued shares of common stock in exchange for the settlement of the October 31, 2015 convertible note with principal of $156,976 with accrued interest of $194,573 and the January 31, 2016 in the principal of $82,735 with accrued interest of $107,635. As a result, the Company recognized a loss on settlement of liabilities of $198,156. As of January 31, 2023, the convertible notes were settled in full.
Note 10. Shareholders’ Equity
Reincorporation
On August 16, 2019, the Company reincorporated from Nevada to Wyoming. The reincorporation was approved by its board of directors and by the holders of a majority of the voting rights for its common stock. There was no change in share ownership as a result of the reincorporation. Authorized shares in the Wyoming corporation are unlimited shares of common stock and shares of preferred stock.
Series A Preferred Stock. In January 2020, our board of directors designated shares of our preferred stock as Series A Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series A Preferred Stock has a stated value of $ per share. The Series A Preferred Stock is entitled to receive dividends of 10% of the net profit of VIVIS Corporation. The holders of the Series A Preferred Stock have the option to convert each share into shares of common stock of the Company. As of January 31, 2023 and 2022, there are shares of Series A Preferred Stock outstanding.
Series B Preferred Stock. In July 2020, our board of directors designated shares of our preferred stock as Series B Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series B Preferred Stock has a stated value of $ per share. The Series B Preferred Stock is entitled to receive dividends of 0.4% of the net profit of VIVIS Corporation. Holders of the Series B Preferred Stock have the option to convert each share into shares of common stock. During the year ended January 31, 2021, the Company subscribed shares of Series B Preferred Stock for cash proceeds of $50,000. The shares were issued during the year ended January 31, 2022. As of January 31, 2023 and 2022, there are shares of Series B Preferred Stock outstanding.
Series C Preferred Stock. In November 2020, our board of directors designated shares of our preferred stock as Series C Preferred Stock which rank subordinate to all shares of common stock and do not have voting rights. The Series C Preferred Stock has a stated value of $ per share. The Series C Preferred Stock is entitled to receive dividends of 10% of the net profit of VIVIS Corporation. After the Series C Preferred Stock has received cumulative dividends of $500,000, the dividend rate will reduce to 1%. Holders of the Series C Preferred Stock have the option to convert each share into shares of common stock. During the year ended January 31, 2021, the Company subscribed shares of Series B Preferred Stock for cash proceeds of $200,000. The shares were issued during the year ended January 31, 2022. As of January 31, 2023 and 2022, there are shares of Series C Preferred Stock outstanding.
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Series E preferred stock issued for services
On November 13, 2015, our board of directors designated shares of our preferred stock as Series E Preferred Stock. The Series E Preferred Stock is subordinated to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock has 2 votes for each outstanding share of common stock in the company. As of January 31, 2023 and 2022, there are shares Series E Preferred Stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes. As of January 31, 2023 and 2022, there are shares of Series E Preferred Stock outstanding.
Series F preferred stock issued for services
The Series F Preferred Stock is subordinated to our common stock and superior to all shares of Preferred Stock. It does not receive dividends and does not participate in equity distributions. The Series F Preferred stock retains 2/3 of the voting rights in the company. During the year ended January 31, 2021, the Company issued shares of Series F Preferred Stock to Sydney Jim, our CEO, in exchange for services. As of January 31, 2023 and 2022, there are shares of Series F Preferred Stock outstanding.
Series G convertible preferred stock
Fiscal Year Ended January 31, 2023
During the year ended January 31, 2023, the Company issued shares of Series G convertible preferred stock and received cash proceeds of $50,000. The Series G convertible preferred stock has a stated value of $ per share, carries no voting rights and earns dividends of 8% per annum on the stated value of the stock. During the year ended January 31, 2023, the Company accrued dividends of $5,245, and the holder of the Series G convertible preferred stock converted shares and accrued dividends of $11,000 into shares of common stock.
Fiscal Year Ended January 31, 2022
During the year ended January 31, 2022, the Company issued shares of Series G convertible preferred stock and received cash proceeds of $426,250. The Series G convertible preferred stock has a stated value of $1.00 per share, carries no voting rights and earns dividends of 8% per annum on the stated value of the stock. Dividends are payable on liquidation, redemption or conversion. The Series G convertible preferred stock is redeemable at the option of the Company during the first six months it is outstanding at a premium of between 3% and 33% depending on the date of redemption. After the stock has been outstanding for six months, it is convertible into common stock of the Company at a 29% discount to the market value of the common stock. The Series G convertible preferred stock is included in mezzanine equity on the condensed consolidated balance sheet, because it is convertible at the stated value into a variable number of shares. The $87,750 difference between the stated value of the stock and the proceeds received has been recognized as a deemed dividend to the preferred shareholders. During the year ended January 31, 2022, the Company accrued dividends of $21,512. The holder of the Series G convertible preferred stock converted shares and accrued dividends of $16,330 into shares of common stock.
Preferred Stock Subscription
On February 23, 2022, the Company sold shares of preferred stock not yet designated for cash proceeds of $50,000.
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Conversions to common stock – convertible notes payable
During the year ended January 31, 2023, the holders of our Series G preferred stock elected to preferred shares and accumulated dividends into shares of common stock as detailed below:
| Date | Preferred Shares Converted |
Amount Converted |
Number of Shares Issued | |||||
| February 3, 2022 | 30,000 | $ | 31,200 | 43,943,662 | ||||
| February 10, 2022 | 29,600 | 30,784 | 48,100,000 | |||||
| February 22, 2022 | 49,000 | 50,960 | 79,625,000 | |||||
| March 18, 2022 | 40,200 | 41,808 | 97,227,907 | |||||
| March 18, 2022 | 20,000 | 20,800 | 48,372,093 | |||||
| April 25, 2022 | 30,000 | 31,200 | 62,400,000 | |||||
| April 26, 2022 | 19,000 | 19,760 | 45,953,488 | |||||
| June 8, 2022 | 20,000 | 20,800 | 57,777,778 | |||||
| June 21, 2022 | 12,200 | 12,688 | 35,244,444 | |||||
| January 20, 2023 | 25,000 | 25,999 | 92,857,143 | |||||
| Total | 275,000 | $ | 285,999 | 611,501,515 | ||||
During the year ended January 31, 2022, the holders of our Series G preferred stock elected to preferred shares and accumulated dividends into shares of common stock as detailed below:
| Date | Preferred Shares Converted |
Amount Converted |
Number of Shares Issued | |||||
| March 4, 2021 | 48,200 | $ | 49,646 | 15,190,303 | ||||
| April 19, 2021 | 37,000 | 38,480 | 10,994,286 | |||||
| July 26, 2021 | 20,000 | 20,800 | 10,947,368 | |||||
| July 27, 2021 | 25,000 | 26,000 | 15,294,118 | |||||
| July 28, 2021 | 26,100 | 27,144 | 18,096,000 | |||||
| August 17, 2021 | 35,000 | 36,400 | 24,266,667 | |||||
| August 17, 2021 | 52,900 | 55,016 | 36,677,333 | |||||
| September 20, 2021 | 38,500 | 40,040 | 26,693,333 | |||||
| September 20, 2021 | 38,200 | 39,728 | 26,485,333 | |||||
| November 18, 2021 | 30,000 | 31,200 | 19,500,000 | |||||
| November 30, 2021 | 19,000 | 19,760 | 17,963,636 | |||||
| December 22, 2021 | 50,400 | 52,416 | 67,200,000 | |||||
| Total | 420,300 | $ | 436,630 | 289,308,377 | ||||
Note 11. Subsequent Events
Subsequent to January 31, 2023, a total of shares of Series G convertible preferred stock and $1,408 of dividends into shares of common stock.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Changes in Accountants
None.
Disagreements with Accountants
There were no disagreements with accountants on accounting and financial disclosures for the years ended January 31, 2023 and 2022.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Limitations on Systems of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses identified in our evaluation, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, 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 and includes those policies and procedures that:
| • | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. |
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of January 31, 2023, 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”) 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: lack of a functioning audit committee; lack of a majority of independent members and a lack of a majority of outside directors on our board of directors; inadequate segregation of duties consistent with control objectives; lack of a formal written policy for the approval, identification and authorization of related party transactions; and management is dominated by a single individual. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of January 31, 2023.
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.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our directors will each serve until a successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
The name, address, age and position of our president, secretary/treasurer, and director and vice president is set forth below:
| Name | Age | Position | ||
| Sydney Jim 54 Sugar Creek Center Blvd., Suite 200 Sugar Land, Texas 77478 |
37 | President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer, and Sole Director |
Mr. Jim was appointed as CEO and a member of the board of directors on September 26, 2018.
Family Relationships
There are no family relationships among our directors, executive officers or persons nominated to become executive officers or directors.
Involvement in Certain Legal Proceedings
During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listen in Item 401 (f) of Regulation S-K.
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Arrangements
There are no arrangements or understandings between an executive officer, director or nominee and any other person pursuant to which he was or is to be selected as an executive officer or director.
Committees of the Board of Directors
Our board of directors has not established any committees, including an Audit Committee, a Compensation Committee, or a Nominating Committee, any committee performing a similar function. The functions of those committees are being undertaken by our sole director. Because we do not have any independent directors, our sole director believes that the establishment of committees of the Board would not provide any benefits to our company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our sole director established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our sole director has not considered or adopted any of these policies, as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future.
While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees.
Our directors are not an “audit committee financial expert” within the meaning of Item 401(e) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or Board of Directors who:
| • | understands generally accepted accounting principles and financial statements, |
| • | is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves, |
| • | has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements, |
| • | understands internal controls over financial reporting, and |
| • | understands audit committee functions |
Our Board of Directors is comprised of Mr. Jim, Mr. Daniel Chen, Mr. Gilbert Fung, Mr. Cole Munger and Mr. Amar Raval. Mr. Jim is also an officer of the Company and is involved in our day-to-day operations. We would prefer to have an audit committee financial expert on our board of directors. As with most small, early stage companies until such time our company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors’ and officers’ insurance, the Company does not have any immediate prospects to attract independent directors. When the Company is able to expand our Board of Directors to include independent directors, the Company intends to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and the Company is not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
WE DO NOT HAVE ANY INDEPENDENT DIRECTORS AND THE COMPANY HAS NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST, AND SIMILAR MATTERS.
Code of Business Conduct and Ethics
We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethic.
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ITEM 11. EXECUTIVE COMPENSATION
Mr. Jim is paid $100,000 per year for his services to the company.
The table below summarizes all compensation awards to, earned by, or paid to our named executive officer for all service rendered in all capacities to us for the fiscal years ended January 31, 2023 and 2022:
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||
| Sydney Jim | 2023 | 105,649 | — | — | — | — | — | — | 105,649 | |||||||||
| CEO and chairman | 2022 | 97,834 | — | — | — | — | — | — | 97,834 | |||||||||
| of the board |
OUTSTANDING EQUITY AWARDS AT JANUARY, 31, 2023
| Option Awards | Stock Awards | |||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | |||||||||
| Sydney Jim | — | — | — | — | — | — | — | — | — | |||||||||
Employment Agreements & Retirement Benefits
None of our executive officers is subject to employment agreements, but we may enter into such agreements with them in the future. We have no plans providing for the payment of any retirement benefits.
Director Compensation
Directors receive no compensation for serving on the Board. We have no non-employee directors.
Our Board of Directors is comprised of Sydney Jim. Mr. Jim also serves as the CEO of the Company. None of our directors has or had a compensation arrangement with the Company for director services, nor have any of them been compensated for director services since the Company’s inception.
We reimburse our directors for all reasonable ordinary and necessary business related expenses, but we did not pay director’s fees or other cash compensation for services rendered as a director in the year ended January 31, 2023 or 2022 to any of the individuals serving on our Board during that period. We have no standard arrangement pursuant to which our directors are compensated for their services in their capacity as directors. We may pay fees for services rendered as a director when and if additional directors are appointed to the Board of Directors.
Director Independence
We do not currently have any independent directors and we do not anticipate appointing additional directors in the foreseeable future. If we engage further directors and officers, however, we plan to develop a definition of independence.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
We do not currently have a stock option plan in favor of any director, officer, consultant, or employee of our company. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to our sole director and officer since our inception; accordingly, no stock options have been granted or exercised by our sole director and officer since we were founded.
The following table sets forth certain information as of June 6, 2023, with respect to the beneficial ownership of our common stock by each beneficial owner of more than 5% of the outstanding shares of common stock of the Company, each director, each executive officer named in the “Summary Compensation Table” and all executive officers and directors of the Company as a group, and sets forth the number of shares of common stock owned by each such person and group. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.
| Name of Beneficial Owner | Number of Shares Beneficially Owned |
Percentage of Outstanding Common Stock Owned | |||
| Sydney Jim, CEO (1) | 20,000,000 | 2 | % | ||
| All directors and executive officers as a group (1) person. | 20,000,000 | 2 | % | ||
__________
(1) In addition to the common stock, Mr. Jim owns 1,000,000 shares of the Company’s Series F Preferred Stock which represents 100% of the outstanding Series F Preferred Stock. The Series F Preferred Stock carries 2/3 voting control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
None.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table summarize the fees billed to the Company by its independent accountants, M&K CPAs PLLC, for the years ended January 31, 2023 and 2022:
| 2023 | 2022 | |||||
| Audit Fees | $ | 37,500 | $ | 18,600 | ||
| Audit Related Fees (1) | $ | — | $ | — | ||
| Tax Fees (2) | $ | — | $ | — | ||
| All Other Fees (3) | $ | — | $ | — | ||
| Total Fees | $ | 37,500 | $ | 18,600 | ||
Notes to the Accountants Fees Table:
| (1) | Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.” |
| (2) | Consists of fees for professional services rendered by our principal accountants for tax related services. |
| (3) | Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” above. |
As part of its responsibility for oversight of the independent registered public accountants, the Board has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board. All of the services provided by M&K CPAs PLLC described above were approved by our Board.
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The Company’s principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| 3.1 | Articles of Incorporation (1) |
| 3.2 | Bylaws (1) |
| 21 | Subsidiaries of the Registrant (2) |
| 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer (2) |
| 32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer and Chief Financial Officer (2) |
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (2) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document (2) |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (2) |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (2) |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (2) |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (2) |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (2) |
______________
| (1) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on February 24, 2011. |
| (2) | Filed or furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Neutra Corp. | |
| Date: June 9, 2023 | BY: /s/ Sydney Jim |
| Sydney Jim | |
| President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer and Sole Director |
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