ITEM
1. FINANCIAL STATEMENTS
The
accompanying unaudited consolidated interim financial statements of Armeau Brands Inc. as at July 31, 2017, have been prepared
by our management in conformity with accounting principles generally accepted in the United States of America and in accordance
with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes
necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity
in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have been included and all such adjustments are of
a normal recurring nature.
Operating
results for the three and six-month periods ended July 31, 2017 are not necessarily indicative of the results that can be
expected for the year ending January 31, 2018.
As
used in this Quarterly Report, the terms “
we
,” “
us
,” “
our
,” “
Armeau
”
and the “
Company
” mean Armeau Brands Inc., unless otherwise indicated. All dollar amounts in this Quarterly
Report are expressed in U.S. dollars, unless otherwise indicated.
ARMEAU BRANDS INC.
Condensed Financial Statements
July 31, 2017
(Expressed in U.S. dollars)
(unaudited)
ARMEAU BRANDS INC.
Condensed Balance Sheets
(Expressed in U.S. dollars)
|
|
July 31,
2017
$
|
|
|
January 31,
2017
$
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
|
738
|
|
|
|
12,634
|
|
Total assets
|
|
|
738
|
|
|
|
12,634
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
99
|
|
|
|
2,391
|
|
Due to related party (Note 3)
|
|
|
—
|
|
|
|
62,638
|
|
Total liabilities
|
|
|
99
|
|
|
|
65,029
|
|
Nature of operations and continuance of business (Note 1)
|
|
|
|
|
|
|
|
|
Subsequent event (Note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
Authorized: 200,000,000 common shares, $0.001 par value 9,450,000 shares issued and outstanding
|
|
|
9,450
|
|
|
|
9,450
|
|
Additional paid-in capital
|
|
|
125,237
|
|
|
|
44,650
|
|
Deficit
|
|
|
(134,048
|
)
|
|
|
(106,495
|
)
|
Total stockholders’ deficit
|
|
|
639
|
|
|
|
(52,395
|
)
|
Total liabilities and stockholders’ deficit
|
|
|
738
|
|
|
|
12,634
|
|
(The accompanying notes are an integral part of these condensed
financial statements)
ARMEAU
BRANDS INC.
Condensed
Statements of Operations and Comprehensive Loss
(Expressed
in U.S. dollars)
(unaudited)
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,740
|
|
|
|
3,007
|
|
|
|
2,183
|
|
|
|
4,313
|
|
Professional fees
|
|
|
12,215
|
|
|
|
4,919
|
|
|
|
25,370
|
|
|
|
16,814
|
|
Total operating expenses
|
|
|
13,955
|
|
|
|
7,926
|
|
|
|
27,553
|
|
|
|
21,127
|
|
Net loss and comprehensive loss
|
|
|
(13,955
|
)
|
|
|
(7,926
|
)
|
|
|
(27,553
|
)
|
|
|
(21,127
|
)
|
Basic and diluted loss per share
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average shares outstanding
|
|
|
9,450,000
|
|
|
|
7,500,000
|
|
|
|
9,450,000
|
|
|
|
7,500,000
|
|
(The
accompanying notes are an integral part of these condensed financial statements)
ARMEAU
BRANDS INC.
Condensed
Statements of Cash Flows
(Expressed
in U.S. dollars)
(unaudited)
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(27,553
|
)
|
|
|
(21,127
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
(2,292
|
)
|
|
|
(1,697
|
)
|
Due to related party
|
|
|
17,949
|
|
|
|
3,100
|
|
Net cash used in operating activities
|
|
|
(11,896
|
)
|
|
|
(19,724
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds from share subscriptions received
|
|
|
—
|
|
|
|
54,000
|
|
Net cash provided by financing activities
|
|
|
—
|
|
|
|
54,000
|
|
Change in cash
|
|
|
(11,896
|
)
|
|
|
34,276
|
|
Cash, beginning of period
|
|
|
12,634
|
|
|
|
15
|
|
Cash, end of period
|
|
|
738
|
|
|
|
34,291
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
—
|
|
|
|
—
|
|
Income taxes paid
|
|
|
—
|
|
|
|
—
|
|
(The
accompanying notes are an integral part of these condensed financial statements)
ARMEAU
BRANDS INC.
Notes
to the Condensed Financial Statements
July
31, 2017
(Expressed
in U.S. dollars)
(unaudited)
|
1.
|
Nature
of Operations and Continuance of Business
|
Armeau
Brands Inc., (the “
Company
”), was incorporated in the State of Nevada on March 15, 2011. The Company’s
business objectives are to produce and market its own brand of ice wine that is using grapes harvested in Armenia, with the plan
to export its ice wine to China and Russia.
These interim financial statements
have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial
support from its shareholder, the ability of the Company to obtain necessary debt or equity financing to continue operations,
and the attainment of profitable operations. As at July 31, 2017, the Company had no revenues and had accumulated losses of $134,048
since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These
interim condensed financial statements do not include any adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
2.
|
Significant
Accounting Policies
|
|
(a)
|
Basis
of Presentation
|
The
accompanying interim financial statements of the Company should be read in conjunction with the financial statements and accompanying
notes filed with the U.S. Securities and Exchange Commission for the fiscal year ended January 31, 2017. In the opinion of management,
the accompanying interim financial statements reflect all adjustments of a recurring nature considered necessary to present fairly
the Company’s financial position and the results of its operations and its cash flows for the periods shown.
The
preparation of these interim financial statements in accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially
from these estimates. The results of operations and cash flows for the period shown are not necessarily indicative of the results
to be expected for the full year.
|
(c)
|
Recent
Accounting Pronouncements
|
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and
does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact
on its financial position or results of operations.
|
3.
|
Related
Party Transactions
|
As
at July 31, 2017, the Company owed $nil (January 31, 2017 - $62,638) to the former President of the Company, which is unsecured,
non-interest bearing, and due on demand. On June 5, 2017, the former President of the Company resigned and forgave outstanding
debt of $80,587 owed by the Company which has been recorded as additional paid-in capital.
On
June 12, 2017, the Company entered into a letter of intent (“
LOI
”) to acquire all of the outstanding interests
in 271 Lake Davis Holdings LLC d/b/a San Sal Wellness (“
San Sal
”), a Delaware limited liability company. In
the transaction contemplated by the LOI, the Company will acquire all of the limited liability company membership interests of
San Sal in exchange for the issuance of 7,800,000 shares of common stock. As of the date of filing, the transaction contemplated
by the LOI has not been completed.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
FORWARD
LOOKING STATEMENTS
The
information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties,
including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are
not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expect,” “plan,”
“intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential”
or “continue,” the negative of such terms or other comparable terminology. Actual events or results may differ materially.
In evaluating these statements, you should consider various factors, including the risks described below, and, from time to time,
in other reports we file with the United States Securities and Exchange Commission (the “
SEC
”). These factors
may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update
these statements, or disclose any difference between its actual results and those reflected in these statements.
We
cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that
the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume
any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements
are found at various places throughout this Report and include information concerning possible or assumed future results of our
operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing
plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations,
business plans and future financial results, and any other statements that are not historical facts.
These
forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are
subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results
to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties
and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or
at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters
addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this Report.
Except
to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or
otherwise.
As
used in this Quarterly Report, the terms “
we
,” “
us
,” “
our
,” and the “
Company
”
mean Armeau Brands Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars,
unless otherwise indicated.
OVERVIEW
Our
company was incorporated in the State of Nevada on March 15, 2011. The Company’s business objective was to produce and market
its own brand of ice wine made from grapes harvested in Armenia. While the Company took numerous steps with respect to implementation
of its business plan, including securing sources of production and did, in fact produce 4,500 bottles of icewine, for product
sampling and customer marketing purposes, the Company was unable to raise sufficient capital to fully implement its business plan
and generate revenues.
On
June 5, 2017, Mr. Jaitegh Singh purchased a total of 7,500,000 “restricted” shares of our Company’s common stock
from our sole officer and director, Cassandra Tavukciyan, for aggregate consideration of $345,000. The share purchase was consummated
in a private transaction pursuant to a common stock purchase agreement entered into between Mr. Singh and Ms. Tavukciyan. As a
result of the transaction, Mr. Singh holds voting and investment power over approximately 79% of our issued and outstanding securities.
Concurrent
with the share purchase transaction, Cassandra Tavukciyan resigned as our Chief Executive Officer, Chief Financial Officer and
sole director, and was succeeded in those capacities by Jaitegh Singh. Mr. Singh relocated the Company’s principal offices
to Fort Lauderdale, Florida.
On
June 12, 2017, the Company entered into a letter of intent (the “
LOI
”) to acquire all the outstanding limited
liability company interests of 271 Lake Davis Holdings, LLC, a Delaware limited liability company d/b/a/ SanSal (“
SanSal
”).
Founded
in 2015, SanSal is a Colorado-based producer of natural rich-hemp products, using strict natural protocols and materials yielding
broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. On the SanSal farm in located in the high-altitude foothills
of the Rocky Mountains in southwest Colorado, SanSal grows hemp plants rooted in purity. SanSal’s proprietary genetic plants
are cultivated from tissue cultures and clones using sustainable farming practices that preserve soil integrity and conserve precious
Rocky Mountain water. SanSal uses neither any pesticides nor any non-natural fertilizers. SanSal is committed to natural cultivation
and protecting the soil. SanSal believes that it offers superior quality natural-grown whole plant broad spectrum phytocannabinoid
hemp oils and extracts in various strengths and formulations, including oils formulated to customer specifications. SanSal is
licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm.
In
the transaction contemplated by the LOI, we intend to acquire all the outstanding limited liability company interests of
SanSal in exchange for the issuance to SanSal’s members,
pro rata
, of 7,800,000 “
restricted
”
shares of our common stock, whereupon the holder the Company’s currently outstanding 7,500,000 shares of
“
restricted
” common stock will contribute those shares to the capital of the Company. The closing of the
transaction contemplated by the LOI, is subject to customary terms and conditions, including, but not limited to, completion
of due diligence, negotiation and execution of definitive transaction documents between the parties and the delivery of
audited and unaudited financial statements of SanSal as required under applicable rules of the Securities and Exchange
Commission. Following consummation of the transaction, which has not occurred as of the date of this report, the Company
intends to implement a six for one forward split of its common stock and amend its Articles of Incorporation to (a) change
the Company’s corporate name to “
SanSal Wellness Holdings, Inc.
” (with a comparable change in its trading
symbol); and (b) authorize a class of “
blank check
” preferred stock.
Results
of Operations
Three
Months Ended July 31, 2017, as compared to Three Months Ended July 31, 2016
Our
operating results for the three month periods ended July 31, 2017 and 2016 are summarized in the table below.
|
|
Three Months
Ended July 31,
2017
|
|
|
Three Months
Ended July 31 ,
2016
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,740
|
|
|
|
3,007
|
|
Professional
fees
|
|
|
12,215
|
|
|
|
4,919
|
|
Total
operating expenses
|
|
|
13,955
|
|
|
|
7,926
|
|
Net
Loss
|
|
|
(13,955
|
)
|
|
$
|
(7,926
|
)
|
Revenues
Our
revenues during the three-month periods ended July 31, 2017 and 2016 were $Nil.
Operating
Expenses
Our
operating expenses amounted to $13,955 during the three-month period ended July 31, 2017, which comprised primarily of professional
fees and general and administrative costs. For the three-month period ended July 31. 2016, our operating expenses amounted to
$7,926.
Six
Months Ended July 31, 2017, as compared to Six Months Ended July 31, 2016
Our
operating results for the six-month periods ended July 31, 2017 and 2016 are summarized in the table below.
|
|
Six Months
Ended July 31,
2017
|
|
|
Six Months
Ended July 31,
2016
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
2,183
|
|
|
|
4,313
|
|
Professional
fees
|
|
|
25,370
|
|
|
|
16,814
|
|
Total
operating expenses
|
|
|
27,553
|
|
|
|
21,127
|
|
Net
Loss
|
|
|
(27,553
|
)
|
|
$
|
(21,127
|
)
|
Revenues
Our
revenues during the six-month periods ended July 31, 2017 and 2016 were $Nil.
Operating
Expenses
Our
operating expenses amounted to $27,553 during the six-month period ended July 31, 2017, which comprised primarily of professional
fees and general and administrative costs. For the six-month period ended July 31. 2016, our operating expenses amounted to $21,127.
Liquidity
and Capital Resources
Working
Capital
|
|
|
|
|
|
|
|
|
As
at
|
|
|
As
at
|
|
|
|
July
31,
|
|
|
January
31,
|
|
|
|
2017
|
|
|
2017
|
|
Current
assets
|
|
$
|
738
|
|
|
$
|
12,634
|
|
Current
liabilities
|
|
|
99
|
|
|
|
65,029
|
|
Working
capital (deficit)
|
|
$
|
639
|
|
|
$
|
(52,395
|
)
|
As
of July 31, 2017, we had $738 in cash and total assets, $99 in total liabilities, and working capital of $639. As of January
31, 2017, we had cash and total assets of $12,634, $65,029 of total liabilities, and working capital deficit of $52,395. The
decrease in cash is due our ongoing use of cash in operations and the absence of financing activities during the most
recent period. The decrease in liabilities and working capital deficit is due to the forgiveness of debt by a related party in
connection with the June 2017 change in control transaction described in “
Overview
” above.
Cash
Flows
|
|
|
|
|
|
|
|
|
Six
Months
Ended
|
|
|
Six
Months
Ended
|
|
|
|
July
31,
|
|
|
July
31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
flows used in operating activities
|
|
$
|
(11,896
|
)
|
|
$
|
(19,724
|
)
|
Cash
flows provided by financing activities
|
|
|
—
|
|
|
|
54,000
|
|
Net
increase (decrease) in cash during the period
|
|
$
|
(11,896
|
)
|
|
$
|
34,276
|
|
Cash
Flows Used in Operating Activities
During
the six-month period ended July 31, 2017, we have used $11,896 in our operating activities compared to $19,724 during the six
months ended July 31, 2016. The decrease in cash used for operating activities from the 2016 to 2017 periods is due to the greater
expenditures from professional fees related to our SEC registration process and business operations in the 2016 period.
Cash
Flows Provided by Financing Activities
During
the six month period ended July 31, 2017, we did not raise any cash from financing activities compared to $54,000 received during
the six months ended July 31, 2016 from the sale of shares of our common stock.
Anticipated
Cash Requirements
We
will require additional funds to fund our planned business operations over the next 12 months, particularly if we complete our
acquisition of SanSal. These funds may be raised through, equity financing, debt financing, or other sources, which may result
in further dilution in the equity ownership of our shares.
We
intend to raise the balance of our cash requirements for the next 12 months from private placements, shareholder loans or possibly
a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money
through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment
from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available,
on terms that will be acceptable to us.
Even
though we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for
funding our operations as we do not have sufficient tangible assets to secure any such financing. We anticipate that any additional
funding will be in the form of equity financing from the sale of our common stock. However, we do not have any financing arranged
and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance
our operations. In the absence of such financing, we may be forced to abandon our business plan.
Going
Concern
Our
financial statements for the three and six-month periods ended July 31, 2017 have been prepared on a going concern basis and
contain an additional explanatory paragraph which identifies issues that raise substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our
continuation as a company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue
operations, and the attainment of profitable operations.. These factors raise substantial doubt regarding our ability to continue
as a going concern. These interim financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going
concern.
If
our operations and cash flow improve, management believes that we can continue to operate. However, no assurance can be given
that management’s actions will result in profitable operations or an improvement in our liquidity situation. The threat
of our ability to continue as a going concern will cease to exist only when our revenues have reached a level able to sustain
our business operations.
Off-Balance
Sheet Arrangements
We
have no significant 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 shareholders.
Critical
Accounting Policies
An
appreciation of our critical accounting policies is necessary to understand our financial results. These policies may require
management to make difficult and subjective judgments regarding uncertainties, and as a result, such estimates may significantly
impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying
variables and a range of possible outcomes. We have applied our critical accounting policies and estimation methods consistently.
Basis
of Presentation
The
accompanying interim financial statements of the Company should be read in conjunction with the financial statements and accompanying
notes filed with the U.S. Securities and Exchange Commission for the fiscal year ended January 31, 2017. In the opinion of management,
the accompanying interim financial statements reflect all adjustments of a recurring nature considered necessary to present fairly
the Company’s financial position and the results of its operations and its cash flows for the periods shown.
Use
of Estimates
The
preparation of these interim financial statements in accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially
from these estimates. The results of operations and cash flows for the period shown are not necessarily indicative of the results
to be expected for the full year.
Recent
Accounting Pronouncements
We
have implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its
financial position or results of operations.
Changes
in and Disagreements with Accountants on Accounting Procedures and Financial Disclosure
None.