Notes to Consolidated Financial Statements
As of June 30, 2017
Note 1
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Nature of Business, Presentation and Going Concern
Organization
Extract Pharmaceuticals, Inc. ("the Company" or "the Issuer") was organized under the laws of the State of Delaware on March 6, 2014 under the name Pacific Media Group Enterprises, Inc. The Company was established as part of the Chapter 11 Plan of Reorganization of Pacific Shores Development, Inc. ("PSD"). Initially the Company was engaged in the business of developing mobile apps designed (a) to allow patients/clients to see fee quotes from professionals for their professional services. and (b) to provide these professionals with prospects or leads for new patients/clients. On April 7, 2017, the Company amended its Certificate of Incorporation with the Secretary of State of Delaware, changing its name from Pacific Media Group Enterprises Inc. to Extract Pharmaceuticals Inc. The Company also left the mobile app development business and began development of products based on chewing gum delivery of medicinal cannabis oils.
Stock Split
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On April 5, 2017, the Company
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s Board of Directors declared a 54:1 forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on July 25, 2017. The effect of the stock split increased the number of shares of common stock outstanding from 2,109,000 to 113,886,000. All common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split for all periods presented prior to July 25, 2017. The total number of authorized common shares and the par value thereof was not changed by the split.
Note 2. Summary of Significant Accounting Policies
a.
Basis of Presentation
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and include all the notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of the financial statements have been included.
b.
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.
c.
Basic and Diluted Net Loss Per Shares
Net loss per share is calculated in accordance with Codification topic 260,
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Earnings Per Share
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for the periods presented. Basic net loss per share is computed using the weighted average number of common
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shares outstanding. Diluted loss per share has not been presented because there are no dilutive items. Diluted earnings loss per share is based on the assumption that all dilutive stock options, warrants, and convertible debt are converted or exercised by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Options, warrants and/or convertible debt will have a dilutive effect, during periods of net profit, only when the average market price of the common stock during the period exceeds the exercise or conversion price of the items.
d.
Cash and Cash Equivalents
For the Balance Sheets and Statements of Cash Flows, all highly liquid investments with initiated maturity of three months or less are considered to be cash equivalents. The Company had no cash equivalents as of June 30, 2017 and cash of $500 at June 30, 2016.
e.
Revenue Recognition
The Company recognizes revenue in accordance with ASC topic 605
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Revenue Recognition, and other applicable revenue recognition guidance under GAAP. Sales revenue is recognized for our retail and wholesale customers when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured
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generally when products are shipped to the customer and services are rendered, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon services rendered.
f.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable, and current economic conditions. The determination of the collectability of amounts due requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company
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s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer account, and the financial condition of the Company
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s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. At June 30, 2017 and June 30, 2016 an allowance for doubtful accounts was not considered necessary as there were no accounts receivable.
g.
Share Based Compensation
Codification topic 718
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Stock Compensation
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requires the cost resulting from all share-based transactions be recorded in the financial statements and establishes fair value as the measurement objective for share-based payment transactions with employees and acquired goods or services from non-employees. The codification also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted the codification upon its creation and will expense share based costs in the period incurred. The Company completed one share-based transaction for mobile app development and programming services on April 1, 2016 valued at $9,000.
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h.
Income Taxes
Income taxes are provided in accordance with the FASB Accounting Standards Classification. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
i.
Impact of New Accounting Standards
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.
Note 3. Going Concern
The Company's financial statements are prepared in accordance with GAAP applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2017 the Company did not have significant cash or other material assets, nor did it have operations or a source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The Company
’
s officers and directors have committed to advancing certain operating costs of the Company.
While the Company believes in will be able to generate sufficient revenues and/or raise additional funds, there can be no assurances that it will accomplish either. The Company
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s ability to continue as a going concern is dependent upon its ability to achieve profitable operations or obtain adequate financing. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 4. Stockholder
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s Equity
As of June 30, 2017, the authorized share capital of the Company consisted of 100,000,000 shares of common stock with $0.0001 par value, and 20,000,000 shares of preferred stock also with $0.0001 par value.
COMMON STOCK: The Company's first issuance of common stock, totaling 580,000 shares, took place on March 6, 2014 pursuant to the Chapter 11 Plan of Reorganization confirmed by the U.S. Bankruptcy Court in the matter of PSD. The Court ordered the distribution of shares in the Company to all general unsecured creditors of PSD, with these creditors to receive their PRO RATA share (according to amount of debt held) of a pool of 80,000 shares in the Company. The Court also ordered the distribution of shares in the Company to all administrative creditors of PSD, with these creditors to receive one share of common stock in the Company for each $0.10 of PSD's administrative debt which they held. A total of 500,000 shares were issued to PSD
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s administrative creditors.
The Court also ordered the distribution of 2,500,000 warrants in the Company to all administrative creditors of PSD, with these creditors to receive five warrants in the Company for each $0.10 of PSD's
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administrative debt which they held. These creditors received 2,500,000 warrants consisting of 500,000 "A Warrants" each convertible into one share of common stock at an exercise price of $4.00; 500,000 "B Warrants" each convertible into one share of common stock at an exercise price of $5.00; 500,000 "C Warrants" each convertible into one share of common stock at an exercise price of $6.00; 500,000 "D Warrants" each convertible into one share of common stock at an exercise price of $7.00; and 500,000 "E Warrants" each convertible into one share of common stock at an exercise price of $8.00. All warrants are exercisable at any time prior to August 30, 2019. As of the date of this report, no warrants have been exercised.
On June 1, 2014, the Company issued 1,520,000 common shares for services at par value, $0.0001 per share for $152. On April 1, 2016, the Company issued 9,000 common shares for services related to mobile app programming and development valued at $1.00 per share for $9,000.
On April 7, 2017 the Company affected a forward split of its shares and warrants such that there are 54 new shares for 1 old share and 54 new warrants for 1 old warrant.
As a result of these issuances and the forward split there were 113,866,000 common shares issued and outstanding, and a total of 135,000,000 warrants to acquire common shares issued and outstanding, at June 30, 2017.
PREFERRED STOCK: The authorized share capital of the Company includes 20,000,000 shares of preferred stock with $0.0001 par value. As of June 30, 2017 no shares of preferred stock had been issued and no shares of preferred stock were outstanding.
Note 5. Income Taxes
The Company has had no revenues and made no U.S. federal income tax provision since its inception on March 6, 2014.
Note 6. Related Party Transactions
On June 1, 2014, the Company issued 1,520,000 shares of common stock in a private placement for services valued at par value of $0.0001 per share. Of these shares, 20,000 were issued to the former CEO and director of the Company and 1,500,000 were issued to the current CEO and director of the Company. At various dates between April 1, 2016 and March 30, 2017 the Company issued various Notes totaling $23,492 to a former officer. On April 5, 2017 all of these Notes were cancelled. On June 29, 2017 a Note for $5,375 was issued to a Shareholder. This Note is non-interest bearing and has no fixed term but is callable by the lender at any time.
Note 7
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Discontinued Operations
On April 12, 2017, the Company experienced a change in control. As of April 12, 2017, the Company has changed its course of business from mobile apps to development of products based on chewing gum delivery of medicinal cannabis oils. As such, all mobile app development operations were discontinued. No expenses were incurred during the year ended June 30, 2017 in conjunction with the discontinued operations. Expenses incurred in conjunction with the discontinued operation were $9,000 for the year ended June 30, 2016
Note 8. Subsequent Events
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At various dates between July 10, 2017 and August 21, 2017 a shareholder advanced funds totaling $12,532 to the Company to cover legal fees, audit fees, and transfer agent fees. The Company issued non-interest bearing demand Notes to the shareholder for each of these loans.