Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol “BKIT” on the OTCPink operated by OTC Markets Group, Inc. Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.
The following tables set forth the range of high and low bid information for our common stock for the each of the periods indicated as reported by the OTCPink. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Fiscal Year Ending August 31, 2017
|
Quarter Ended
|
|
High $
|
|
|
Low $
|
|
November 31, 2016
|
|
|
1.55
|
|
|
|
0.7
|
|
February 28, 2017
|
|
|
1.6
|
|
|
|
0.3511
|
|
May 31, 2017
|
|
|
0.85
|
|
|
|
0.33
|
|
August 31, 2017
|
|
|
0.5225
|
|
|
|
0.0041
|
|
|
Fiscal Year Ending August 31, 2018
|
Quarter Ended
|
|
High $
|
|
|
Low $
|
|
November 31, 2017
|
|
|
0.1750
|
|
|
|
0.0500
|
|
February 28, 2018
|
|
|
0.1050
|
|
|
|
0.0400
|
|
May 31, 2018
|
|
|
0.0700
|
|
|
|
0.0300
|
|
August 31, 2018
|
|
|
0.0600
|
|
|
|
0.0100
|
|
On February 11, 2019 the last sales price per share of our common stock was $0.15.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of February 11, 2019 we had 32,517 shares of our common stock issued and outstanding, held by approximately 5 shareholders of record at our transfer agent, with other shareholders holding our shares in street name.
Dividends
We currently intend to retain future earnings for the operation of our business. We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
In the event that a dividend is declared, common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on the common stock by our board of directors from funds legally available.
There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
|
1.
|
We would not be able to pay our debts as they become due in the usual course of business; or
|
|
2.
|
Our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
|
Securities Authorized for Issuance under Equity Compensation Plans
We do not have an equity compensation plan.
Recent Sales of Unregistered Securities
On October 26, 2018, the Company underwent a reverse stock split at a ratio of 1,000 to 1 share, reducing the issued and outstanding shares from 31,597,572 to 32,517 shares issued and outstanding as of the date of the reverse split.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for the Years Ended August 31, 2018 and 2017
Revenues
We have not earned any revenues since our inception. We can provide no assurance that we will generate revenues from our sleep insomnia drug business to sustain a viable business operation.
Expenses
We incurred operating expenses in the amount of $31,251 for the year ended August 31, 2018, as compared with $98,409 for the same period ended 2017. Our operating expenses for the year ended August 31, 2018 consisted of administrative expenses of $28,329 and patent costs of $2,707 as compared with administrative expenses of $95,833 and patent costs of $2,576 or the year ended August 31, 2017.
We will likely have increased operating expenses in 2019 if we are able to obtain financing and implement our business plan.
We incurred interest expense of $13,950 for the year ended August 31, 2018, as compared with $11,914 for the year ended August 31, 2017.
We may have increased interest expenses in future years as we seek out new financing opportunities.
Net Loss
We incurred a net loss in the amount of $45,201 for the year ended August 31, 2018, as compared with a net loss of $110,323 for the same period ended 2017. Our losses for each period are attributable to operating expenses together with a lack of any revenues.
Liquidity and Capital Resources
On October 26, 2018, the Company underwent a reverse stock split at a ratio of 1,000 to 1 share, reducing the issued and outstanding shares from 31,597,572 to 32,517 shares issued and outstanding as of the date of the reverse split. All share amounts in these financial statements and footnotes reflect the reverse stock split.
As of August 31, 2018, we had total current assets of $nil Our total current liabilities as of August 31, 2018 were $236,450. As a result, we had a working capital deficit of $236,450 as of August 31, 2018.
Operating activities used $84 in cash for the year ended August 31, 2018, as compared with $76,699 in cash for the same period ended 2017. Our net loss was the main reason for our negative operating cash flow in both periods.
Financing activities provided $nil for the year ended August 31, 2018, as compared with $72,000 for the same period ended 2017. Our positive cash flow from financing activities for 2017 was a result of proceeds from notes payable. There we no positive cash flow in 2018.
On September 19, 2016, we issued a promissory note payable in the amount of $42,000. The note is due on demand and bears interest at 10% per annum.
On March 17, 2017, we issued a promissory note payable in the amount of $10,000. The note is due on demand and bears interest at 10% per annum.
On April 19, 2017, we issued a promissory note payable in the amount of $20,000. The note is due on demand and bears interest at 10% per annum.
Despite the short term loans, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate our continuation as a going concern. However, we have no revenues as of August 31, 2018. We currently have negative working capital, and have not completed our efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that we will be dependent, for the near future, on additional investment capital to fund operating expenses. We intend to position the company so that we may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our critical accounting policies are set forth in Note 2 to the financial statements.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Off Balance Sheet Arrangements
As of August 31, 2018, there were no off balance sheet arrangements.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
|
|
19720 Jetton Road, 3rd Floor
Cornelius, NC 28031
Tel: 704-897-8336
Fax: 704-919-5089
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Blake Insomnia Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Blake Insomnia Therapeutics, Inc. (the Company) as of August 31, 2018 and 2017, and the related statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended August 31, 2018, 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 August 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended August 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight These 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 audit to obtain reasonable assurance about whether the 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, an audit 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 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The Company's Ability to Continue as a 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 has insufficient working capital, a stockholders’ deficit and recurring net losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ L&L CPAS, PA
L&L CPAS, PA
We have served as the Company’s auditor since March 2014.
Cornelius, NC
February 19, 2019
www.llcpas.net
|
|
|
|
|
|
|
Blake Insomnia Therapeutics, Inc.
|
Balance Sheets
|
(Audtited)
|
|
|
|
|
|
|
|
|
|
As of
August 31,
|
|
|
As of
August 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
ASSETS
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
84
|
|
Total Current Assets
|
|
|
-
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
-
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
139,500
|
|
|
$
|
139,500
|
|
Accounts payable
|
|
|
31,318
|
|
|
|
21,406
|
|
Accounts payable-related pary
|
|
|
21,040
|
|
|
|
-
|
|
Due to related party
|
|
|
11,637
|
|
|
|
11,637
|
|
Accrued interest
|
|
|
32,955
|
|
|
|
19,005
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
236,450
|
|
|
|
191,548
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
236,450
|
|
|
|
191,548
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock ($0.0001 par value; 10,000,000 authorized; no shares issued and outstanding)
|
|
|
-
|
|
|
|
-
|
|
Common stock ($0.0001 par value, 100,000,000 shares authorized; 32,517 shares issued and outstanding)
|
|
|
3
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
220,932
|
|
|
|
220,932
|
|
Deficit accumulated during the development stage
|
|
|
(457,385
|
)
|
|
|
(412,399
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity (Deficit)
|
|
|
(236,450
|
)
|
|
|
(191,464
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
-
|
|
|
$
|
84
|
|
The accompanying notes are an integral part of these audited financial statements.
Blake Insomnia Therapeutics, Inc.
|
Statements of Operations
|
(Audited)
|
|
|
|
|
For the year
|
|
|
For the year
|
|
|
|
ended
|
|
|
ended
|
|
|
|
August 31,
2018
|
|
|
August 31,
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs
|
|
|
|
|
|
|
|
|
Administrative Expenses
|
|
|
28,329
|
|
|
|
95,833
|
|
Patent Costs
|
|
|
2,707
|
|
|
|
2,576
|
|
|
|
|
|
|
|
|
|
|
Total Operating Costs
|
|
|
31,036
|
|
|
|
98,409
|
|
|
|
|
|
|
|
|
|
|
Other (Expense)
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
(13,950
|
)
|
|
|
(11,914
|
)
|
|
|
|
|
|
|
|
|
|
Total Other (Expense)
|
|
|
(13,950
|
)
|
|
|
(11,914
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(44,986
|
)
|
|
|
(110,323
|
)
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(1.38
|
)
|
|
$
|
(3.39
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
32,517
|
|
|
|
32,517
|
|
The accompanying notes are an integral part of these audited financial statements.
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Development
|
|
|
|
|
|
|
Stock
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, August 31, 2016
|
|
|
32,517
|
|
|
$
|
3
|
|
|
$
|
220,932
|
|
|
$
|
(302,076
|
)
|
|
$
|
(81,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for year ended August 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110,323
|
)
|
|
|
(110,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, August 31, 2017
|
|
|
32,517
|
|
|
$
|
3
|
|
|
$
|
220,932
|
|
|
$
|
(412,399
|
)
|
|
$
|
(191,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for year ended August 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(44,986
|
)
|
|
|
(44,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, August 31, 2018
|
|
|
32,517
|
|
|
$
|
3
|
|
|
$
|
220,932
|
|
|
$
|
(457,385
|
)
|
|
$
|
(236,450
|
)
|
The accompanying notes are an integral part of these audited financial statements.
Blake Insomnia Therapeutics, Inc.
|
Statements of Cash Flows
|
(Audited)
|
|
|
|
|
|
|
|
|
|
For the year
|
|
|
For the year
|
|
|
|
ended
|
|
|
ended
|
|
|
|
August 31,
2018
|
|
|
August 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(44,986
|
)
|
|
$
|
(110,323
|
)
|
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable
|
|
|
9,912
|
|
|
|
10,609
|
|
Increase (decrease) in accounts payable related party
|
|
|
21,040
|
|
|
|
11,101
|
|
Increase (decrease) in accrued interest
|
|
|
13,950
|
|
|
|
11,914
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) operating activities
|
|
|
(84
|
)
|
|
|
(76,699
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes paybable
|
|
|
-
|
|
|
|
72,000
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
72,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(84
|
)
|
|
|
(4,699
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
84
|
|
|
|
4,783
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
-
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash Paid For:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these audited financial statements.
Blake Insomnia Therapeutics, Inc. (“The Company”) was incorporated in the State of Nevada on August 11, 2012 as Book It Local, Inc. to develop its online booking system to help consumers find and hire live entertainment for weddings, corporate events, private parties, night clubs, grand openings, and other events. On September 1, 2015, the Company changed its name to Blake Insomnia Therapeutics, Inc. The Company is in the development stage with no revenues and a limited operating history.
2. GOING CONCERN CONSIDERATION
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These financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a cumulative net loss of $457,385 since its inception and requires capital for its contemplated operation and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern.
Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses. The financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s year-end is August 31.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes 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 period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
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(i)
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persuasive evidence of an arrangement exists,
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(ii)
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the services have been rendered and all required milestones achieved,
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(iii)
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the sales price is fixed or determinable, and
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(iv)
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collectability is reasonably assured.
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On January 1, 2017, the Company adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers” and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting standards under Topic 605. The adoption has had an immaterial impact to the Company’s comparative net income and as such comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to the Company’s net income on an ongoing basis.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with ASC 830, “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Development Stage Company
The Company complies with Financial Accounting Standards Codification (“ASC”) 915 and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as development stage enterprise.
Fair Value for Financial Assets and Financial Liabilities
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1
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Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
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Level 3
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Pricing inputs that are generally observable inputs and not corroborated by market data.
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The carrying amounts of the Company’s financial assets and liabilities, such as cash, approximate their fair values because of the short maturity of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at August 31, 2018, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the period ended August 31, 2018.
Income Taxes
The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At August 31, 2018 a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”),
Revenue from Contracts with Customers
, which supersedes the revenue recognition requirements in ASC Topic 605,
Revenue Recognition
, and most industry-specific guidance. The new standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB approved a one-year deferral of the effective date of this standard to annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018 using the modified retrospective method. The adoption of this guidance did not have a significant impact on the Company’s financial statements.
In July 2015, the FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
(“ASU 2015- 11”). ASU 2015-11, which simplifies the measurement of inventories valued under most methods, including the Company’s inventories valued under FIFO — the first-in, first-out cost method. Inventories valued under LIFO — the last-in, first-out method — are excluded. Under this new guidance, inventories valued under these methods would be valued at the lower of cost and net realizable value, with net realizable value defined as the estimated selling price less reasonable costs to sell the inventory. This guidance is effective for annual reporting beginning after December 15, 2016, including interim periods within the year of adoption, with early application permitted. The Company adopted this standard on January 1, 2017. The adoption of this guidance did not have a significant impact on the Company’s financial statements.
In January 2016, the FASB issued ASU No. 2016-01, "
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
," which addresses the recognition, measurement, presentation and disclosure of financial assets and liabilities. This ASU primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, this ASU clarifies the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standard became effective on January 1, 2018. This standard did not have a material impact on our consolidated financial statements and related disclosures for the year ended |August 31, 2018.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, or ASU 2016-02. ASU 2016-02 requires that lessees recognize in the statement of financial position for all leases (with the exception of short-term leases) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset representing the lessee’s right to use the underlying asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The adoption of this guidance is not expected to have a significant impact on our financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”). ASU 2016-09 will simplify the income tax consequences, accounting for forfeitures and classification on the statements of consolidated cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. As a result of adopting ASU No. 2016-09 during the year ended The adoption of this standard had no significant impact on our financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
, or ASU 2016-15. The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB Accounting Standards Codification 230,
Statement of Cash Flows
. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. We have evaluated the impact of ASU No. 2016-15 and noted it had no impact on our financial statements for the year ended August 31, 2018.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issue Task Force)
, or ASU 2016-18. This new standard addresses the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within the year of adoption, with early adoption permitted. Our financial statements reflect this standard for the year ended August 31, 2018.
In July 2017, the FASB issued ASU 2017-11,
“Earnings Per Share (ASC 260) Distinguishing Liabilities from Equity (ASC 480) Derivatives and Hedging (ASC 815),”
which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of ASU 2017-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has concluded that the retroactive provisions of ASU 2017-11 should have no impact on the accounting for the Company.
4. MATERIAL AGREEMENTS
On February 6, 2017, the Company and Sajo Consulting LLC announced entry into a Letter of Intent to provide joint development and commercialization of Zleepax™, in combination with formulations to produce a series of oral drug products to aid in the treatment of insomnia. This venture looks to develop a product to treat transient insomnia through the mechanism of Blake’s proprietary formula.
On February 1, 2018, the Company entered into a consulting agreement with a former director. In consideration, the company agreed to compensate him with a 5% royalty for a period of 5 years for any revenue generated by us from sales of Zleepax and any new product or services derived from Zleepax.
5. NOTES PAYABLE
On August 31, 2014 the Company issued a promissory note payable in the amount of $5,000. The note is due on August 31, 2015 and bears interest at 10% per annum.
On November 20, 2014 the Company issued a promissory note payable in the amount of $10,000. The note is due on demand and bears interest at 10% per annum
On January 18, 2015 the Company issued a promissory note payable in the amount of $10,000. The note is due on demand and bears interest at 10% per annum.
On June 24, 2015 the Company issued a promissory note payable in the amount of $12,500. The note is due on demand and bears interest at 10% per annum.
On December 10, 2015 the Company issued a promissory note payable in the amount of $15,000. The note is due on demand and bears interest at 10% per annum.
On July 29, 2016 the Company issued a promissory note payable in the amount of $15,000. The note is due on demand and bears interest at 10% per annum.
On September 19, 2016 the Company issued a promissory note payable in the amount of $42,000. The note is due on demand and bears interest at 10% per annum.
On March 17, 2017 the Company issued a promissory note payable in the amount of $10,000. The note is due on demand and bears interest at 10% per annum.
On April 19, 2017 the Company issued a promissory note payable in the amount of $20,000. The note is due on demand and bears interest at 10% per annum.
The interest expense for the periods ended August 31, 2018 and August 31, 2017 is $13,950 and $11,914, respectively.
6. RELATED PARTY TRANSACTIONS
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The President of the Company provides management and office premises to the Company for no compensation. The effects of this is immaterial to the financial statements taken as a whole.
A shareholder of the company paid expenses on behalf of the company in the amount of $3,058 during the year ended August 31, 2016. During the year ended August 31, 2016, $2,522 was repaid. During the year ended August 31, 2017, a shareholder of the company paid expenses of $31,101 of expenses on behalf of the company. In June 2017, the company repaid $20,000 of expenses to the shareholder. As at August 31, 2018, there is a balance owing to the shareholder of $11,637. This balance is non-interest bearing and has no specified terms of repayment.
In August, 2012, the Company authorized the issue of 100,000,000 common shares of the Company at par value of $.0001 and authorized the issue of 10,000,000 preferred shares at par value of $.0001.
On October 26, 2018, 2018 the Company undertook a 1,000 to 1 reverse stock split of the common shares. The stock split has been recorded in these financial statements retroactively.
At August 31, 2018, there are total of 32,517 common shares of the Company issued and outstanding.
8. INCOME TAXES
As of August 31, 2018, the Company had net operating loss carry forwards of approximately $457,000 that may be available to reduce future years' taxable income through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The difference between the Company's tax rate and the statutory rate is due to significant non-deductible expenses.
The provision for Federal income tax consists of the following:
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August 31
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August 31
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2018
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2017
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Federal income tax benefit attributable to:
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Current operations
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$
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15,370
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$
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37,510
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Less: valuation allowance
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(15,370
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)
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(37,510
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)
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Net provision of income taxes
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$
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-
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$
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-
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The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
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August 31,
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August 31,
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2018
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2017
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Deferred tax asset attributable to:
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Net operating loss carryforward
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$
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155,380
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$
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140,080
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Less: valuation allowance
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(155,380
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)
|
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(140,080
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)
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Net deferred tax asset
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$
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-
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$
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-
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Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
9. SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to August 31, 2018 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose, except as noted below.