INVENTORY
Inventory is stated at the lower of cost or market, determined by the first-in, first-out method. Inventory consists solely of finished goods.
PROPERTY, EQUIPMENT AND LONG-LIVED ASSETS
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the assets, five years, utilizing the straight method. Maintenance and repairs are expensed as incurred. Expenditures which significantly increase value or extend useful asset lives are capitalized. When property or equipment is sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation period or the undepreciated balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment existed at February 28, 2017.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
INTANGIBLE ASSET
The Company's intangible assets consist of goodwill and is accounted for as an indefinite lived intangible asset in accordance with ASC 350 "Goodwill and Other Intangible Assets" ("ASC 350"). Intangible assets
are reviewed annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no impairment charges taken during the years ended February 28, 2017 and February 29, 2016.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC 605, "
Revenue Recognition
". Revenue from the sale of cosmetics and other retail products is recognized when all of the following criteria have been met:
|
i)
|
Persuasive evidence for an agreement exists;
|
|
ii)
|
The product has been provided;
|
|
iii)
|
The fee is fixed or determinable; and,
|
|
iv)
|
Collection is reasonably assured.
|
We recognize a sale when the product has been shipped at which time risk of loss has passed to the customer and the above criteria have been met.
Revenue from the provision of cosmetic procedures is recognized at the point of sale. Substantially all sales are paid for at the time of service based on established price lists and when all the following criteria have been met:
|
i)
|
Persuasive evidence for an agreement exists;
|
|
ii)
|
Service has been provided;
|
|
iii)
|
The fee is fixed or determinable; and,
|
|
iv)
|
Collection is reasonably assured.
|
SHARE-BASED COMPENSATION
ASC 718,
Compensation – Stock Compensation
, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized in the period of grant.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
Equity – Based Payments to Non-
Employees.
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the years ending February 28, 2017 and February 29, 2016 were $0 and $0, respectively.
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. Deferred tax assets or liabilities were off-set by a 100% valuation allowance, therefore there has been no recognized benefit as of February 28, 2017.
DERIVATIVE LIABILITY
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At February 28, 2017 and February 29, 2016, the Company did not have any derivative instruments that were designated as hedges.
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. There were no commitments or contingencies as of February 28, 2017.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs incurred for the period ending February 28, 2017 and February 29, 2016 were $252,321 and $60, respectively.
EARNINGS PER SHARE
Net income (loss) per share is calculated in accordance with ASC 260, "
Earnings Per Share
." The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at February 28, 2017 and February 29, 2016. Due to net operating loss, there is no presentation of dilutive earnings per share, as it would be anti-dilutive. As of February 28, 2017, the Company had no dilutive potential common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This guidance changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital ("APIC"), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. All of the guidance will be effective for the Company in the fiscal year beginning October 1, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning October 1, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory.
The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation, rather than the lower of cost or market in the previous guidance. This amendment applies to inventory that is measured using first-in, first-out (FIFO). This amendment is effective for public entities for fiscal years beginning after December 15, 2016, including interim periods within those years. A reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In July 2015, the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning October 1, 2018, with an option to adopt the standard for the fiscal year beginning October 1, 2017. The Company is currently evaluating this standard and has not yet selected a transition method or the effective date on which it plans to adopt the standard, nor has it determined the effect of the standard on its financial statements and related disclosures.
NOTE 3 - INVENTORY
Inventory consists of finished goods. Inventory is carried at cost on a first-in-first-out basis (FIFO) and held at public warehouse, which performs shipping and distribution function. All products held in inventory are of our popular brands ordered and anticipated minimal order quantities are held in inventory necessary to operate without backlog or delays in order fulfillment. Products have not significantly changed from year to year and there is no concentration of suppliers.
NOTE 4 - PROPERTY AND EQUIPMENT
Property consists of equipment purchased for the production of revenues. As of February 28, 2017 and February 29, 2016:
|
Description
|
|
2017
|
|
|
2016
|
|
|
Property and equipment
|
|
$
|
30,569
|
|
|
$
|
10,459
|
|
|
Less accumulated depreciation
|
|
|
11,692
|
|
|
|
7,002
|
|
|
Property and equipment, net
|
|
$
|
18,877
|
|
|
$
|
3,457
|
|
Depreciation for the years ending February 28, 2017 and February 29, 2016 was $4,690 and $655, respectively.
NOTE 5 – FAIR VALUE DISCLOSURES
The following is an analysis of liabilities presented at fair value by level as of February 28, 2017. No assets or equity instruments were presented at fair value as of February 28, 2017. No assets, liabilities or equity instruments were presented at fair value as of February 2, 2016.
|
|
|
Fair Value Measurements at December 31,2016
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs (Level 3)
|
|
|
Total Carrying Value
|
|
|
Derivative liabilities – debt
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
303,308
|
|
|
|
303,308
|
|
|
Less: current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
187,006
|
|
|
|
187,006
|
|
|
Long-term portion
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
116,302
|
|
|
|
116,302
|
|
NOTE 6 - RELATED PARTY ADVANCES
The Company's management has advanced funds and has made payments on behalf of the Company for the purpose of meeting obligations. These accumulated advances have been formalized by demand notes payable and accrue interest at 2.6%. The Company is indebted to its two majority shareholders for an aggregate amount of $XXX and $612,737, as of February 28, 2017 and February 29, 2016, respectively.
NOTE 7 - LONG-TERM DEBT
On May 12, 2014, in accordance with the acquisition agreement, the Company issued promissory notes payable, amounting $3,000,000 to its two majority shareholders. The terms of the notes (2, each at $1,500,000) are at a stated interest rate of 5% and mature on May 12, 2016. The company recorded this as an equity transaction as the notes did not represent any prior or future compensation.
In accordance with the acquisition agreement, the previous majority shareholder of Pronto Corp. received a promissory note payable of $15,600 for costs incurred prior to the acquisition. The note has a stated interest rate of 5% and matured on July 12, 2014. The debt was paid in February 2016.
NOTE 8 - INCOME TAXES
Income taxes are provided based upon the liability method. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by accounting standards to allow recognition of such an asset.
Deferred tax assets/liabilities were as follows as of February 28, 2017 and February 29, 2016:
|
Description
|
|
2017
|
|
|
2016
|
|
|
Net operating loss carry forward
|
|
$
|
347,763
|
|
|
$
|
180,632
|
|
|
Valuation allowance
|
|
|
(347,763
|
)
|
|
|
(180,632
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
The valuation allowance was increased by $167,131 during fiscal year ended February 28, 2017.
At February 28, 2017, the Company expected no net deferred tax assets to be recognized, resulting from net operating loss carry forwards. Deferred tax assets were offset by a corresponding allowance of 100%.
At February 28, 2017, the Company had a net operating loss ("NOL") carry forward in the amount of approximately $695,526, available to offset future taxable income through 2037. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
|
|
|
|
|
|
Year of Expiration
February 28,
|
|
Amount
|
|
|
2024
|
|
$
|
45,644
|
|
|
2025
|
|
|
313,690
|
|
|
2026
|
|
|
156,758
|
|
|
2027
|
|
|
179,434
|
|
|
Total
|
|
$
|
695,526
|
|
No income tax expense has been realized as a result of operations and no income tax penalties and interest have been accrued related to uncertain tax positions.
NOTE 9 – CONVERTIBLE DEBT
Convertible notes payable as of February 28, 2017 and February 29, 2016, consists of the following:
|
Description
|
|
2017
|
|
|
2016
|
|
|
Convertible note payable dated January 11, 2017 maturing January 11, 2020 bearing interest at -% with a default rate of 18%, convertible into common stock at $1.35 per share the first 180 days and at the lesser of $1.35 per share or 65% of the second lowest closing price for the prior 20 trading days
|
|
|
85,000
|
|
|
|
|
|
Convertible note payable dated February 1, 2017 February 11, 2018 bearing interest at -% with a default rate of 24%, convertible into common stock at $
the lower of closing price prior closing date and 65% of the average lowest two sales price during 20days prior closing date or the closing bid price whichever is lower
|
|
|
90,000
|
|
|
|
|
|
Convertible note payable dated January 11, 2017 maturing January 11, 2020 bearing interest at -% with a default rate of 24%, convertible at the
lesser of 65% multiple average of two lowest trading price prior the note issued date or variable conversion price 65% multiple the average two lowest trading price during 20 days prior to the conversion date
|
|
|
90,000
|
|
|
|
|
|
Principal balance
|
|
$
|
265,000
|
|
|
$
|
-
|
|
|
Less: debt discount
|
|
|
(265,000
|
)
|
|
|
-
|
|
|
Less: conversions
|
|
|
-
|
|
|
|
-
|
|
|
Add: amortization of debt discount
|
|
|
18,955
|
|
|
|
-
|
|
|
Balance of convertible debt, net
|
|
|
18,955
|
|
|
|
-
|
|
|
Less: current portion
|
|
|
15,229
|
|
|
|
-
|
|
|
Long-term convertible debt, net
|
|
$
|
3,726
|
|
|
$
|
-
|
|
NOTE 10 – DERIVATIVE LIABILITIES
The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.
|
Description
|
|
Amount
|
|
|
Derivative liabilities – February 29, 2016
|
|
$
|
-
|
|
|
Add fair value at the commitment date for convertible notes issued during the current year
|
|
|
628,266
|
|
|
Less derivatives due to conversion
|
|
|
-
|
|
|
Fair value mark to market adjustment for derivatives
|
|
|
(324,958
|
)
|
|
|
|
|
|
|
|
Derivative liabilities – February 28, 2017
|
|
$
|
303,308
|
|
|
Less current portion
|
|
|
187,006
|
|
|
Long-term portion
|
|
|
116,302
|
|
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded derivative interest expenses for the year ended December 31, 2016 of $412,926.
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions during the current quarter:
|
Assumption
|
|
Commitment
Date
|
|
|
Re-measurement
Date
|
|
|
|
|
|
|
|
|
|
|
Expected dividends
|
|
-
|
%
|
|
|
-
|
%
|
|
Expected volatility
|
|
|
175-208
|
%
|
|
173-195
|
%
|
|
Expected term in years
|
|
|
0.75-3
|
Yrs.
|
|
0.68-2.87
|
Yrs.
|
|
Risk free interest rate:
|
|
|
0.83-1.47
|
%
|
|
0.69-1.49
|
%
|
NOTE 11 – DEBT DISCOUNT, ORIGINAL ISSUE DISCOUNTS AND DEBT ISSUANCE COSTS
During the quarter end March 31, 2017, the Company recorded debt discounts totaling $535,586. The debt discount amount consists of debt discount due to beneficial conversion feature, warrant, original issue cost, and debt issue cost. The Company amortized $18,955 of debt issue costs in the year ended February 28, 2017. The following is a summary of the Company's debt issue costs for the year ended February 28, 217 and February 29, 2016:
|
Description
|
|
2017
|
|
|
2016
|
|
|
Debt discount beginning of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Additional debt discount
|
|
|
265,000
|
|
|
|
-
|
|
|
Amortization of debt discount
|
|
|
(18,955
|
)
|
|
|
-
|
|
|
Debt discount, net
|
|
$
|
246,045
|
|
|
$
|
-
|
|
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.
Related Party
The Company has limited needs for office administration and does not own or lease property or lease office space. The office space used by the Company was arranged by the officers and directors of the Company to use at no charge.
Facilities
We operate our cosmetics distribution division. from business offices provided by our executive officers and we contract our warehouse and fulfilment facilities.
The LABB operates from a leased retail facility in Miami Beach, FL which lease was for a one year term form April 15, 2016 to April 14, 2017 after which it is a month to month lease.
The Company does not have employment contracts with its key employees, including the controlling shareholders who are officers of the Company.
Legal and other matters
In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company's financial position or results of operations.
NOTE 13 - EQUITY
The Company is authorized to issue 1,500,000,000 shares of $0.001 par value common stock.
In June 2015, the Company received stock subscriptions for 250,025 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,005.
In January 2016, the Company received stock subscriptions for 250,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,000.
On February 26, 2016 Joey New York, Inc. ("JOEY" or the "Company") entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Joey Merger Subsidiary, Inc., a Nevada Corporation ("Merger Sub"), with Merger Sub being the surviving entity but with a name change to Joey New York, Inc.. As part of that merger, each 200 shares of our common stock were exchanged for one share in the surviving company. The officers and directors of JOEY remain the officers and directors subsequent to the merger. The reverse exchange ratio of 1 share for 200 shares became effective on August 1, 2016 on the stock market upon review by and approval by the Financial Industry Regulatory Authority ("FINRA").
During the three months ended August 31, 2016, the company issued 25,500,000 shares of common stock, 25,000,000 of which were issued in order to acquire a 100% interest in The LABB, LLC. (see note 9).
In connection with the acquisition mentioned above, the Company also issued 42,000,000 warrants, each valued at $.009. These warrants were valued using a Black-Scholes model, with the following inputs:
|
Description
|
|
Input
|
|
Stock price
|
|
$
|
0.01
|
|
|
|
Exercise price
|
|
$
|
0.01
|
|
|
|
Term
|
|
|
10
|
|
Yrs.
|
|
Discount rate
|
|
|
2.28
|
|
%
|
|
Volatility
|
|
|
100
|
|
%
|
The stock price of $0.01 was used because with no active market for the Company's stock, the best evidence for its value on the grant date was the exercise price of the warrants.
On October 4, 2016, the Company issued 100,000 restricted shares to an investor for $30,000 cash.
On October 14, 2016, the Company issued 33,333 restricted shares to an investor for $10,000 cash.
On October 17, 2016, the Company issued 50,000 restricted shares to an investor for $15,000 cash.
There are no options outstanding.
NOTE 14 - ACQUISITION OF THE REFLEX PRODUCTIONS, INC.
On August 11, 2016, the Company entered into a purchase agreement for the acquisition of 100% of the common stock of Reflex Productions, Inc. (Reflex) Reflex provides clinical cosmetic procedures including Botox injections and other cosmetic procedures.
In exchange for the common stock of Reflex the Company issued 25,000,000 restricted shares of its common stock and 42,000,000 warrants to the owners of Reflex. The entirety of the value of the equity instruments issued was recorded as goodwill. Net assets acquired in the acquisition consisted of the following:
|
Description
|
|
Amount
|
|
|
Cash
|
|
$
|
8,995
|
|
|
Other current assets
|
|
|
4,460
|
|
|
Property and equipment, net
|
|
|
15,893
|
|
|
Accounts payable and accrued expenses
|
|
|
(104,936
|
)
|
|
Net assets acquired (liabilities assumed)
|
|
|
(75,588
|
)
|
|
Value of shares issued
|
|
|
-
|
|
|
Goodwill recorded on acquisition
|
|
$
|
(75,588
|
)
|
The Company has used an estimate of the shares and warrants issued for the ownership interest in Reflex as consideration for the acquisition. We do not feel as though there are significant enough operations to determine a fair value of the entity and management's assumptions as to projected revenue and costs have not been born out in initial operations.
Additionally, the shares and warrants issued have been discounted by approximately 100% of the standard valuation methodology as the Company recently experienced a 200 to 1 stock split and the market had not had sufficient time to adjust to the post-split value of the additional shares issued.
Reflex accounts are consolidated in these financial statements, in accordance with generally accepted accounting principles. Operations of Reflex have been consolidated from the date of acquisition or August 11, 2016.
Below is a pro forma statement of operations, showing the results of the six months ended August 31, 2016 as if the Reflex acquisition had taken place at the beginning of the period. There are no significant adjustments reflected in the pro forma information below, other than the inclusion of Reflex's results from February 28, 2016 to August 11, 2016, and routine consolidation adjustments as required by generally accepted accounting principles.
|
|
|
Six months ended August 31, 2016 (historical)
|
|
|
Pro forma adjustments
|
|
|
Six months ended August 31, 2016 (pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
45,713
|
|
|
$
|
132,343
|
|
|
$
|
178,056
|
|
|
Cost of sales
|
|
|
1,973
|
|
|
|
68,592
|
|
|
|
70,565
|
|
|
Gross margin
|
|
|
43,740
|
|
|
|
63,751
|
|
|
|
107,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
223,059
|
|
|
|
168,612
|
|
|
|
391,671
|
|
|
Loss from operations
|
|
|
(179,320
|
)
|
|
|
(104,860
|
)
|
|
|
(284,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
90,319
|
|
|
|
-
|
|
|
|
90,319
|
|
|
Net loss
|
|
$
|
(269,639
|
)
|
|
$
|
(104,680
|
)
|
|
$
|
(374,499
|
)
|
Since Reflex only began significant operations in the quarter ended August 31, 2016, it is difficult to predict future financial results from the historical financial statements presented above. As a result, we have also prepared a projection of the statement of operations for the year ended February 28, 2017, based on certain assumptions. This financial projection is inherently susceptible to error, and actual results often differ from predicted ones. In preparing this projection, we extrapolated the results of the quarter ended August 31, 2016 and applied them to the subsequent two quarters. In addition, we made adjustments to cost of goods sold and operating expenses, increasing cost of goods sold by $40,000 to account for the historical results being skewed by large rebates, and decreasing operating expenses by $75,000 to account for a projected decrease over time in marketing and other start-up costs. The following should be taken as an illustration of possible results given the above assumptions, and not as a guarantee of actual results:
|
|
|
Year ended February 28, 2017 (projected)
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
438,689
|
|
|
Cost of sales
|
|
|
197,083
|
|
|
Gross margin
|
|
|
241,606
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
540,312
|
|
|
Loss from operations
|
|
|
(298,707
|
)
|
|
|
|
|
|
|
|
Other (expense)
|
|
|
|
|
|
Interest expense
|
|
|
182,731
|
|
|
Net loss
|
|
$
|
(481,438
|
)
|
NOTE 15 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date of filing the consolidated financial statements with the Securities and Exchange Commission, the date the consolidated financial statements
were available to be issued. Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the consolidated financial statements thereby requiring adjustment or disclosure, other than those notes below:.
We executed a promissory note payable on April 24, 2017 in the principal amount of $75,000, net of original issue discount in the amount of $7,500 receiving net proceeds of $67,500. This note matures on January 24, 2018, and bears interest at 12%. The notes bears substantial prepayment premiums of from 135% to 145% of principal and unpaid interest for any prepayment form 90 to 180 days after issuance and a prepayment penalty of 150% anytime after 180 days from issuance up to the maturity date. This note in convertible 180 days after issuance into common shares at a conversion price defined as 135% of the market price of the shares defined as the average of the two (2) trading prices during the previous twenty (20) trading days to the date of a Conversion Notice.
We executed a promissory note payable on May 3, 2017 in the principal amount of $600,000, net of original issue discount in the amount of $60,000 receiving net proceeds of $540,000. This note matures on February 11, 2018, is non-interest bearing and carries a default interest rate of 24%. The note is convertible into common shares at the lower of $1 per share or 50% of the market price of the shares (lowest trading price for 30 days preceding the conversion date.
Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure
On August 3, 2015, Joey New York Inc.. (the "Registrant" or the 'Company") was notified by RBSM, LLP ("RBSM") that the firm resigned as the Registrant's independent registered public accounting firm RBSM was engaged by the Company on February 26, 2015. RBSM did not issue an audit report on the Company's financial statements.
During the period February 26, 2015 through August 3, 2015, the Company has not had any disagreements with RBSM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to RBSM's satisfaction, would have caused them to make reference thereto in their reports on the Company's financial statements for such periods.
During the period February 26, 2015 and through August 3, 2015, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
On August 3, 2015 (the "Engagement Date"), the Company engaged Thayer O'Neal Company PLLC ("Thayer O'Neal ") as its independent registered public accounting firm for the Company's fiscal year ending February 28, 2015. The decision to engage Thayer O'Neal as the Company's independent registered public accounting firm has been approved by the Company's Board of Directors.
During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with Thayer O'Neal regarding either:
|
1.
|
the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report was provided to the Company nor oral advice was provided that Thayer O'Neal concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
|
|
2.
|
any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).
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On February 23, 2015 the Company was notified by L.L. Bradford & Company, LLC that the firm resigned as the Company's independent registered public accounting firm. In connection with the resignation, L.L. Bradford & Company, LLC informed the Company that it will no longer service SEC reporting companies because partners in its SEC practice moved to RBSM, LLP.
On February 26, 2015, the Company, through and with the approval of its Board of Directors, engaged RBSM LLP as its independent registered public accounting firm.
Prior to engaging RBSM LLP, the Company did not consult with RBSM LLP regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by RBSM LLP on the Company's financial statements, and RBSM LLP did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
The report of L.L. Bradford regarding the Company's financial statements for the fiscal year ended February 28, 2014 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended February 28, 2014 and during the period from February 28, 2014 to February 23, 2015, the date of the resignation, there were no disagreements with L.L. Bradford on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of L.L. Bradford would have caused it to make reference to such disagreement in its reports.
The Company provided L.L. Bradford with a copy of this report on Form 8-K prior to its filing with the Securities and Exchange Commission and requested that L.L. Bradford furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether is agrees with above statements and, if it does not agree, the respects in which it does not agree.
Prior to engaging Thayer O'Neal, the Company did not consult with Thayer O'Neal regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Thayer O'Neal on the Company's financial statements, and Thayer O'Neal did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
The report of L.L. Bradford regarding the Company's financial statements for the fiscal year ended February 28, 2014 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended February 29, 2017 and during the period from February 28, 2017 to May 29, 2017, the date of dismissal, there were no disagreements with Thayer O'Neal on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Thayer O'Neal would have caused it to make reference to such disagreement in its reports.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Our management, consisting of a sole officer and director at that time, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our sole officer and director at that time concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, or person/s performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management's Annual Report on Internal Control over Financial Reporting
. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of the Company's internal control over financial reporting as of February 29, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, consisting of a sole officer and director at that time, concluded that, as of February 28, 2016, our internal control over financial reporting were not effective.
In response to that assessment we have made a determination that all accounting and financial reporting services should be outsources to a qualified consulting firm and we are in the process of evaluating alternative to our current provider.
We have also made the determination that we need to dedicate more of the company's current and future financial resources to this function
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
.
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended February 29, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.