Rainbow Coral Corp. - FORM 10-Q

Attached files

file	filename
EX-31 - RULE 13(A)-14(A)/15(D)-14(A) CERTIFICATION - Rainbow Coral Corp.	ex_31-2.htm
EX-31 - RULE 13(A)-14(A)/15(D)-14(A) CERTIFICATION - Rainbow Coral Corp.	ex_31-1.htm
EX-32 - SECTION 1350 CERTIFICATION - Rainbow Coral Corp.	ex_32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _________

COMMISSION FILE NUMBER: 333-169554

RAINBOW CORAL CORP.

(Exact name of registrant as specified in its charter)


Florida		27-3247562
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification Number)

495 Grand Blvd., Suite 206
Miramar Beach, Florida		32550
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (850) 269-7230

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 9,168,598 shares of common stock are issued and outstanding as of November 16, 2012.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets (Unaudited)	3
	Statement of Operations (Unaudited)	4
	Statement of Stockholders’ Equity (Unaudited)	5
	Statement of Cash Flows (Unaudited)	6
	Notes to Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	11

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	13
Item 1A.	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	Mine Safety Disclosures	13
Item 5.	Other Information	13
Item 6.	Exhibits	13

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2010. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to Rainbow Coral Corp. a Florida corporation.

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RAINBOW CORAL CORP.

Balance Sheets


	September 30, 2012			March 31, 2012
	(Unaudited)			(Audited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	18,751		$	20,219
Prepaid expenses		350			350
Inventory		39,020			28,253
Total current assets		58,121			48,822

Fixed assets, net of accumulated depreciation		6,469			6,460
Goodwill		27,868			27,868

TOTAL ASSETS	$	92,458		$	83,150

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	34,944		$	30,848
Advances payable		272,410			182,751
Total current liabilities		307,354			213,599

Convertible note payable, net of discount of $2,299		1,980			—
Note payable		63,706			52,775

TOTAL LIABILITIES		373,040			266,374

STOCKHOLDERS’ (DEFICIT)
Preferred Stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2012 and March 31, 2012		—			—
Common Stock, $0.0001 par value; 250,000,000 authorized; 575,000 shares and 9,168,598 shares issued and outstanding at September 30, 2012 and March 31, 2012, respectively		917			58
Additional paid-in capital		1,103,455			388,942
Accumulated Deficit		(1,384,954	)		(572,224	)
Total stockholders’ equity (deficit)		(280,582	)		(183,224	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	92,458		$	83,150

The accompanying notes are an integral part of these financial statements.

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RAINBOW CORAL CORP.

Statement of Operations

(Unaudited)


	Six months ended September 30,						Three months ended September 30
	2012			2011			2012			2011

REVENUE	$	51,956		$	34,690		$	27,568		$	31,020
COST OF GOODS SOLD		27,657			25,968			13,784			25,503

GROSS PROFIT		24,299			8,722			13,784			5,517

OPERATING EXPENSES
Sales, general and administrative expenses		749,702			50,401			82,355			18,560

LOSS FROM OPERATIONS		(725,403	)		(41,479	)		(68,571	)		(13,043	)

OTHER INCOME (EXPENSE)
Interest expense		(87,327	)		(731	)		(87,116	)		(731	)

NET LOSS	$	(812,730	)	$	(42,410	)	$	(155,687	)	$	(13,774	)


NET LOSS PER COMMON SHARE – Basic and fully diluted	$	(0.24	)	$	(0.08	)	$	(0.03	)	$	(0.00	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		3,355,715			550,000			6,059,575			550,000

The accompanying notes are an integral part of these financial statements.

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RAINBOW CORAL CORP.

Statement of Stockholders’ Equity (Deficit)

(Unaudited)


				Additional
	Common Stock			Paid-In		Accumulated
	Shares	Amount		Capital		Deficit			Total

BALANCE, MARCH 31, 2012	575,000	$	58	$	388,942	$	(572,224	)	$	(183,224	)

Shares issued for:
Services	80,000		8		541,992		—			542,000
Conversion of notes payable	8,513,598		851		84,285		—			85,136
Discount on issuance of convertible notes payable	—		—		88,236		—			88,236
Net loss	—		—		—		(812,730	)		(812,730	)

BALANCE, SEPTEMBER 30, 2012	9,168,598	$	917	$	1,103,455	$	(1,384,954	)	$	(368,818	)

Effective June 28, 2012, the Company effected a one-for-20 reverse stock split. All share and per share amounts have been retroactively restated to reflect the reverse stock split.

The accompanying notes are an integral part of these financial statements.

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RAINBOW CORAL CORP.

Statement of Cash Flows

(Unaudited)


	Six months ended September 30,
	2012			2011

CASH (USED IN) OPERATING ACTIVITIES:
Net loss	$	(812,730	)	$	(42,410	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		542,000			—
Amortization of discount on convertible notes payable		85,937			—
Depreciation		719			—
Changes in operating assets and liabilities:
Inventory		(10,767	)		(9,132	)
Accounts payable and accrued liabilities		5,275			4,768
NET CASH (USED IN) OPERATING ACTIVITIES		(189,566	)		(46,774	)

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Acquisition of Father Fish, net of cash acquired		—			6,229
Purchase of fixed assets		(728	)		(1,760	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(728	)		4,469

CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from advances		177,895			44,350
Proceeds from issuance of notes payable		25,721			—
Repayments of notes payable		(14,790	)		(6,934	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		188,826			37,416

NET (DECREASE) INCREASE IN CASH		(1,468	)		(4,889	)
CASH, at the beginning of the period		20,219			20,019

CASH, at the end of the period	$	18,751		$	15,130

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	—		$	—
Taxes	$	—		$	—

Noncash investing and financing transactions:
Acquisition of Father Fish for note payable	$	—		$	40,000
Refinance of advances into convertible notes payable	$	88,236		$	—
Discount on convertible notes payable	$	88,236		$	—
Issuance of common stock for convertible notes payable	$	85,136		$	—

The accompanying notes are an integral part of these financial statements.

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RAINBOW CORAL CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

September 30, 2011

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

RAINBOW CORAL CORP. (the “Company”), a Florida corporation, was formed to build a coral farm facility to develop and propagate (or grow) live coral, independent of the oceans, as a future farm reserve against the decline of natural wild reefs. We intend to grow, harvest and distribute as many varieties of hard and soft sizes as possible of captive-bred corals that are attractive, to as many consumers as possible who can maintain them in a healthy ecosystem aquarium. We believe that coral and other marine aquarium livestock should be supplied by farms or captive breeders, rather than removed from the natural reefs. The additional uses for coral as a source of potential leading edge medical discoveries are an attractive opportunity for the Company’s coral farming activity. We believe that the world of bio-research is a natural continuation of our core coral propagation business. Accordingly on October 23, 2011, the Company formed a subsidiary, Rainbow Biosciences, LLC to look into the opportunities within the bioscience market. Rainbow Biosciences, LLC will continue to research opportunities into the bioscience markets.

The Company was incorporated on August 13, 2010 with its corporate headquarters located in Nokomis, Florida. Through Board resolution, the Company’s fiscal year has been changed from August 31 to March 31.

NOTE 2. GOING CONCERN

The Company incurred a net loss of $812,730 during the six months ended September 30, 2012 and had net cash used in operating activities of $189,566 for the same period. The Company does not expect to generate positive net income or generate positive cash flow from operating activities in the coming year. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

Interim Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements for the year ended March 31, 2012and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).

The results of operations for the three month period ended September 30, 2012 are not necessarily indicative of the results for the full fiscal year ending March 31, 2013.

Cash and Cash Equivalents

For the purpose of the financial statements cash equivalents include all highly liquid investments with maturity of three months or less.

Earnings (Loss) per Share

The basic earnings (loss) per share are calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per share are calculated by dividing the Company’s net income (loss) available to common Shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity. There are no diluted shares outstanding for any periods reported.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Goodwill

Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and intangible assets of businesses acquired. We evaluate goodwill for impairment utilizing undiscounted projected cash flows in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other” (“ASC Topic 350”). The Company has determined that there was no impairment of goodwill during the three months ended September 30, 2012.

Revenue and Cost Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue is recognized net of sales returns and allowances.

Recently Issued Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

NOTE 4. STOCKHOLDERS’ EQUITY

On April 13, 2012, the Company issued 20,000 shares of common stock to a third party for services. The shares were valued at $200,000 based on the market value of the stock on the date of issuance.

On April 30, 2012, the Company issued 30,000 shares of common stock to a third party for services. The shares were valued at $216,000 based on the market value of the stock on the date of issuance.

On May 31, 2012, the Company issued 30,000 shares of common stock to a third party for services. The shares were valued at $126,000 based on the market value of the stock on the date of issuance.

On June 13, 2011, Rainbow Coral Corp. entered into an agreement to purchase all of the assets and the business of Father Fish Aquarium, Inc. (“Father Fish”) for $50,000. Father Fish was owned and operated by Lou Foxwell, the Company’s CEO and sole director. Rainbow Coral, as the surviving entity, will continue the business operations as a publicly-traded business under the same name of Rainbow Coral Corp. In the Agreement, the parties agreed that Rainbow Coral Corp would convey to Lou Foxwell at closing $10,000 cash and a note payable in the amount of $40,000. The note bears interest at 6% per year and is payable in 16 monthly installments of $2,500 with a final balloon payment due in the 17^th month.

On July 20, 2012, the Company signed a Convertible Promissory Note which refinanced non-interest bearing advances in the amount of $69,586 into a convertible note payable. The Convertible Promissory Note bears interest at 10% per annum and is payable along with accrued interest on July 20, 2013. The Convertible Promissory Note is convertible into common stock at the option of the holder at the rate of $0.01 per share.

Additionally, on July 20, 2012, the Company signed a Convertible Promissory Note which refinanced non-interest bearing advances in the amount of $18,650 into a convertible note payable. The Convertible Promissory Note bears interest at 10% per annum and is payable along with accrued interest on July 20, 2013. The Convertible Promissory Note is convertible into common stock at the option of the holder at the rate of $0.01 per share.

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The Company evaluated the application of ASC 470-50-40/55, Debtor’s Accounting for a Modification or Exchange of Debt Instrument as it applies to the two notes listed above and concluded that the revised terms constituted a debt modification rather than a debt extinguishment because the present value of the cash flow under the terms of each of the new instruments was less than 10% from the present value of the remaining cash flows under the terms of the original notes. No gain or loss on the modifications was required to be recognized.

The Company evaluated the terms of these notes in accordance with ASC Topic No. 815 – 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion features and account for them as a separate derivative liabilities. The Company evaluated the conversion features for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized beneficial conversion features in the amounts of $69,586 and $18,650 on July 20, 2012. The beneficial conversion features were recorded as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. The discounts to the Convertible Notes Payable will be amortized to interest expense over the life of the respective notes.

On August 1, 2012, the holder of the Convertible Promissory Note in the amount of $69,586 elected to the convert the note into 6,958,598 shares of common stock. These shares were issued to Glendive Investments, a significant shareholder of the Company. As a result of the conversion on August 1, 2012, the remaining unamortized discount of $69,586 was immediately amortized to interest expense.

On August 2, 2012, the holder of the Convertible Promissory Note in the amount of $18,650 assigned notes in the total principal amount of $13,500 to three different entities. On the same date, the holders of Convertible Promissory Notes elected to convert principal in the amount of $11,250 into 1,125,000 shares of common stock. As a result of this conversion, the remaining unamortized discount related to the converted principal in the amount of $9,270 was immediately amortized to interest expense.

On July 25, 2012, the original holder of the Convertible Promissory Note in the amount of $18,650 assigned notes in the total principal amount of $5,150 to a different entity. On August 30, 2012, the holder elected to convert principal in the amount of $4,300 into 430,000 shares of common stock. As a result of this conversion, the remaining unamortized discount related to the converted principal in the amount of $3,536 was immediately amortized to interest expense.

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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

Rainbow Coral Corp. (“we”, “us”, “our”, “RBCC”, or the “Company”) was incorporated in the State of Florida on August 13, 2010. On June 13, 2011 we acquired all of the assets and the business of Father Fish Aquarium, Inc, (“Father Fish”) for $50,000. We plan to continue the business of Father Fish under the name of Rainbow Coral Corp. The Company was formed to build a coral farm facility to develop and propagate (or grow) live coral, independent of oceans, as a future farm reserve against the decline of natural wild reefs. We intend to grow, harvest and distribute as many varieties of hard and soft sizes as possible for use by consumers and as a source for advances in bio-research. The uses for coral as a source of potential leading edge medical discoveries are an attractive opportunity for the Company’s coral farming activity. We believe that the world of bio-research is a natural continuation of our core coral propagation business. Accordingly on October 23, 2011, the Company formed a subsidiary, Rainbow Biosciences, LLC to look into the opportunities within the bioscience market. On March 13, 2012, we entered into a stock purchase agreement (“N3D Stock Purchase Agreement”) with Nano3D Biosciences, Inc. (“N3D”), a Texas corporation that has developed a unique concept in three dimensional cell research tools. Under the terms of the N3D Stock Purchase Agreement, we have agreed to acquire 604 shares of common stock of N3D, representing approximately 5% of the outstanding shares on the date of the agreement, for a price of $413.62. The total purchase price of $249,826 will be paid by making weekly payments of $5,000 until fully paid. We may discontinue payment of the purchase price at any time by providing written notice to N3D. This would result in our owning fewer than 604 shares. Rainbow Biosciences, LLC will continue to research opportunities into the bioscience markets.

We were a development stage entity until June 13, 2011 when we acquired Father Fish Aquarium, Inc.

Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements for the year ended March 31, 2012 included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”). Results of interim periods may not be indicative of results for the full year.

Six months ended September 30, 2012 compared to the six months ended September 30, 2011

Revenue

Revenue increased to $51,956 for the six months ended September 30, 2012 compared to $34,690 for the six months ended September 30, 2011. The Company has been able to increase sales due to increased marketing efforts.

Cost of Goods Sold

Cost of goods sold increased to $27,657 for the six months ended September 30, 2012 compared to $25,968 for the comparable period of 2011. The increase in cost of goods sold was less than the increase in revenue due to the Company’s efforts at controlling costs.

Gross Profit

Gross profit increased from $8,722 for the six months ended September 30, 2011 to $24,299 for the six months ended September 30, 2012. The increase in gross profit was a result of increased revenues as discussed above and a higher profitability rate on sales during the six months ended September 30, 2012.

General and administrative expenses

We recognized general and administrative expenses in the amount of $749,702 and $41,679 for the six months ended September 30, 2012 and for the three months ended September 30, 2011, respectively. During the six months ended September 30, 2012, we issued stock for services resulting in general and administrative expense of $542,000. The remaining increase in general and administrative expenses was the result of the increased operations of the Company as a result of the acquisition of Father Fish and exploring other business opportunities.

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Three months ended September 30, 2012 compared to the three months ended September 30, 2011

Revenue

Revenue decreased slightly to $27,568 for the three months ended September 30, 2012 compared to $31,020 for the three months ended September 30, 2011.

Cost of Goods Sold

Cost of goods sold decreased to $13,784 for the three months ended September 30, 2012 compared to $25,503 for the comparable period of 2011. The decrease in cost of goods sold was the result of the Company’s efforts to control costs.

Gross Profit

Gross profit increased from $5,517 for the three months ended September 30, 2011 to $13,784 for the three months ended September 30, 2012. The increase in gross profit was a result of an increased profitability rate partially offset by slightly lower revenues during the three months ended September 30, 2012.

General and administrative expenses

We recognized general and administrative expenses in the amount of $82,355 and $731 for the three months ended September 30, 2012 and for the three months ended September 30, 2011, respectively. The increase in general and administrative expenses was the result of the increased operations of the Company as a result of the acquisition of Father Fish and exploring other business opportunities.

Going Concern

We incurred a net loss of $812,730 for the six months ended September 30, 2012. Net cash used by operations for the six months ended September 30, 2012 was $189,566. We do not anticipate having positive net income in the immediate future. These conditions create an uncertainty as to our ability to continue as a going concern.

We will need to obtain loans or other financing in order to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will be able to obtain these loans or that they will be available to us on terms that are acceptable to the Company. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.

Liquidity and Capital Resources

At September 30, 2012, we had cash on hand of $18,751 and negative working capital of $249,233.

Net cash used in operating activities for the three months ended September 30, 2012 was $189,566. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to fully implement our business plan. There is no guarantee that we will be able funds when we need them or that funds will be available on terms that are acceptable to the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As smaller reporting company, this information is not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

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	·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

	·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

	·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of September 30, 2012, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2012.

Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Management’s Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

We will work as quickly as possible to implement these initiatives; however, the lack of adequate working capital and positive cash flow from operations will likely slow this implementation.

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Changes in internal controls over financial reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Not applicable to a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On August 2, 2012, we issued 1,125,000 shares of common stock for the conversion of $11,250 of principal of the Convertible Note Payable.

On August 30, 2012, we issued 430,000 shares of common stock for the conversion of $4,300 of principal of theConvertible Note Payable.

An exemption under Section 4(1) of the Securities Act is claimed for the common stock issued in the above conversions since the criteria of Rule 144 were satisfied.

On August 1, 2012, we issued 6,958,598 shares of restricted common stock for the conversion of $69,586 of principal of the Convertible Note Payable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.


2.1	Stock Purchase Agreement, dated as of June 13, 2011, by and among Rainbow Coral Corporation and Father Fish Aquarium, Inc. (1)

2.2	Membership Interest Purchase Agreement, dated as of June 13, 2011 by and among Father Fish Aquarium, Inc. and Father Fish Aquarium, LLC. (1)

3.1	Articles of Incorporation of Rainbow Coral Corp. (2)

3.2	Articles of Amendment of Rainbow Coral Corp. (1)

3.3	Articles of Amendment of Rainbow Coral Corp. (3)

3.4	Bylaws of Rainbow Coral Corp. (2)

3.5	Articles of Incorporation of Father Fish Aquarium, Inc. (1)

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3.6	Articles of Amendment of Father Fish Aquarium, Inc. (1)

3.7	Bylaws of Father Fish Aquarium, Inc. (1)

3.8	Articles of Organization of Father Fish Aquarium, LLC (1)

3.9	Articles of Amendment of Father Fish Aquarium, LLC (1)

3.10	Bylaws of Father Fish Aquarium, LLC (1)

10.1	Note from Rainbow Coral Corp. to Louis Foxwell (1)

31.1 *	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer

31.2 *	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer

32.1 *	Section 1350 Certification of principal executive officer and principal financial and accounting officer

101 **	XBRL Interactive Data

* Filed or furnished herewith

** To be submitted by amendment.

(1) Incorporated by reference to the comparable exhibit filed with our Form 8-K filed on June 13, 2011

(2) Incorporated by reference to the comparable exhibit filed with our Registration Statement on Form S-1

(3) Incorporated by reference to the Registrant’s Form 10-K for the year ended March 31, 2012.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	RAINBOW CORAL CORP.

	BY:	/s/ Patrick Brown
		Patrick Brown
		President, Secretary, Treasurer,
		Principal Executive Officer,
		Principal Financial and Accounting
		Officer and Sole Director

	Dated: November 19, 2012

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