UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to _______

 

Commission File Number 333-157565

 

STRAGENICS, INC.

(Exact name of registrant as specified in its charter)

 

Florida		46-5209647
(State of incorporation)		(I.R.S. Employer Identification No.)

 

100 Rialto Place, Suite 700. Melbourne, FL 32901

(Address of principal executive offices)

 

321-541-1216

(Registrant’s telephone number)

 

Indicate by check mark whether the issuer (1) 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 o

 

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 o 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	☒
Do not check if a 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 o No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of October 22, 2014 the registrant had 89,005,250 shares of common stock, par value $.0001 per share issued and outstanding. 

 

 

 

STRAGENICS, INC.

 

TABLE OF CONTENTS

 

		Page
PART I.    FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	18
ITEM 4.	CONTROLS AND PROCEDURES	18
PART II.   OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	19
ITEM 1A.	RISK FACTORS	19
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	19
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	19
ITEM 4.	MINE SAFETY DISCLOSURE	19
ITEM 5.	OTHER INFORMATION	19
ITEM 6.	EXHIBITS	19

 

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Stragenics, Inc., (formerly known as Allerayde SAB, Inc.), (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Stragenics" refers to: (i) Stragenics, Inc., formerly Allerayde SAB, Inc., a Florida corporation, and (ii) Allerayde SAB Limited, a U.K. company that is wholly-owned by the Company.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

STRAGENICS, INC.

 

(FORMERLY ALLERAYDE SAB, INC.)

 

FINANCIAL STATEMENTS

 

MARCH 31, 2014

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

AS OF MARCH 31, 2014 AND DECEMBER 31, 2013

 

		March 31, 2014				December 31, 2013
ASSETS
Current Assets
Cash and equivalents		$	5,681			$	0
Total Current Assets			5,681				0
TOTAL ASSETS		$	5,681			$	0
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current Liabilities
Bank overdraft]		$	0			$	409
Accounts payable and accrued expenses			127,116				134,616
Accrued interest			233,680				220,603
Convertible notes payable, net of discount of $9,834 (2013 - $1,016)			1,436,847				1,430,665
Derivative liability			1,013,126				735,979
Due to related parties			431,061				431,061
Line of credit – related party			50,300				50,300
Loans payable, net of discount of $0 (2013 - $286)			57,255				56,969
Advances from shareholder			5,100				0
Total Liabilities			3,354,485				3,060,602
Stockholders’ Deficit
Preferred Stock Authorized: 100,000,000 preferred shares. No shares issued and outstanding at March 31, 2014 and December 31, 2013			0				0
Common Stock, 400,000,000 shares of common stock with par value of $.0001; Issued 89,005,250 shares of common stock issued and outstanding at March 31, 2014 and December 31, 2013			8,901				8,901
Additional paid in capital			114,643				114,643
Accumulated other comprehensive loss			835				835
Accumulated deficit			(3,473,183	)			(3,184,981	)
Total Stockholders’ Deficit			(3,348,804	)			(3,060,602	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	5,679			$	0

 

See accompanying notes to financial statements.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013

 

		Three months ended March 31, 2014				Three months ended March 31, 2013
REVENUES		$	0			$	16,289
EXPENSES
Professional fees			4,010				4,247
Consulting fees			0				50,000
Salaries and benefits			0				8,184
Office expense			1,179				1,640
Filing and registration			1,321				0
General and administrative			0				7,809
TOTAL EXPENSES			6,510				71,880
LOSS FROM OPERATIONS			(6,510	)			(55,591	)
OTHER INCOME (EXPENSES)
Interest expense			(13,077	)			(5,634	)
Amortization of debt discount			(1,302	)			0
Change in fair market value of derivative liability			(267,313	)			0
TOTAL OTHER INCOME (EXPENSE)			(281,692	)			(5,634	)
LOSS BEFORE PROVISION FOR INCOME TAXES			(288,202	)			(61,225	)
PROVISION FOR INCOME TAXES			0				0
NET LOSS		$	(288,202	)		$	(61,225	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments							(78	)
TOTAL COMPREHENSIVE LOSS		$	(288,202	)		$	(61,303	)
NET LOSS PER SHARE: BASIC AND DILUTED		$	(0.00	)		$	(0.00	)
TOTAL COMPREHENSIVE LOSS PER SHARE: BASIC AND DILUTED		$	(0.00	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED			89,005,250				9,369,412

 

See accompanying notes to financial statements.

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013

 

		Three months ended March 31, 2014				Three months ended March 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period		$	(288,202	)		$	(61,225	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			1,302				0
Change in fair market value of derivative liability			267,313				0
Changes in assets and liabilities:
Increase in accounts receivable			0				(4,000	)
Increase in accounts payable and accrued expenses			(7,500	)			12,619
Increase in accrued interest			13,077				0
Net Cash Used in Operating Activities			(14,010	)			(52,606	)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft			(409	)			0
Proceeds from promissory notes			15,000				0
Proceeds from convertible notes payable			0				54,000
Proceeds from issuance of common stock			0				0
Advances from shareholder			5,100				0
Net Cash Provided by Financing Activities			19,691				54,000
Exchange rate effect on cash			0				(78	)
NET INCREASE IN CASH			5,681				1,316
Cash and equivalents, beginning of period			0				16
Cash and equivalents, end of period		$	5,681			$	1,332
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	0			$	0
Cash paid for income taxes		$	0			$	0

 

See accompanying notes to financial statements.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

Stragenics, Inc., formerly known as Allerayde SAB, Inc. (the “Company” or “Stragenics”) was incorporated under the laws of the State of Florida on January 15, 2009. On February 23, 2010, the Company changed its name to Resource Exchange of America Corp. Effective April 30, 2013, the Company changed its name to Allerayde SAB, Inc. Effective April 28, 2014, the Company changed its name to Stragenics, Inc. The Company’s prior business was a mobile enterprise software company aimed at improving productivity of field service organizations. Upon completion of the acquisition of assets from UTP Holdings, LLC on February 22, 2010, the Company adopted the business of UTP Holdings, LLC. The Company was then engaged in the business of recycling ferrous and nonferrous metals to customers in the United States and abroad.

 

On March 21, 2013, the Company entered into a Share Exchange Agreement with Allerayde SAB Limited. (“Allerayde”) and Mike Rhodes, the sole member of Allerayde (the “Allerayde Stockholder”) (the “Share Exchange Agreement”). This share exchange transaction constituted a reverse merger and a recapitalization of Stragenics (formerly Allerayde).  In conjunction with this reverse merger, the historical accounts of Stragenics become the historical accounts of Resource Exchange of America Corp for accounting purposes. The Company is now engaged in the business of developing and manufacturing allergy management products in the United Kingdom and other countries such as the U.S. and Canada.

 

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a December 31 fiscal year end.

 

Cash and Cash Equivalents

Stragenics considers all highly liquid investments with maturities of three months or less to be cash equivalents. At March 31, 2014 and December 31, 2013, respectively, the Company had $5,681 and $0 of cash and a bank overdraft of $409

 

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses, convertible notes payable, derivative liability, amounts due to related parties and loans payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Foreign Currency

The operations of the Company were located in England and Wales. Stragenics maintained a Great Britain Pounds bank account. The functional currency is the U.S. Dollar. Transactions in foreign currencies other than the functional currency, if any, are re-measured into the functional currency at the rate in effect at the time of the transaction. Monetary assets and liabilities denominated in Great Britain Pounds are translated into U.S. Dollars at the rate in effect at the balance sheet date. Revenue and expenses denominated in Great Britain Pounds Dollars are translated at the average exchange rate.

 

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income 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 for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of March 31, 2014.

 

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

 

Recent Accounting Pronouncements

On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915).   Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders equity, (2) label the financial statements as those of a development stage entity;  (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued.  The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements.

 

Stragenics does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow other than the pronouncement described above. 

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 2 – GOING CONCERN

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception, has an accumulated deficit of $3,473,183 as of March 31, 2014, has negative working capital, and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and or private placement of common stock.

 

NOTE 3 – DUE TO RELATED PARTIES

 

The Company has amounts due to the former president of the Company and another company controlled by the former president totaling $431,061 as of March 31, 2014. The loans are unsecured, non-interest bearing and due on demand.

 

Effective March 18, 2010, the Company entered into a line of credit agreement with a company owned by the former President of the Company allowing for borrowings of up to $150,000 bearing interest at 8% per annum. The line of credit is unsecured and all borrowings plus interest are due on demand. The balance on the line of credit as of March 31, 2014 is $50,300.

 

During the period ended March 31, 2014, the Company received advances from a shareholder of the company in the amount of $ 5,100. The advances are non- interest bearing and due on demand.

 

NOTE 4 – PROMISSORY NOTES

 

On September 10, 2013 and September 24, 2013, the Company signed promissory notes with Capital Nordic Ltd. in the amounts of $3,000 and $5,000. The notes plus interest of $450 and $750 respectively were payable after 4 months. The notes are currently in default.

 

On August 1, 2013, the Company signed a promissory note with DeBondo Capital Limited in the amount of $18,700. The note had an original issue discount of $1,700 and was due on February 1, 2014. The discount was amortized over the life of the loan. The remaining unamortized discount was $0 as of March 31, 2014. The note is currently in default.

 

The Company has an amount due of $30,555 to an unrelated party as of March 31, 2014. The amount is unsecured, non-interest bearing and due on demand.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

(a) On February 22, 2010, the Company issued a $250,000 promissory note to the former President of the Company. The note bears interest at 10% per annum, is unsecured, and was due on December 31, 2010. The holder may convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 75% of the average of the closing market price of the Company’s common stock during the five trading days immediately preceding the conversion date.

  

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversions feature of $175,081 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011. The carrying value of the convertible debt as of March 31, 2014 is $250,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $218,891 as of March 31, 2014.

 

(b) On April 13, 2010, the Company entered into a $250,000 draw down promissory note agreement with a non-related party. Amounts drawn on this credit facility bear interest at 8% per annum, are unsecured, and were due on April 13, 2011. The holder could convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 75% of the average of the closing market price of the Company’s common stock during the thirty trading days immediately preceding the conversion date. On October 14, 2010, the conversion price was changed to be fixed at $0.45 per share.

 

As of March 31, 2014, the outstanding balance is $250,000. The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $147,140 with an equivalent discount on the convertible debt. Upon modification of the conversion feature, the derivative liability was removed as the number of shares to be issued upon conversion became fixed.  The carrying value of the convertible debt as of March 31, 2014 is $250,000.

 

(c) Effective January 31, 2005, the former President of the Company entered into a line of credit agreement with a financial institution allowing for borrowings of up to $800,000 with annual interest at prime to be used to fund the operations of the Company. The line of credit is secured by the principal residence of the former President of the Company. Monthly interest-only payments are required. On October 21, 2010, the Company agreed to add a conversion option to the entire balance of principal and interest outstanding at any time on the line of credit. The President of the Company may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 75% of the average of the closing market price of the Company’s common stock during the five trading days immediately preceding the conversion date. The maturity date was December 31, 2011 and the note is now due on demand.

 

As of March 31, 2014, the outstanding balance is $788,472 (December 31, 2013 - $788,472). The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $592,991 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011.  The carrying value of the convertible debt as of March 31, 2014 is $788,472. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $690,356 as of March 31, 2014.

 

On August 18, 2011 the company defaulted on the payments owed to the financial institution. As a result, UTP Holdings LLC was obligated to make the monthly bank payments on behalf of the company. UTP Holdings LLC notified the company of the default and the payments.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(d) On February 23, 2011, the Company issued an 8% convertible note for proceeds of $37,500 which matured on November 28, 2011. The holder could elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 61% of the average of the three lowest closing market prices during the ten day trading period immediately preceding the conversion date.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $37,500 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011. On April 5, 2013, the promissory note of $37,500 and $13,387 of accrued interest was converted into 5,088,700 shares of common stock.

 

(e) On March 24, 2011, the Company issued an 8% convertible note for proceeds of $27,500 which matured on December 28, 2011. The holder could elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 61% of the average of the three lowest closing market prices during the ten day trading period immediately preceding the conversion date.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $27,500 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011. On April 5, 2013, the promissory note of $27,500 and $9,320 of accrued interest was converted into 3,682,000 shares of common stock.

 

(f) On May 25, 2011 the Company issued an 8% convertible note for proceeds of $27,500 which matured on February 27, 2012. The holder could elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 61% of the average of the three lowest closing market prices during the ten day trading period immediately preceding the conversion date.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $27,500 with an equivalent discount on the convertible debt. The debt was fully accreted as of March 31, 2013. On April 5, 2013, the promissory note of $27,500 and $8,258 of accrued interest was converted into 3,575,800 shares of common stock.

 

(g) On August 31, 2012 the Company issued a 6% convertible note for proceeds of $20,000 which matured on August 30, 2013. The holder may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to the market price of the stock as determined by taking the average trading price of the stock over the previous 30 days.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $1,407 with an equivalent discount on the convertible debt. The debt was fully accreted as of March 31, 2014.  The carrying value of the convertible debt as of March 31, 2014 is $20,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $12,282 as of March 31, 2014. The note is currently in default.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(h) On November 16, 2012 the Company issued a 6% convertible note for proceeds of $66,709 which matured on November 16, 2013. The holder may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to the market price of the stock as determined by taking the average trading price of the stock over the previous 30 days. The derivative liability related to this note is recalculated each reporting period.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $1,410 with an equivalent discount on the convertible debt. The debt was fully accreted as of March 31, 2014.  The carrying value of the convertible debt as of March 31, 2014 is $66,709. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $44,721 as of March 31, 2014. The note is currently in default.

 

(i) The Company entered into a consultancy agreement with DeBondo Capital on January 7, 2013 to pay a sum of $50,000 to DeBondo for services to be provided during the first 4-5 months of 2013. DeBondo agreed to convert the fees due to a convertible loan in the amount of $50,000. The note matured on January 8, 2014 and bears interest at 5%. The holder of this note shall have the right, exercisable in whole or in part, to convert the outstanding principle and accrued interest hereunder into fully paid and non-assessable common shares of the Borrower's stock at fair market value.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $29,841 with an equivalent discount on the convertible debt. Amortization of the discount totaled $29,351 for the year ended December 31, 2013. The remaining discount of $490 was amortized during the three months ended March 31, 2014. The carrying value of the convertible debt as of March 31, 2014 was $50,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $32,781 as of March 31, 2014. The note is currently in default.

 

(j) On February 4, 2013, the Company signed a promissory note with DeBondo Capital Limited in the amount of $4,000. The note matured on February 4, 2014 and bears interest at 5%. The holder of this note shall have the right, exercisable in whole or in part, to convert the outstanding principle and accrued interest hereunder into fully paid and non-assessable common shares of the Borrower's stock at fair market value.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $2,408 with an equivalent discount on the convertible debt. Amortization of the discount totaled $2,183 for the year ended December 31, 2013. The remaining discount of $225 was amortized during the three months ended March 31, 2014. The carrying value of the convertible debt as of March 31, 2014 was $4,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $2,623 as of March 31, 2014. The note is currently in default.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(k) On March 12, 2013, the Company signed a promissory note with Laurag Associates S.A. in the amount of $2,500. The note matured March 13, 2014 and bears interest at 5%. The holder of this note shall have the right, exercisable in whole or in part, to convert the outstanding principle and accrued interest hereunder into fully paid and non-assessable common shares of the Borrower's stock at fair market value.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $1,568 with an equivalent discount on the convertible debt. Amortization of the discount totaled $1,267 for the year ended December 31, 2013. The remaining discount of $301 was amortized during the three months ended March 31, 2014. The carrying value of the convertible debt as of March 31, 2014 was $2,500. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $1,639 as of March 31, 2014. The note is currently in default.

 

On March 31, 2014, the Company issued a convertible promissory note for $15,000. The note is due on October 1, 2014, is unsecured and bears interest at 8%. The note and any accrued interest may be converted into shares of the Company’s common stock at fair market value. The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $9,834 with an equivalent discount on the convertible debt. The debt discount will be amortized over the life of the debt.

 

NOTE 6 – COMMON STOCK

 

The Company originally had an unlimited number of shares of no par value common stock.

 

On inception, the Company issued 10 shares of common stock at £1.00 per share to its founder for total cash proceeds of £10, which converted at its historical rate is $15. The Company closed a share exchange transaction effective March 23, 2013 with the shareholders of Resource Exchange of America Corp. This share exchange transaction constituted a reverse merger and a recapitalization of Allerayde.  In conjunction with this reverse merger, the historical accounts of Allerayde become the historical accounts of Resource Exchange of America Corp for accounting purposes. The shareholders of Allerayde were issued 75,872,411 shares of Resource Exchange, representing 98.97% of the issued and outstanding shares of Resource Exchange. At the time of the reverse merger there were 786,328 shares of common stock outstanding.

 

On January 31, 2013, the Company amended its Articles of Incorporation to increase the total authorized shares of common stock, par value $.0001 per share from 250,000,000 shares to 400,000,000 shares and to additionally authorize a total of 100,000,000 shares of preferred stock, par value $.0001 per share which may be issued by the Company.

 

On April 5, 2013, the Company issued 12,346,500 shares of common stock for debt of $92,500 and accrued interest of $30,965 for a total of $123,465.

 

As of March 31, 2014 there were 89,005,250 shares of common stock issued and outstanding.

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

The Company had entered into a lease agreement for its business premises which called for monthly payments in the amount of approximately £368 through May 31, 2014. The lease was assumed by the former CEO upon the change of control on March 4, 2014. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

 

 

STRAGENICS, INC.

(FORMERLY ALLERAYDE SAB, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

 

NOTE 8 – INCOME TAXES

 

As of March 31, 2014, the Company had net operating loss carry forwards of approximately $879,732 that may be available to reduce future years’ taxable income arising from the same trade. Future tax benefits which may arise as a result of these losses have not been recognized in these 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 provision for corporate income tax at the expected rate of 34% consists of the following for the three months ended March 31, 2014 and 2013:

 

		2014				2013
Corporate income tax benefit attributable to:
Current Operations		$	97,989			$	20,817
Less: valuation allowance			(97,989	)			(20,817	)
Net provision for Corporate income taxes		$	0			$	0

 

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of March 31, 2014 and December 31, 2013:

 

		March 31, 2014				December 31, 2013
Deferred tax asset attributable to:
Net operating loss carryover		$	299,111			$	201,122
Less: valuation allowance			(299,111	)			(201,122	)
Net deferred tax asset		$	0			$	0

 

NOTE 9 – SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above. 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

RESULTS OF OPERATIONS

 

Working Capital

 

		March 31,				December 31,
		2014 $				2013 $
Current Assets			5,681				0
Current Liabilities			3,354,485				3,060,602
Working Capital Deficit			(3,348,804	)			(3,060,602	)

 

Cash Flows

 

		Three months ended March 31, 2014 $				Three months ended March 31, 2013 $
Cash Flows (used in) Operating Activities			(14,010	)			(52,606	)
Cash Flows provided by Investing Activities			0				0
Cash Flows provided by Financing Activities			19,691				54,000
Exchange rate effect on cash			0				(78	)
Net Increase in Cash During Period			5,681				1,316

 

 

For the three-month period ended March 31, 2014

 

Operating Revenues

 

Operating revenues for the period ended March 31, 2014 were $nil.

 

Operating revenues for the period ended March 31, 2013 were $16,289, which were proceeds from a grant.

 

Operating Expenses and Net Loss

 

Operating expenses, including other income (expenses), for the three months ended March 31, 2014 were $288,202, which is comprised of professional fees of $4,010, office expenses of $1,179, filing and registration fees of $1,321, interest expense of $13,077, amortization of debt discount of $1,302 and a change in fair market value of the derivative liability of $267,313.

 

Operating expenses, including other income (expenses), for the three months ended March 31, 2013 were $77,514, which is comprised of consulting fees of $50,000, professional fees of $4,247, salaries and benefits of $8,184, rent of $1,640, general and administrative expenses of $7,809 and interest expenses of $5,634.

 

Liquidity and Capital Resources

 

As of March 31, 2014 and December 31, 2013, the Company’s cash balance was $5,681 and $nil, respectively.  As of March 31, 2014, the total asset balance was $5,681.

 

As of March 31, 2014, the Company had total liabilities of $3,354,485 compared with total liabilities of $3,060,602 as of December 31, 2013. The increase in total liabilities is mainly attributed to an increase in convertible notes payable, accrued interest and the derivative liability that was offset by a decrease in accounts payable and accrued expenses.

 

As of March 31, 2014, the Company had a working capital deficit of $3,348,804 compared to a deficit of $3,060,602 as of December 31, 2013.

 

Cash flows from Operating Activities

 

During the period ended March 31, 2014, the Company used cash of $14,010 from operating activities compared to $52,606 of cash used by operating activities during the period ended March 31, 2013.

 

Cash flows from Investing Activities

 

During the period ended March 31, 2014, the Company used $nil of cash from investing activities compared to $nil for the period ended March 31, 2013.

 

Cash flows from Financing Activities

 

During the period ended March 31, 2014, the Company received $19,691 of cash in financing activities compared to $54,000 for the period ended March 31, 2013.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

 

Future Financings

 

We will continue to rely on debt and equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Recently Issued Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September  30, 2013, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting. 

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

   

ITEM 6.  EXHIBITS

 

Exhibit Number		Description of Exhibit		Filing Reference
31.01		Certification of Principal Executive and Financial Officer Pursuant to Rule 13a-14.		Filed herewith.
32.01		CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.		Filed herewith.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

* The XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	STRAGENICS, INC.
Dated:   October 22, 2014	By:	/s/ Alan W. Grofe
		Alan W. Grofe
		Title: President, Chief Executive Officer, Secretary & Treasurer

 

 

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