UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2014

 

or

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to______

 

Commission File Number: 333-169802

 

PRACO CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada		27-1497347
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employee Identification No.)

 

90122 Hoey Road

Chapel Hill, NC 27517

(Address of principal executive offices) (Zip code)

_______________

 

(919) 889-9461

(Registrants telephone number, including area code)

_______________

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐     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 ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition 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  ☐ (Do not check if a smaller reporting company)	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 ☐

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: As of February 17, 2015, there were 6,902,500 shares, par value $0.0001 per share, of Common Stock issued and outstanding.

 

 

 

PRACO CORPORATION

QUARTERLY REPORT ON FORM 10-Q

 

December 31, 2014

 

TABLE OF CONTENTS

 

PART I-- FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16
PART II--OTHER INFORMATION
Item 1.	Legal Proceedings.	16
Item 1A.	Risk Factors.	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16
Item 3.	Defaults Upon Senior Securities.	17
Item 4.	Mine Safety Disclosures.	17
Item 5.	Other Information.	17
Item 6.	Exhibits.	17
SIGNATURE		18

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

 

PRACO CORPORATION

 

CONTENTS

 

PAGE	4	CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2014 (UNAUDITED) AND JUNE 30, 2014
PAGE	5	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2014 AND 2013 (UNAUDITED)
PAGE	6	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY) FOR THE SIX MONTHS ENDED DECEMBER 31, 2014 (UNAUDITED)
PAGE	7	CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 2014 AND 2013 (UNAUDITED)
PAGES	8 - 12	NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Praco Corporation

Condensed Balance Sheets

 

ASSETS

 

		December 31, 2014				June 30, 2014
		Unaudited
Current Assets
Cash		$	43			$	3,746
Total Assets		$	43			$	3,746
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable		$	6,387			$	9,176
Notes Payable			245,800				200,078
Total Liabilities			252,187				209,254
Commitments and Contingencies (See Note 4)
Stockholders' Deficit
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued and outstanding			-				-
Common stock, $0.0001 par value; 100,000,000 shares authorized, 6,902,500 and 6,902,500 shares issued and outstanding, respectively			690				690
Additional paid-in capital			300,967				289,787
Accumulated deficit			(553,801	)			(495,985	)
Total Stockholders' Deficit			(252,144	)			(205,508	)
Total Liabilities and Stockholders' Deficit		$	43			$	3,746

 

See accompanying notes to condensed financial statements

 

 

Praco Corporation

Condensed Statements of Operations

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		December 31, 2014				December 31, 2013				December 31, 2014				December 31, 2013
Operating Expenses
Professional fees		$	14,249			$	23,823				41,353				46,848
General and administrative			3,268				8,935				7,883				10,981
Total Operating Expenses			17,517				32,758				49,236				57,829
Loss from Operations			(17,517	)			(32,758	)			(49,236	)			(57,829	)
Other Expense
Interest Expense			(4,787	)			(2,643	)			(8,580	)			(4,847	)
Total Other Expense			(4,787	)			(2,643	)			(8,580	)			(4,847	)
LOSS FROM OPERATIONS BEFORE INCOME TAXES			(22,304	)			(35,401	)			(57,816	)			(62,676	)
Provision for Income Taxes			-				-				-				-
NET LOSS		$	(22,304	)		$	(35,401	)		$	(57,816	)		$	(62,676	)
Net Loss Per Share - Basic and Diluted		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.01	)
Weighted average number of shares outstanding during the period - Basic and Diluted			6,902,500				6,902,500				6,902,500				6,902,500

 

See accompanying notes to condensed financial statements

 

 

Praco Corporation

Condensed Statement of Changes in Stockholder's Deficiency

For the Six Months Ended December 31, 2014

(Unaudited)

 

																		Additional								Total
		Preferred Stock								Common stock								paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				capital				Deficit				Deficit
Balance, June 30, 2014			-			$	-				6,902,500			$	690			$	289,787			$	(495,985	)		$	(205,508	)
In kind contribution of services and interest			-				-				-				-				11,180				-				11,180
Net loss for the six months ended December 31, 2014			-				-				-				-				-				(57,816	)			(57,816	)
Balance, December 31, 2014			-			$	-				6,902,500			$	690			$	300,967			$	(553,801	)		$	(252,144	)

 

See accompanying notes to condensed financial statements

 

 

Praco Corporation

Condensed Statements of Cash Flows

(Unaudited)

 

		For the Six Months Ended
		December 31, 2014				December 31, 2013
Cash Flows Used in Operating Activities:
Net Loss		$	(57,816	)		$	(62,676	)
Adjustments to reconcile net loss to net cash used in operations
In-kind contribution of services and interest			11,180				7,447
Changes in operating assets and liabilities:
(Decrease) Increase in accounts payable and accrued expenses			(2,789	)			5,672
Net Cash Used In Operating Activities			(49,425	)			(49,557	)
Cash Flows From Financing Activities:
Proceeds from a note payable			45,722				55,000
Net Cash Provided by Financing Activities			45,722				55,000
Net Increase (Decrease) in Cash			(3,703	)			5,443
Cash at Beginning of Period			3,746				827
Cash at End of Period		$	43			$	6,270
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	-			$	120

 

See accompanying notes to condensed financial statements

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

 

It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statements presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

 

Praco Corporation (the "Company") was incorporated in Nevada on December 15, 2009 to design and market enrichment excursions for U.S. travelers. The enrichment component of these trips can be educational, informational or experiential and is tailored to the travelers’ specific interests and tastes. Enrichment travel can also be referred to as adventure travel. 

 

(B) Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include valuation of equity based transactions and the valuation of deferred tax assets.

 

(C) Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2014 and June 30, 2014, the Company had no cash equivalents.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(D) Loss Per Share

 

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.” As of December 31, 2014 and 2013 there were no common share equivalents outstanding.

 

(E) Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”).  Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement 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.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(F) Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

(G) Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue derived from travel related transactions on the net basis when the Company is not the merchant of record and the prices and services are determined by and provided by third parties.

 

(H) Fair Value of Financial Instruments

 

The carrying amounts on the Company’s financial instruments including accounts payable and note payable, approximate fair value due to the relatively short period to maturity for these instruments.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(I) Recent Accounting Pronouncements

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). The Company adopted this pronouncement for the three months ended September 30, 2014.

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation ( Topic 718 ); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

NOTE 2

NOTE PAYABLE

 

The Company received $30,000 on April 30, 2013, $30,000 on July 12, 2013, $25,000 on October 9, 2013, $25,000 on January 9, 2014, $25,000 on April 11, 2014 and $25,000 on July 10, 2014from an unrelated party. Total balance due is $160,000.  Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the six months ended December 31, 2014, the Company recorded $5,906 as an in-kind contribution of interest (See Note 3(A)).

 

The Company received $8,500 on June 25, 2012, $20,000 on September 14, 2012 and $27,578 on January 17, 2013 from an unrelated party. Total balance due is $56,078. Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the six months ended December 31, 2014, the Company recorded $2,236 as an in-kind contribution of interest (See Note 3(A)).

 

On June 5, 2012 the Company received $9,000 from an unrelated party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the six months ended December 31, 2014, the Company recorded $369 as an in-kind contribution of interest (See Note 3(A)).

On November 13, 2014, an unrelated party paid operating expenses on behalf of the Company totaling $20,722 in exchange for note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and due on demand. The Company recorded a total of $69 in imputed interest as in-kind contributions for the six months ended December 31, 2014.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

NOTE 3

STOCKHOLDERS’ EQUITY

 

(A) In-Kind Contribution of services and interest

 

For the six months ended December 31, 2014, the Company recorded $8,580 as an in kind contribution of interest (See Note 2).

 

For the six months ended December 31, 2014, a shareholder of the Company contributed services having a fair value of $2,600 (See Note 5).

 

NOTE 4

COMMITMENTS

 

On February 8, 2010, the Company entered into a consulting agreement with Europa Capital Investments, LLC to receive administrative and other miscellaneous consulting services. The Company is required to pay $5,000 a month. The agreement is to remain in effect unless either party desired to cancel the agreement. Effective March 1, 2012, the agreement was terminated but services were still provided as a contribution.

 

On April 1, 2012, the Company entered into a new consulting agreement with Europa Capital Investments, LLC for administrative and other miscellaneous services. The terms of the agreement remain the same as the prior agreement. During the quarter ended December 31, 2014, the Company is utilizing the consulting services on an as needed basis.

 

NOTE 5

RELATED PARTY TRANSACTIONS

 

For the six months ended December 31, 2014, shareholders of the Company contributed services having a fair value of $2,600 (See Note 3(A)).

 

NOTE 6

GOING CONCERN

 

As reflected in the accompanying condensed unaudited financial statements, the Company has minimal operations, used cash in operations of $49,425 and has a net loss of $57,816 for the six months ended December 31, 2014. The Company also has a working capital deficit and stockholders’ deficit of $252,144 as of December 31, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Overview

 

The Company was incorporated on December 15, 2009 as Hunt for Travel, Inc. to design and market travel excursions featuring entertainment, adventure, intellectual stimulation and access to experts on topics related to the destinations they visit. The Company is now a “shell company” as defined in Rule 12b-2 promulgated under the Exchange Act, as amended, as we have no operations. Our current intention is to close the Exchange Agreement, as defined and described below. If the Exchange Agreement closes, we will, through our majority-owned subsidiaries, own and manage real estate around Philadelphia and the Delaware Valley.

 

On July 3, 2012, the Company entered into an Equity Exchange Agreement (the “Exchange Agreement”) with Hawk Opportunity Fund, LP, a Delaware limited partnership (“Hawk”), Philly Residential Acquisition LP, a Pennsylvania limited partnership (“Philly”), Green Homes Real Estate, LP, a Pennsylvania limited partnership (“GH”), Nidus, LP, a Delaware limited partnership (“Nidus”), and several other related parties. In the years since the Exchange Agreement was signed, the assets of Nidus have been sold and Nidus will no longer be a part of the transactions contemplated by the Exchange Agreement. Pursuant to the Exchange Agreement, the Company will issue 3,100,000 shares of its common stock, par value $0.0001 per share, to Hawk, and in connection therewith, the Company will receive 89% of the aggregate equity interest of each of Philly and GH.

 

The closing of the Exchange Agreement (the “Closing”) is still subject to certain conditions such as the completion of an audit of Philly and GH, and the approval of the transaction from a lender, if necessary. These conditions of Closing have not occurred and they may never be fulfilled, so the Closing may never occur. As the Closing has not yet occurred, the Company has no interest in Philly and GH or any real estate at this time.

 

Philly and GP own and manage real estate around Philadelphia and the Delaware Valley. Together these entities own approximately 225 separate properties with a current aggregate market value of approximately $15 million. These are primarily comprised of residential rental units which provide a steady stream of income.

 

If and when the Closing occurs, the Company will be the majority-owner and assume the operations of each of Philly and GP. Although in the years since the Exchange Agreement was signed, the assets of Nidus have been sold and Nidus will no longer be a part of the transactions contemplated by the Exchange Agreement, Philly and GP have acquired more rental properties. Due to these acquisitions, the total number of rental properties the Company will be the majority-owner and assume the operations of will still be approximately 225 separate properties. Through these majority-owned subsidiaries, the Company will own and manage real estate around Philadelphia and the Delaware Valley. The Company no longer operates in the travel industry sector.

 

Limited Operating History

 

We have generated no independent financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.

 

For the Three Months Ended December 31, 2014 Compared to the Three Months Ended December 31, 2013

 

Results of Operations

 

For the three months ended December 31, 2014 and December 31, 2013, we had $0 in revenue. Operating expenses for the three months ended December 31, 2014 and December 31, 2013 totaled $17,517 and $32,758, resulting in a net loss of $22,304 and $35,401, respectively.

 

 

For the Six Months Ended December 31, 2014 Compared to the Six Months Ended December 31, 2013

 

For the six months ended December 31, 2014 and December 31, 2013, we had $0 in revenue. Operating expenses for the six months ended December 31, 2014 and December 31, 2013 totaled $49,236 and $57,829, resulting in a net loss of $57,816 and $62,676, respectively.

 

Capital Resources and Liquidity

 

As of December 31, 2014, we had $43 cash on hand.

 

The Company does not anticipate generating any revenues until the Closing. After the Closing, if the Closing occurs, the Company will re-position itself as an owner and manager of real estate. At such time, the Company anticipates that it will generate revenues through rental income from the real property owned by its future majority-owned subsidiaries.

 

We believe that our expenses will be very limited until the Closing and that we will obtain enough cash to support our daily operations until that time through future financings. However, if the Exchange Agreement is never consummated or if we fail to obtain financing, we may have difficulty continuing our daily operations. Should this occur, we will attempt to combine with another entity. If this is not possible, we may be forced to suspend or cease operations.

 

The foregoing represents our best estimate of our cash needs based on current planning and business conditions. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

 

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.

 

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan, in particular effecting the Closing. The Company has a working capital deficiency and stockholders’ deficiency of $252,144. We anticipate that we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern. If we are unable to find an investor or strategic partner or buyer, we will either have to suspend or cease our expansion plans entirely.

 

Critical Accounting Policies

 

Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

 

Loss Per Share

 

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, “Earnings Per Share.” As of December 31, 2014 and 2013, there were no common share equivalents outstanding.

 

 

Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement 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. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Fair Value of Financial Instruments

 

The carrying amounts reported in the balance sheets for accounts payable and notes payable approximate fair value based on the short-term maturity of these instruments.

 

Recent Accounting Pronouncements

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). The Company adopted this pronouncement for the three months ended September 30, 2014.

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that disclosures by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by 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 Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

a)

Exhibits

 

31.1*	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Schema
101.CAL*	XBRL Taxonomy Calculation Linkbase
101.DEF*	XBRL Taxonomy Definition Linkbase
101.LAB*	XBRL Taxonomy Label Linkbase
101.PRE*	XBRL Taxonomy Presentation Linkbase

 

* Filed herewith

+ In accordance with SEC Release 33-8238, Exhibit 32.1 is deemed furnished and not filed.

 

 

SIGNATURES

 

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

 

	PRACO CORPORATION
Date: February 17, 2015	By:	/s/ Carolyn Hunter
		Carolyn Hunter President, Chief Executive Officer, and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

 

 

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