UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

 

 

 

 

 

 

 

 

 

 

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Table of Contents

 

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PART 1 – FINANCIAL INFORMATION

Item 1.           Financial Statements
 

The following unaudited interim financial statements of Sirrus Corp. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this quarterly report on Form 10-Q:

Sirrus Corp.

 

 

Index

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SIRRUS CORP.

Balance Sheets

(Unaudited)

 

 

  

 

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

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SIRRUS CORP.

Statements of Operations

(Unaudited)

 

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SIRRUS CORP.

Statements of Cash Flows

(Unaudited)

 

 

 

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

SIRRUS CORP.
Notes to the Financial Statements
(Unaudited)

NOTE 1.           NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

 

Sirrus Corp. (the “Company”) was formed on May 7, 2014 in Nevada.  The Company is engaged in the business of designing, marketing and distributing electronic cigarettes (“e-cigarette”) in East Africa. The Company’s products and services are all in the startup stage.  

 

These financial statements have been prepared on a going concern basis which assumes the Company will continue to realize it assets and discharge its liabilities in the normal course of business.  As of February 29, 2016, the Company has incurred losses totaling $66,063 since inception, has not yet generated revenue from operations, and will require additional funds to maintain our operations.   These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company intends to finance operating costs over the next twelve months through continued financial support from its shareholders and private placements of common stock. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

a)       Basis of Presentation

 

These financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Company’s year end is August 31.

 

b)       Estimates and Assumptions

 

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

c)       Cash and Cash Equivalents

 

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NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

d)       Foreign Currency Transactions

 

The Company’s planned operations are outside of the United States, which results in exposure to market risks from changes in foreign currency exchange rates.  The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.  Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year.  Revenues and expenses are translated at average rates for the year.  Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations.

 

e)       Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

f)         Inventory 

 

Inventory is recorded at lower of cost or market; cost is computed on a first-in first-out basis.  The inventory consists of e-cigarettes.

 

g)       Revenue Recognition

 

Revenue from the sale of goods is recognized when the following conditions are satisfied:

 

·         The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

·         The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·         The amount of revenue can be measured reliably;

·         It is probable that the economic benefits associated with the transaction will flow to the entity; and

·         The costs incurred or to be incurred in respect of the transaction can be measured reliably.

 

h)       Earnings (Loss) Per Common Share (“EPS”)

 

Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At February 29, 2016, the Company had no potentially dilutive securities outstanding.

 

i)         Stock-Based Compensation

 

Compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period.  We did not grant any stock options during the six months ended February 29, 2016.

j)        Income Taxes

 

The Company accounts for income taxes using the asset and liability method. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

k)       Subsequent Events

 

The Company has evaluated all transactions through the financial statement issuance date for subsequent disclosure consideration.

 

l)         New Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements - Going Concern. The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.

 

NOTE 3.           RELATED PARTY TRANSACTIONS

 

As of February 29, 2016 and August 31, 2015, the Company owed $8,019 and $386, respectively, to its president and director, Ahmed Guled, for incorporation fees, product purchases, transfer agent fees, and travel expenses that he paid for on the Company’s behalf.  The total amount is unsecured, non-interest bearing, and has no specific terms for repayment.

 

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

Forward Looking Statements

 

The information set forth in this Management's Discussion and Analysis of Financial Condition and Results of  Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

 

Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

 

We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.

 

Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the our company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our products and businesses.

   

US Dollars are denoted herein by “USD”, "$" and "dollars".

  

Overview

 

Plan of Operations

 

                Our business objectives for the next twelve months (beginning upon completion of this Offering), provided the necessary funding is available, are to expand upon our business with a focus on the development of our e-cigarette distribution and sales.

 

                We believe that we will be able to generate revenue once we secure four distribution contracts and through the direct public offering of our shares pursuant a registration statement that was declared effective by the Securities and Exchange Commission (the “SEC”) on February 26, 2015.  If we are able to establish additional contracts, we hope to generate additional revenue and prove our business model to be effective.   However, even if we were able to sell all of the shares being registered under the registration statement, we will still require an additional $180,000 in order to carry out our anticipated business operations for the next twelve months.  It is management’s goal to continue raising capital, secure distribution contacts, generate revenues, and attract additional financing.  However, there can be no assurance that we will be able to establish distribution contracts, or generate revenues from our operations.  There can also be no assurance that we will be able to raise the additional capital we require to operate our business for the next twelve months.

 

                The following chart provides an overview of our budgeted expenditures for the next twelve months.  The expenditures are categorized by significant area of activity. 

 

                Our Company used the funds raised by our public offering to pay for the expenses related to our offering and the expenses to maintain our reporting status for twelve months after the effective date. Our plan of operations is based on the net proceeds from our offering (gross proceeds less expenses related to this offering, estimated at a fixed cost of $10,000 and expenses to maintain our report status for twelve months after effective date, estimated at a fixed cost of $17,500).

                We currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

 

Results of Operations – For the Three Months Ended February 29, 2016 and February 28, 2015

 

We have not earned any revenues from inception through February 29, 2016.

 

          

                We incurred a net loss of $13,458 and $17,141 for the six months ended February 29, 2016 and February 28, 2015, respectively.

 

Liquidity and Capital
 

 

 

    

             As of February 29, 2016 and August 31, 2015, we had a working capital (deficit) of $(8,773) and $4,685, current assets of $4,807, and $15,229 and current liabilities of $13,580 and $10,544, respectively. We used a total of $18,530 and $14,024 in operating activities and were provided $7,633 and $26 through financing activities for six months ended February 29, 2016 and February 28, 2015, respectively.      
  

Critical Accounting Policies

 

Use of Estimates

 

                The discussion and analysis of our financial condition and results of operations is based upon the accompanying consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America and are expressed in United States Dollars. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.  

Inventory

 

                Inventory is recorded at lower of cost or market; cost is computed on a first-in first-out basis.  The inventory consists of e-cigarettes.

 

Revenue Recognition

 

                Revenue from the sale of goods is recognized when the following conditions are satisfied:

 

·         The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

·         The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·         The amount of revenue can be measured reliably;

·         It is probable that the economic benefits associated with the transaction will flow to the entity; and

·         The costs incurred or to be incurred in respect of the transaction can be measured reliably.

 

Foreign Currency Translation

 

                Our company’s planned operations will be in the United States, which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to our company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, our company does not use derivative instruments to reduce its exposure to foreign currency risk. Our company’s functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into US dollars are included in current results of operations.

Item 3.           Quantitative and Qualitative Disclosures About Market Risks
 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4.           Controls and Procedures
  

Management’s Report on Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

 

As of the end of our three months covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not aware of any 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 any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A.        Risk Factors
  

As a “smaller reporting company”, we 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.

  None.

Item 6.       Exhibits 
   

  

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.