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EX-32.1 - CERTIFICATION - Apawthecary Pets USAapaw_ex321.htm
EX-31.1 - CERTIFICATION - Apawthecary Pets USAapaw_ex311.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended August 31, 2018

 

or

 

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

 

For the transition period from ____________to _____________

 

333-176705

Commission file number

 

APAWTHECARY PETS USA.

(Exact name of registrant as specified in its charter)

 

Nevada

 

26-1679929

(State or other jurisdiction of

 incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

 c/o Brad Kersch 619 S. Ridgeley Drive, Los Angeles, CA

 

  90036

 (Address of principal executive offices)

 

 (Zip Code)

 

(323) 345-4587

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes   x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes   x No

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Non-accelerated filer

¨

Accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

Emerging Growth company

x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes   x No

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ¨ Yes   ¨ No

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of December 14, 2018, 24,827,264 common shares are Issued and Outstanding.

 

 
 
 
 

 

PART I

 

Item 1. Business.

 

Apawthecary Pets USA was formerly known as Bookedbyus Inc., a development stage company, which was formed on December 27, 2007. Bookedbyus Inc. had commenced limited operations, primarily focused on organizational matters. The Company had not yet implemented its business model and has generated $31,502 in revenue since inception from consulting projects unrelated to our planned business model and has incurred losses of $400,549 through August 31, 2018.

 

On January 1, 2011, the Company entered into an agreement (the “License Agreement”) with Digital Programa Inc. The Company has licensed the Digital Programa System which is digital media management software which emphasizes a touch-optimized web framework for smart phones and tablets. The basic terms of the License Agreement are as follows:

 

 

1) Digital Programa Inc. has granted exclusive license to the Company to market and sell certain software systems, as defined in the License Agreement, which consists of eDrive and iDrive (the “System”), exclusively in Canada and the United States;

 

 

 

 

2)

The Company issued 1,000,000 common shares of the Company, valued at $0.005 per share, to Digital Programa Inc. for initial, non-recurring, non-refundable license fee;

 

 

 

 

3) The Company is required to pay Ditgal Programa Inc. a 5% royalty on gross revenues for each month from the sales of the System software; and

 

 

 

 

4) The License Agreement shall remain in effect for a period of 10 years, commencing on 1 January 2011, and the Company has the option to renew the License Agreement for an additional 10 year term provided that the Company pay then current renewal fee, which shall be no greater than 10% of the then current license fee charged by Digital Programa Inc. for new licensees.

 

Digital Programa Inc. (“DP”) is a privately owned and controlled corporation located at Plaza 2000 Building, P.O. Box 0815-01117, 50th Street Panama, Republic of Panama. DP develops digital media management and workflow automation system software for the entertainment business. DP has developed an online digital collaboration management system that corporations who create and distribute rich media (photo, audio and video as well as other digital assets like documents), find, organize, securely share, distribute, store and view such rich media. The DP software solution is a group of web services that permits enterprises to upload, download, search, collaborate, notify, track usage and authenticate users to perform authorized transactions with digital media, all of which are easily logged and reported.

 

We intended to market two software applications developed by DP: “eDrive” and “iDrive”. eDrive is a web and email based rich media application that allows clients to push rich media marketing material to its customers with a fully integrated back end including business analytics. eDrive, allows companies to market their message or product directly to their customers.

 

The Company has not yet implemented its business model. We must raise cash to implement our strategy and stay in business. In the event we do not raise any proceeds, the Company’s existing cash will not be sufficient to fund the expenses related to maintaining a reporting status and to implement its planned business. Accordingly, the Company has abandoned its business related to Digital Programma Inc. and the Digital Programma System. The Company intends to implement a different business plan; a business that will sell 100% all natural hemp infused wellness treats for dogs, cats and horses.

 

On July 20, 2017 the Company changed its name to Apawthecary Pets USA

 

On August 24, 2017 Apawthecary Pets USA entered into a license agreement with Solace Management Group Inc. a British Columbia corporation. The material terms of such license agreement are:

 

 

1. Upon execution of the Agreement, Apawthecary Pets USA shall provide a non-refundable license fee in the amount of $100,000 (the "License Fee") to be held in an escrow account pursuant and subject to the terms of an escrow agreement whereby the License Fee will remain in the escrow account until the earlier of a $3,000,000 raise by the Licensee or after the Set-up Period.

 

 

 

 

2. Term of the Licence Agreement is 10 years with a 5 year renewal term.

 

 

 

 

3. The license is an exclusive, non-transferable, non-sub licensable license to manufacture, sell, represent, market, distribute and advertise the Licensed Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Management Group Inc.’s Licensed Products and Services, Marks, Manuals, brands, and the business format, formulations, methods, specifications, standards, and operating procedures.

 

 

 

 

4. Apawthecary Pets USA shall pay the Solace Management Group Inc. for all packaging and shipment expenses to the Licensee at the then current market rate plus 20%.

 

 

 

 

5. Royalties will commence to accrue when the Licensed Products are accepted by the Apawthecary Pets USA. Apawthecary Pets USA shall pay quarterly royalties in addition to the yearly royalty fee, 10% of sales based on the wholesale price of each item.

 

 
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Apawthecary Pets Inc., a Canadian corporation, licensed the brand and distribution rights for Apawthecary Pets for use in Canada from Solace Management Group Inc. Apawthecary Pets Inc. licensed the same brand and products that were licensed by Apawthecary Pets USA however Apawthecary Pets Inc.’s distribution rights are restricted to Canada. Apawthecary Pets Inc. is not affiliated with Apawthecary Pets USA. Apawthecary Pets Inc.’s sole shareholder and sole officer Tami Kersch has a 13% ownership in Apawthecary Pets USA and is married to Bradley Kersch the Company’s President, Director and significant shareholder.

 

Solace Management Group Inc. and Apawthecary Pets USA have an officer and director in common, Bradley Kersch. Apawthecary Pets USA has negotiated a licensing and distribution agreement with Solace Management Group Inc.

 

The Company has raised $102,500 through recent sales of its common stock. In the event we do not raise any proceeds from this offering, the Company’s existing cash will not be sufficient to maintaining a reporting status and to implement its planned business. The Company will continue to raise money through private placements of its common stock.

 

The Company’s auditors have issued an opinion that the ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.

 

Our business office is located at 297 Kingsbury Grade Suite 100, Lake Tahoe NV 89449-4470, our telephone number is (323) 345-4587 and our fax number is (323) 634-1001. Our United States and registered statutory office is located at 297 Kingsbury Grade, Lake Tahoe NV 89449-4470, telephone number (800) 553-0615.

 

Product Overview

 

Apawthecary Treats are wellness treats infused with our proprietary blend of plant-based ingredients. AMERICAN made with non-GMO human grade food ingredients. Our products are created to help maintain health and alleviate aches and pains from injury or old age.

 

Apawthecary is committed to researching and developing pet treat products using all natural ingredients. We source organic wherever we can. Our treats are for overall health benefits, from pain to calming. 200g bags,

 

Apawthecary Tinctures - Apawthecary Pet Tinctures higher concentrate of hemp terpenes per 30ml bottles. The concentrates come in Bacon flavour and Seafood flavouring Ingredients:

 

Hemp Terpenes, MCT Oil, Natural flavourings. (no animal by products) For pain and anxiety.

 

 
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Apawthecary’s - Wild Tails- Meal replacement bars: COMPLETE K9 MEAL BARS ON THE GO! Made with 100% grain-free, all natural, human grade ingredients. Convenient, healthy, premium products interchangeable with regular dog food. Four Flavours –Pumpkin, Peanut Butter, Bacon, Beef

 

Wrinkles by APAWTHECARY PETS All-natural organic face cream specially formulated to treat & prevent skin fold disease, infection & discomfort. For treating & preventing: Skin fold dermatitis, Yeast & bacterial infections, Redness, chaffing, inflammation, Crusty buildup, Sores, pimples, scabbing, Interdigital cysts, Itchy, flaky skin, hair loss, baldness, Unpleasant odor.

 

Hot Spot by APAWTHECARY PETS 100% all-natural organic salve specially formulated to treat “hot spots” Hotspots are essentially an immune-mediated response of the skin. They appear as red, moist, irritated, sometimes oozy skin lesions.

 

Nose Soother by APAWTHECARY PETS 100% all-natural organic salve specially formulated to treat Crusty and damaged noses. May heal crusty, dry, cracked, chapped, even bleeding dog noses. Our cream for dog’s noses is a synergistic, perfect blend of organic, vegan, nourishing, healing and moisturizing ingredients. Snout Soother can be applied to a dog’s nose to treat painful cracking and dryness as well as a preventative with its natural sunscreen elements.

 

Pet Paw Protection: 100% All Natural Organic Pet Paw Protection Wax. Prevent damage and paw conditions with Apawthecary’s Paw Protection. The paw protection comes in wax form and provides protection even in the most extreme conditions. Recommended for dogs who don't like boots on their feet!

 

Horse Tincture: 100% All Natural Organic tincture for horses. Specifically formulated and flavored for horses. Apple cinnamon flavour in a 50ml bottle contains 250mg of hemp terpenes / medicine

 

 
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Vet-Line: Our Vet-Line of tinctures have been specially formulated for use by and recommended by Veterinarians. This line of tinctures are higher in Hemp medicine than our regular tinctures and are only sold through Veterinarians. From 120mg to 2000mg dosages.

 

According to the American Pet Products Association, The USA pet industry has tripled in size since 1994 from annual revenues of $17 billion to over $60 billion today. (American Pet Products Association’s U.S. Pet Industry Spending Figures & Outlook) This dramatic rise can be linked to three significant paradigm shifts:

 

1.

The awareness and acceptance of pets being a member of our family

 

2.

The increasing focus on product ‘premium’, wellness and quality of life in our society

 

3.

Rising awareness of food safety and security concerns related to continuing pet food recalls

 

Apawthecary Pet’s initial hemp-based treats and tinctures will compete in the ‘wellness pet treat or functional chew’ category. This market segment continues to grow as sophisticated ‘treat’ formulas provide functional health benefits and attract supplement consumers.

 

Apawthecary Pet’s products will be sold online, in pet stores and will be offered as an anti-inflammatory and anti-anxiety supplement, from the supplement and pet medication market who are seeking more natural - yet effective alternatives to pharmaceutical medicines.

 

Competition

 

Several companies have similar offerings to Apawthecary. To managements best of knowledge, none have combined the benefits of hemp into an all-in-one product offering to the dog, cat and equestrian markets to date. With Apawthecary’s proprietary process we can infuse any product from jerky to bones with our enriched formulas.

 

Popular competitive products include: Zuke's® ‘Hip-Action’ Hip and Joint Chews, Pet Naturals® ‘Calming’ Soft Moist Chews, Cloud Star® ‘Dynamo Dog’ Hip and Joint Treats, Blue Buffalo® ‘Jolly Joints’ Jerky Treats.

 

Hemp supplement products: There are four companies that we know of who are currently operating in this category. They are offering products in capsule and baked biscuit formats; Canna-PetTM ‘Canna-Biscuits’ and capsules, Canna-CompanionTM Hemp capsules, TreatiblesTM baked CBD dog biscuits and TruLeaf dog chews.

 

Market Opportunity

 

Apawthecary Pets USA is an American hemp company positioning a niche in the fast growing and dynamic $60 billion American pet industry (http://www.americanpetproducts.org/press_industrytrends.asp ) with its line of Pet products branded under “Apawthecary Pets”. Apawthecary has entered the natural pet product sector with a product line consisting of innovative hemp-based wellness pet products pet treats, pet tinctures, creams and slaves followed by hemp based supplements for pets in the USA market. This will lay a profitable foundation for the company’s long-term strategy to secure a new animal drug application for a Hemp-based pet medication sold via veterinary prescription in the $13.8 billion pet medication market.

 

Statistics show that consumers are looking for higher quality products that address health needs common to their pets, without having to worry about food safety or harmful side effects. Products containing hemp, including hemp seed oil, hemp protein and hemp terpenes, are gaining significant acceptance as evidence of their nutritional and medicinal effectiveness becomes recognized. (http://www.forbes.com/sites/nancygagliardi/2015/02/18/consumers-want-healthy-foods-and-will-pay-more-for-them/#236d595875c5)

 

 
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Apawthecary is well-positioned to meet the consumer demand for innovative pet health by marketing hemp-focused natural products that are professionally designed and, scalable for sale in the USA market. The Apawthecary product line-up provides hemp-based antioxidant, joint and calming support in biscuit format and a liquid tincture that are currently sold successfully across Canada. Apawthecary Pets USA has acquired the worldwide rights, with an option to purchase the Canadian rights for the Apawthecary Pet brand and its proprietary formulations. The company will be introducing this line to the American market and will utilize all natural ingredients including but not limited hemp as the active ingredient for anti-inflammatory and anti-anxiety supplements in the USA and worldwide. Apawthecary Pets has tremendous benefits by having continued R&D done by Apawthecary Pets Canada. This would include and not limited to new formulations and on-going updates in product development, expanding development into cat treats, horse treats and a full meal replacement bar for dogs. Apawthecary will utilize its proprietary procedures to infuse its products, this process allows pets to absorb the medicine and nutrients more effectively.

 

The USA pet industry has tripled in size since 1994 from annual revenues of $17 billion to over $60 billion today. – (http://www.americanpetproducts.org/press_industrytrends.asp) This dramatic rise can be linked to three significant paradigm shifts:

 

 

·

The awareness and acceptance of pets being a member of our family

 

·

The increasing focus on product ‘premium’, wellness and quality of life in our society

 

·

Rising awareness of food safety and security concerns related to continuing pet food recalls

 

Apawthecary Pet’s initial hemp-based treats and tinctures will enter the $3.2 billion natural pet product market and compete in the ‘wellness pet treat or functional chew’ category. This market segment continues to grow as sophisticated ‘treat’ formulas provide functional health benefits and attract supplement consumers. (http://www.packagedfacts.com/Pet-Supplements-Nutraceutical-7259313/)

 

Apawthecary Pet’s products will be sold online, in pet stores and will be offered as an anti-inflammatory and anti-anxiety supplement, capturing consumers from the supplement and pet medication market who are seeking more natural - yet effective alternatives to pharmaceutical medicines.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.

 

Item 1B. Unresolved Staff Comments.

 

None

 

Item 2. Properties.

 

We do not own any real estate or other properties and have not entered into any long-term lease or rental agreements for property.

 

Item 3. Legal Proceedings.

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or stockholder is a party adverse to the Company or has a material interest adverse to the Company.

 

Item 4. (Removed and Reserved)

 

 
6
 
 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Although our common stock is not listed on a public exchange, we intend to apply for quotation on the Over-the-Counter Bulletin Board (OTCBB). In order to be quoted on the OTCBB, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, who, generally speaking, must approve the first quotation of a security by a market maker on the OTCBB, nor can there be any assurance that such an application for quotation will be approved.

 

Item 6. Selected Financial Data

 

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Management’s Discussion and Analysis

 

This section of the Registration Statement 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.

 

Capital Resources and Liquidity

 

Our auditors have issued a “going concern” opinion, meaning that there is substantial doubt if we can continue as an on-going business unless we obtain additional capital. No substantial revenues from our planned business model are anticipated until we have completed financing the Company.

 

We need to seek capital from resources such as the sale of registered securities on Form S-1 and private placements in the Company’s common stock or debt financing, which may not even be available to the Company. However, if such financing were available, because we are a, early stage company with no or limited operations to date, it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the company cannot raise additional proceeds via such financing, it may be required to cease business operations.

 

As of August 31, 2018, we had $42,594 in cash as compared to $13,380 as of August 31, 2017. As of the date of this Form 10-K, the current funds available to the Company will not be sufficient to fund the expenses related to maintaining a reporting status. We are in the process of seeking additional equity financing in the form of private placements to fund our operations over the next 12 months and we have filed a registration statement on Form S-1 to raise $3,000,000 to fund our intended business operations.

 

Management believes that if subsequent private placements are successful or we are successful in raising funds from registered securities, we will generate sales revenue within twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

 

The Company raised $17,500 during August 31, 2017 for the sale of common stock at $0.10 per common share and issued 175,000 common shares. During the year ended August 31, 2018, the Company issued 850,000 common shares at a price of $0.10 per common share to raise total cash proceeds of $85,000. The Company’s existing cash will not be sufficient to maintaining a reporting status and to implement its planned business. The Company will continue to raise money through private placements of its common stock.

 

We do not anticipate researching any further products nor the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees.

 

Results of Operations

 

At August 31, 2018, the Company was not engaged in continued business and has been primarily involved in early stage activities to date. Due to a lack of funding, we have not implemented our Plan of Operations.

 

The Company has not yet implemented its business model. We must raise cash to implement our strategy and stay in business. In the event we do not raise any proceeds, the Company’s existing cash will not be sufficient to fund the expenses related to maintaining a reporting status and to implement its planned business. Accordingly, the Company intends to implement a different business plan, a business that will sell 100% all natural hemp infused wellness treats for dogs, cats and horses.

 

We had $Nil in revenue for the fiscal year ended August 31, 2018 as compared to revenue for the fiscal year ended August 31, 2017 of $Nil.

 

 
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Total expenses in the fiscal year ended August 31, 2018 were $48,274 as compared to total expenses for the fiscal year ended August 31, 2017 of $30,267 resulting in a net loss for the fiscal year ended August 31, 2018 of $48,274 as compared to a net loss of $30,267 for the fiscal year ended August 31, 2017. The net loss for the fiscal year ended August 31, 2018 is a result of Professional fees of $35,677, comprised primarily of legal and accounting expense, General and administrative expense of $12,597, Management fees of $Nil as compared to the net loss for the fiscal year ended August 31, 2017 of $30,267 which was a result of Professional fees of $13,200, comprised primarily of legal and accounting expense, General and administrative expense of $7,142 Management fees of $9,925 and Rent of $Nil.

 

Off-balance sheet arrangements

 

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

Plan of Operations

 

Over the 12 month period our company must raise capital to introduce its planned products and start its sales. The amount of the offering will likely allow us to operate for at least one year however, due to the fact that there is no minimum on sold shares, you may be investing in a company that will not have the funds necessary to fully develop its Plan of Operations.

 

We are highly dependent upon the success of the offering described herein. Therefore, the failure thereof would result in need to seek capital from other resources such as private placements in the Company’s common stock or debt financing, which may not even be available to the Company. However, if such financing were available, because we are a development stage company with no or limited operations to date, it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the company cannot raise additional proceeds via such financing, it would be required to cease business operations.

 

Over the next twelve months, we intend to l (i) open our office in Washington (ii) introduce all of our products described in the Product Overview section on page 33; (iii) launch our website as licensed from Solace Management Group Inc.

 

The first phase of our planned operations over this period would be to lease office space in Washington and build out the office to meets the Company needs. Immediately thereafter, the Company will launch its website and secure initial inventory.

 

The Company has budgeted: $11,450 for legal and accounting; $988,550 for general business development, build out of USA sales office lease of equipment for production travel expenses, wages; $300,000 sales commissions as necessary; $100,000 Legal fees; $1,600,000 additional product research and development, working capital, inventory & raw materials.

 

Apawthecary Pet’s products will be sold online, in pet stores, veterinary clinics, distributers and will be offered as an anti-inflammatory and anti-anxiety supplement, capturing consumers from the supplement and pet medication market who are seeking more natural - yet effective alternatives to pharmaceutical medicines.

 

In the event the Company sells 25% of the shares offered, the Company will introduce two of its planned products, 1) Tinctures 2) Creams and salves – direct to consumer through online sales and through distributers. We will utilize co-packers to produce our products and fulfillment houses to full fill the orders on a cost plus basis. The Company will minimize its budget by the following: $11,450 for legal and accounting; $651,462 for build out of USA sales office lease of equipment for production travel expenses, wages; $37,500 sales commissions as necessary; $49,588 working capital, inventory & raw materials.

 

In the event the Company sells 50% of the shares offered, the Company will introduce two of its planned products, 1) Tinctures 2) Creams and salves – Increase markets by going direct to consumer through online sales through distributers and direct to Veterinarians. We will utilize co-packers to produce our products and fulfillment houses to full fill the orders on a cost plus basis. The Company will minimize its budget by the following: budget by the following: $11,450 for legal and accounting; $760,000 for build out of USA sales office lease of equipment for production travel expenses, wages; $75,000 sales commissions as necessary; $50,000 Legal fees; $603,550 additional product research and development, working capital, inventory & raw materials.

 

In the event the Company sells 75% of the shares offered, the Company will introduce three of its planned products, 1) Tinctures 2) Creams and salves 3) Dog Treats –by going direct to consumer through online sales through distributers and direct to Veterinarians. We will utilize a smaller corporate plant in Washington and co-packers to produce our products and fulfillment houses to full fill the orders on a cost plus basis. The Company will minimize its budget by the following: $11,450 for legal and accounting; $857,503 for build out of USA sales office lease of equipment for production travel expenses, wages; $112,500 sales commissions as necessary; $100,000 Legal fees; $1,168,547 additional product research and development, working capital, inventory & raw materials.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.

 

 
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Item 8. Financial Statements and Supplementary Data.

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of

Apawthecary Pets USA

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Apawthecary Pets USA (the “Company”) as of August 31, 2018 and 2017, and the related statements of operations, changes in stockholders' deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2015.

Houston, Texas

December 14, 2018

 

 
9
 
 

 

Apawthecary Pets USA

 

 

 

 

 

 

Balance Sheets

 

 

 

 

 

 

(Expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 31,

 

 

August 31,

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 42,594

 

 

$ 13,380

 

Inventory

 

$ 7,200

 

 

$ -

 

Total current assets

 

 

49,794

 

 

 

13,380

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 49,794

 

 

$ 13,380

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 5,069

 

 

$ 5,333

 

Accounts payable due to related parties (Note 3)

 

 

551

 

 

 

599

 

Due to related parties (Note 3)

 

 

70,673

 

 

 

70,673

 

Total current liabilities

 

 

76,293

 

 

 

76,605

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

76,293

 

 

 

76,605

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

Capital stock (Note 4)

 

 

 

 

 

 

 

 

Authorized

 

 

 

 

 

 

 

 

75,000,000 of common shares, par value $0.001

 

 

 

 

 

 

 

 

Issued and outstanding

 

 

 

 

 

 

 

 

24,827,264 common shares issued and outstanding (2017 - 23,977,264), par value $0.001

 

 

24,827

 

 

 

23,977

 

Additional paid in capital

 

 

349,223

 

 

 

265,073

 

Accumulated deficit

 

 

(400,549 )

 

 

(352,275 )

 

 

 

 

 

 

 

 

 

Total stockholders' deficit

 

 

(26,499 )

 

 

(63,225 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

$ 49,794

 

 

$ 13,380

 

 

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

 

 
10
 
 

 

Apawthecary Pets USA

 

 

 

 

 

 

Statements of Operations

 

 

 

 

 

 

(Expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the

 

 

For the

 

 

 

year ended

 

 

year ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

Professional fees

 

$ 35,677

 

 

$ 13,200

 

General and administrative

 

 

12,597

 

 

 

7,142

 

Management fees (Note 3)

 

 

-

 

 

 

9,925

 

 

 

 

 

 

 

 

 

 

Total operating Expenses

 

 

48,274

 

 

 

30,267

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (48,274 )

 

$ (30,267 )

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share - basic and diluted

 

 

(0.00

)

 

 

(0.00

)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares - basic and diluted

 

 

24,799,935

 

 

 

23,033,065

 

 

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

 

 
11
 
 

 

Apawthecary Pets USA

 

 

 

 

 

 

 

 

 

 

Statements of Changes in Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

(Expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

For the years ended August 31, 2018 and August 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

shares issued

 

 

Capital stock

 

 

paid in capital

 

 

deficit

 

 

deficit

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance at August 31, 2016

 

 

22,170,000

 

 

 

22,170

 

 

 

86,180

 

 

 

(322,008 )

 

 

(213,658 )

Shares issued for settlement for due to related party

 

 

1,632,264

 

 

 

1,632

 

 

 

161,568

 

 

 

-

 

 

 

163,200

 

Common shares sold for cash

 

 

175,000

 

 

 

175

 

 

 

17,325

 

 

 

 

 

 

 

17,500

 

Net loss for the year

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,267 )

 

 

(30,267 )

Balance at August 31, 2017

 

 

23,977,264

 

 

 

23,977

 

 

 

265,073

 

 

 

(352,275 )

 

 

(63,225 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at August 31, 2017

 

 

23,977,264

 

 

 

23,977

 

 

 

265,073

 

 

 

(352,275 )

 

 

(63,225 )

Common shares sold for cash

 

 

850,000

 

 

 

850

 

 

 

84,150

 

 

 

-

 

 

 

85,000

 

Net loss for the year

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48,274 )

 

 

(48,274 )

Balance at August 31, 2018

 

 

24,827,264

 

 

 

24,827

 

 

 

349,223

 

 

 

(400,549 )

 

 

(26,499 )

 

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

 

 
12
 
 

 

Apawthecary Pets USA

 

 

 

 

 

 

Statements of Operations

 

 

 

 

 

 

(Expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the

 

 

For the

 

 

 

year ended

 

 

year ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (48,274 )

 

$ (30,267 )

Changes in operating asssets and liabilities:

 

 

 

 

 

 

 

 

Increase (decrease) in inventory

 

 

(7,200 )

 

 

-

 

Increase (decrease) in accounts payable and accrued liabilities

 

 

(264 )

 

 

1,942

 

Increase (decrease) in accounts payable due to related parties

 

 

(48 )

 

 

(9,925 )

 

 

 

 

 

 

 

 

 

Cash flows used in operating activities

 

 

(55,786 )

 

 

(18,400 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Advances from related parties

 

 

-

 

 

 

13,300

 

Proceeds from common shares sold for cash

 

 

85,000

 

 

 

17,500

 

 

 

 

 

 

 

 

 

 

Cash provided by financing activities

 

 

85,000

 

 

 

30,800

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

29,214

 

 

 

12,400

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of year

 

 

13,380

 

 

 

980

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of year

 

$ 42,594

 

 

$ 13,380

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$ -

 

 

$ -

 

Income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Shares issued in settlement of due to related parties

 

$ -

 

 

$ 163,200

 

 

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

 

 
13
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars)   

 

1. Nature and Continuance of Operations

 

 

 

Apawthecary Pets USA (the “Company”) was incorporated under the laws of the States of Nevada on December 27, 2007. The Company intends to operate in the pet industry.

 

On July 20, 2017, the Company changed its name from Bookedbyus Inc. to Apawthecary Pets USA.

 

On January 9, 2008, the Company affected a thousand (1,000) for one (1) forward stock split of all outstanding common shares and a corresponding forward increase in the Company’s authorized common stock. The effect of the forward split was to increase the number of the Company’s authorized common shares from 75,000 shares par value $0.001 to 75,000,000 shares par value $0.001. At the time of the stock split, the Company had no commons shares issued and outstanding. All references in these financial statements to number of common shares, price per share and weighted average number of common shares have been adjusted to reflect the stock split on a retroactive basis, unless otherwise noted. (Note 4).

 

The Company’s financial statements as at August 31, 2018 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $48,274 for the year ended August 31, 2018 and $30,267 for the year ended August 31, 2017 and has a working capital deficit at August 31, 2018. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ended August 31, 2019. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 
14
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

1. Nature and Continuance of Operations (Continued)

 

 

 

As of August 31, 2018, the Company was not engaged in continued business, and had significant expenses from early stage activities. Although management is currently attempting to implement its business plan and is seeking additional sources of financing, there is no assurance the activity will be successful. Accordingly, the Company must rely on its president to perform essential functions without compensation until a business operation can be commenced. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

2. Significant Account Policies

 

 

 

The following is a summary of significant accounting policies used in the preparation of these financial statements.

 

Definition of fiscal year

 

The Company’s fiscal year end is August 31st.

 

Basis of presentation

 

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.GAAP”).

 

Cash and cash equivalents

 

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

 

Inventory

 

The company reviews inventory usage reports or physically examines the inventory to determine which items should be disposed of. We then determine the most likely disposition price of the obsolete items, subtract this projected amount from the book value of the obsolete items, and set aside the difference as a reserve. As the company later disposes of the items, or the estimated amounts to be received from disposition change, adjust the reserve account to reflect these events. Inventories are stated at the lower of cost or market or net realizable value, using the first-in first-out method. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company regularly review inventory quantities on hand, future purchase commitments with supplies, and the estimated utility of inventory. If the review indicates a reduction in utility below carrying value, the Company reduces the inventory to a new cost basis through a charge to cost of goods sold. All inventory as of August 31, 2018 is finished goods.

 

Financial instruments

 

Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. Fair value of financial instruments is the amount at which the instruments could be exchanged in a current transaction between willing parties. The Company considers the carrying amounts of related party loans and accounts payable approximate their fair values because of the short period of time between the origination of such instruments and their expected realization.

 

 
15
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars 

 

2. Significant Account Policies (Continued)

 

 

 

Financial instruments

 

Level 1 The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

 

Level 2 FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

 

Level 3 If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

 

Credit Risk

 

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents. The Company deposits cash and cash equivalents with high credit quality financial institutions as determined by rating agencies.

 

Currency Risk

 

 

The Company’s assets and liabilities are in U.S. dollars, which is the Company’s functional and presentation currency. The Company has no transactions in currencies other than U.S. dollar. As a result, foreign currency risk is insignificant.

 

 

Interest Rate Risk

 

 

The Company has cash balances and no interest-bearing debt. It is management’s opinion that the Company is not exposed to significant interest risk arising from these financial instruments.

 

 
16
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

2. Significant Account Policies (Continued)

 

 

 

Financial instruments (Continued)

 

Liquidity Risk

 

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with its financial liabilities. The Company is reliant upon equity issuances and advances from related parties as its sole source of cash. The Company has been successful in raising equity financing in the past; however, there is no assurance that it will be able to do so in the future.

 

Income taxes

 

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits 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, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

 

Basic and diluted net loss per share

 

The Company computes net loss per share in accordance with ASC 260 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive 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 potentially dilutive shares if their effect is anti-dilutive.

 

Related parties

 

 

Accounts payable due to related party represents an obligation to pay for services that were used in the ordinary course of business. The amount is classified as a current liability as payment is due on demand.

 

 
17
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

2. Significant Account Policies (Continued)

 

 

 

Financial instruments (Continued)

 

Comprehensive loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at August 31, 2018, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

 

Start-up expenses

 

The Company has adopted ASC 720-15, “Start-Up Costs”, which requires that costs associated with start-up activities be expensed as incurred. Accordingly, start-up costs associated with the Company's formation have been included in the Company's general and administrative expenses.

   

Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

 

 

Stock-based compensation

 

 

 

ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). Adoption of ASC 718 does not change the way the Company accounts for share-based payments to non-employees, with guidance provided by ASC 505-50, “Equity-Based Payments to Non-Employees”.

 

 
18
 
 

  

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

2. Significant Account Policies (Continued)

 

 

 

Financial instruments (Continued)

 

Recent accounting pronouncements

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The core principle of this ASU is that revenue should be recognized for the amount of consideration expected to be received for promised goods or services transferred to customers. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, and assets recognized for costs incurred to obtain or fulfill a contract.ASU 2014-09 was scheduled to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date,” which deferred the effective date of ASU 2014-09 by one year and allowed entities to early adopt, but no earlier than the original effective date. ASU 2014-09 is now effective for public business entities for the annual reporting period beginning December 15, 2017. This update allows for either full retrospective or modified retrospective adoption. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which amends guidance previously issued on these matters in ASU 2014-09. The effective date and transition requirements of ASU 2016-10 are the same as those for ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which clarifies certain aspects of the guidance, including assessment of collectability, treatment of sales taxes and contract modifications.

 

The Company has considered all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

 

3. Due to Related Parties and Related Party Transactions

 

 

 

During the year ended August 31, 2018, the Company accrued management fee in the amount of $Nil (2017 - $9,925). The outstanding balance of management fees payable is $551 and $599 as of August 31, 2018 and 2017, respectively.

 

 

 
19
 
 
  

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

3. Due to Related Parties and Related Party Transactions (Continued)

 

 

 

As of August 31, 2018, related parties of the Company have provided a series of loan, totaling $70,673 (2017 - $70,673), for working capital purposes. During the year August 31, 2017, the Company borrowed $20,473. These amounts are unsecured, interest-free and are due on demand.

 

During the year ended August 31, 2017, the Company accrued rent expense in the amount of $Nil (2016 - $36,800) to a company with an officer in common. The outstanding balance of rent payable was $Nil and $76,800 as of August 31, 2017 and 2016, respectively.

 

Yuying Liang has contributed uncompensated financial accounting services to Apawthecary Pets USA.

 

On August 24, 2017 Apawthecary Pets USA entered into a license agreement with Solace Management Group Inc. a British Columbia corporation. The material terms of such license agreement are:

 

 

1. Upon execution of the Agreement, the Apawthecary Pets USA shall provide a non-refundable license fee in the amount of $100,000 (the "License Fee") to be held in an escrow account pursuant and subject to the terms of an escrow agreement whereby the License Fee will remain in the escrow account until the earlier of a $3,000,000 raise by the Licensee or after the Set-up Period.

 

 

 

 

2. Term of the License Agreement is 10 years with a 5 year renewal term.

 

 

 

 

3. The license is an exclusive, non-transferable, non-sub licensable license to manufacture, sell, represent, market, distribute and advertise the Licensed Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Management Group Inc.’s Licensed Products and Services, Marks, Manuals, brands, and the business format, formulations, methods, specifications, standards, and operating procedures.

 

 

4. Apawthecary Pets USA shall pay the Solace Management Group Inc. for all packaging and shipment expenses to the Licensee at the then current market rate plus 20%.

 

 

 

 

5. Royalties will commence to accrue when the Licensed Products are accepted by the Apawthecary Pets USA. Apawthecary Pets USA shall pay quarterly royalties in addition to the yearly royalty fee, 10% of sales based on the wholesale price of each item.

 

 

Solace Management Group Inc. owns the brand and intellectual property rights to Apawthecary Pets.

 

Apawthecary Pets Inc., a Canadian corporation licensed the brand and distribution rights for Apawthecary Pets for use in Canada from Solace Management Group Inc.

 

Solace Management Group Inc. and Apawthecary Pets USA have an officer and director in common, Bradley Kersch. Apawthecary Pets USA has negotiated a licensing and distribution agreement with Solace Management Group Inc. The $100,000 License fee has not been paid as of August 31, 2018.

 

 
20
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

4. Capital Stock

 

 

 

The total authorized capital is 75,000,000 common shares with a par value of $0.001 per common share.

 

On January 9, 2008, the Company affected a thousand (1,000) for one (1) forward stock split of all outstanding common shares and a corresponding forward increase in the Company’s authorized common stock. The effect of the forward split was to increase the number of the Company’s authorized common shares from 75,000 shares par value $0.001 to 75,000,000 shares par value $0.001. At the time of the stock split, the Company had no common shares issued and outstanding.

 

All references in these financial statements to number of common shares, price per share and weighted average number of common shares have been adjusted to reflect the stock split on a retroactive basis, unless otherwise noted.

 

Issued and outstanding

 

The Company had 24,827,264 and 23,977,264 common shares issued and outstanding as at August 31, 2018 and August 31, 2017, respectively.

   

On February 24, 2017, the Company issued 1,632,264 common shares to officers of the Company for the settlement of $163,200 in related party debt. The Company determined the fair market value of each common share to be $0.10 per share. There was no gain or loss on settlement of related party debt.

 

During the year ended August 31, 2017, the Company issued 175,000 common shares at a price of $0.10 per common share to raise total cash proceeds of $17,500.

 

During the year ended August 31, 2018, the Company issued 850,000 common shares at a price of $0.10 per common share to raise total cash proceeds of $85,000.

 

5. Income Taxes

 

 

 

The Company accounts for income taxes under FASB Accounting Standard Codification ASC 740 "Income Taxes". ASC 740 requires use of the liability method. ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. There was a change in control in the current year and as such the total amount should be limited to section 382 of the Internal Revenue Code such a change in control negates much of the tax loss carry forward and deferred income tax.

 

 
21
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

5. Income Taxes (Continued)

 

 

 

As of August 31, 2018, and 2017, the Company had net operating loss carry forwards of $400,549 and $352,275 that may be available to reduce future years' taxable income. 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 carryforwards. Net operation losses will begin to expire in 2030. The Company has not filed any tax returns and as such all tax years are open for inspection.

 

Components of net deferred tax assets, including a valuation allowance, are as follows at August 31, 2018 and 2017:

 

 

 

2018

 

 

2017

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carry forward

 

 

102,855

 

 

 

123,296

 

Less: valuation allowance

 

 

(102,855 )

 

 

(123,296 )

Net deferred tax assets

 

 

-

 

 

 

-

 

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction took effect on January 1, 2018. As the Company’s 2018 fiscal year ended on August 31, 2018, the Company’s federal blended corporate tax rate for fiscal year 2018 is 25.7%, based on the applicable tax rates before and after the Tax Act and the number of days in the fiscal year to which the two different rates applied.

 

 

 

The valuation allowance for deferred tax assets as of August 31, 2018 was $102,855, as compared to $123,296 as of August 31, 2017. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of August 31, 2018.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes.

 

 
22
 
 

 

Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars

 

5. Income Taxes (Continued)

 

 

 

The sources and tax effects of the differences are as follows:

 

U.S. federal statutory rate

 

 

21 %

Valuation reserve

 

 

(21 %)

Total

 

 

0 %

 

 

At August 31, 2018, the Company had unused net operating loss carryover approximating $400,549 with a full valuation allowance of $102,855 that is available to offset future taxable income which expires beginning 2030.

 

 

6. Contracts Under Commitment

 

 

 

The Company has leased an office in Los Angeles California for a period of twelve months commencing January 1, 2014. The office is located at Suite 101, 619 S. Ridgley Los Angeles CA 90036 ($2,000 per month) due on the first calendar day of each month. This twelve-month term automatically renews if no written notice of termination is given 30 days prior to the end on each term. The landlord agrees to accept either cash or shares as settlement for each months' rent. The landlord will defer rent in lieu of common shares at $0.10 a share as per the Registration Statement or cash. As a concession for this deferment, the landlord will charge an additional 20% per month for each month deferred. (ie. $400 or 4,000 shares at $0.10 per share.)

 

The California lease agreement was terminated effective August 31, 2016. The Company settled accounts payable to Digital Pilot a corporation controlled by Aerock Fox an Officer and Director of the company. As of August 31, 2017, the Company has an undetermined amount use of 619 S.Ridgley, Los Angeles CA suite for an indefinite period of time at no cost.

 

On February 24, 2017, the Company issued 768,000 common shares with a fair value of $0.10 per shares to settle accounts of $76,800 in the California lease agreement.

 

The Company has entered into a consulting agreement with Brad Kersch for marketing and business consulting. The term of the agreement is one year beginning January 1, 2014. Consideration for such consulting services is $2,000 per month payable in cash or common shares, at the Company’s election. The Consultant agrees to accept either cash or shares as settlement for each months' pay.

 

The Consultant agrees to defer payments in lieu of shares at $0.10 a share as per the Registration Statement. As a concession for this deferment, the Consultant will charge an additional 20% per month for each month deferred. (ie. $400 or 4,000 shares at $0.10 per share.)

 

The consulting agreement was terminated effective December 31, 2016.

 

On February 24, 2017, the Company issued 864,000 common shares with a fair value of $0.10 per share to settle accounts payable of $86,400 in the consulting agreement with Brad Kersch, who is an officer and director of the company.

 

 
23
 
 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

 

In connection with this annual report, as required by Rule 13a -15d and 15d-15e under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer and principal financial officer. Based upon that evaluation, our company’s principal executive officer and principal financial officer concluded that as of August 31, 2017 our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

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

 

 

1. Pertains to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and disposition of assets;

 

 

 

 

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

 

 

 

 

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

 

Management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments as of the end of the period covered by this report. Management conducted the assessment based on certain criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. As of August 31, 2018, management determined material weaknesses occurred over our internal control over financial reporting as discussed below.

 

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. Due to these material weaknesses management concluded that our internal control over financial reporting was not effective as of August 31, 2018.

 

 
24
 
 

 

Material Weakness Discussion and Remediation

 

Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on the Company's previous reported financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can result in the Company's determination to its financial statements for the future periods.

 

We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future.

 

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the small business issuer's last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None

 

 
25
 
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Identification of directors and executive officers

 

Our directors serve until their successor are elected and qualified. Our officers are elected by the Board of Directors to a term of one (1) year and serve until their successor(s) is duly elected and qualified, or until they are removed from office. The Board of Directors has no nominating or compensation committees. The company’s current Audit Committee consists of our officers and directors.

 

Our directors serve until a successor is elected and qualified. Our officers are elected by the Board of Directors to a term of one (1) year and serves until their successor(s) is duly elected and qualified, or until they are removed from office. The Board of Directors has no nominating or compensation committees. The company’s current Audit Committee consists of our officers and directors.

 

The name, address, age and position of our present officers and directors is set forth below:

 

Name

 

Age

 

Position(s)

Bradley Kersch4

 

52

 

President, Director

Aerock Fox5

 

72

 

Secretary, Director

Fred Person1

 

68

President, Treasurer, Chief Financial Officer and Chairman of the Board of Directors.

Susan Fox2

 

61

 

Secretary

David Batrick3

 

52

 

President, Secretary, Treasurer, Director

__________________

1 The person named above held his office from October 22nd, 2009 until February 24, 2017.

2 The person named above has held her office from October 22nd, 2009 until February 24, 2017.

3 The person named above held his office from December 27, 2007 through October 22nd, 2009.

4 The person named above held this office from February 24, 2017 and is expected to hold his offices/positions at least until the next annual meeting of our stockholders.

5 The person named above held this office from February 24, 2017 and is expected to hold his offices/positions at least until the next annual meeting of our stockholders.

 

Bradley Kersch

 

Since June 2014 Bradley is the President and CEO of Solace Management Group Inc. From January 2010 until May 2014, he was the CEO of Blackrock Films and the Executive Producer of Blackrock Media. From May 1995 until January 2010 Bradley was the CEO and Executive Producer at Shoreline Studios Inc. He holds a Bachelor of Commerce degree from the University of British Columbia

 

Aerock Fox

 

Since 1981 Aerock has been the President of Fox Productions Inc. He graduated from Bishop’s University with a Bachelor of Arts Degree in 1971 and graduated from University of British Columbia with a Masters of Counselling Psychology in 1979.

 

Our directors and officers do not hold positions on the board of directors of any other U.S. reporting companies and have no affiliation with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company or any of the Company’s subsidiaries or has a material interest adverse to it or any of its subsidiaries.

 

The Company believes that Mr. Kersch’s and Mr. Fox’s business experience and their entrepreneurial success make them well suited to serve as our officers and directors.

 

Our directors and officers do not hold positions on the board of directors of any other U.S. reporting companies and has no affiliation with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company.

 

Significant Employees

 

The Company does not, at present, have any employees other than the current officer and director. We have not entered into any employment agreements, as we currently do not have any employees other than the current officer and director.

 

Family Relations

 

There are no family relationships among the Directors and Officers of Apawthecary Pets USA.

 

Involvement in Legal Proceedings

 

No executive Officer or Director of the Company has been convicted in any criminal proceeding or is the subject of a criminal proceeding that is currently pending.

 

No Executive Officer or Director of the Company is involved in any bankruptcy petition by or against any business in which they are a general partner or executive officer at this time or within two years of any involvement as a general partner, executive officer, or Director of any business.

 

 
26
 
 

 

Item 11. Executive Compensation.

 

The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers and director for all services rendered in all capacities to us for the period from inception through August 31, 2018.

 

SUMMARY COMPENSATION TABLE

Name and principal position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock Awards ($)

 

 

Option

Awards

($)

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

Nonqualified

Deferred

Compensation

Earnings ($)

 

 

All Other

Compensation

($)

 

 

Total

($)

 

Bradley D Kersch

 

2017

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

President/Treasurer

 

2018

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerock

 

2017

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Fox Secretary

 

2018

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 
27
 
 

   

Outstanding Equity Awards at Fiscal Year-End

 

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of August 31, 2018.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS

 

 

STOCK AWARDS

 

Name

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

 

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

 

 

Option

Exercise

Price

($)

 

 

Option

Expiration

Date

 

 

Number

of

Shares

or Units

of

Stock That

Have

Not

Vested

(#)

 

 

Market

Value

of

Shares

or

Units

of

Stock

That

Have

Not

Vested

($)

 

 

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

(#)

 

 

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

(#)

 

Fred Person

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Susan Fox

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Bradley Kersch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Aerock Fox

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

There were no grants of stock options since inception to the date of this Form 10-K.

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

The Board of Directors of the Company has not adopted a stock option plan. The company has no plans to adopt it but may choose to do so in the future. If such a plan is adopted, this plan may be administered by the board or a committee appointed by the board (the “Committee”). The committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. Bookedbyus may develop an incentive based stock option plan for its officers and directors and may reserve up to 10% of its outstanding shares of common stock for that purpose.

 

Stock Awards Plan

 

The company has not adopted a Stock Awards Plan, but may do so in the future. The terms of any such plan have not been determined.

 

 
28
 
 

 

Director Compensation

 

The table below summarizes all compensation awarded to, earned by, or paid to our directors for all services rendered in all capacities to us for the period from inception (December 27, 2007) through August 31, 2018:

 

DIRECTOR COMPENSATION

Name

 

Fees Earned or

Paid in

Cash

($)

 

 

Stock Awards

($)

 

 

Option Awards

($)

 

 

Non-Equity

Incentive

Plan

Compensation

($)

 

 

Non-Qualified

Deferred

Compensation

Earnings

($)

 

 

All

Other

Compensation

($)

 

 

Total

($)

 

1)Fred Person

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2)Bradley Kersch

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3)Aerock Fox

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 

 

 0

 

 ___________

[1] Fred Person resigned as President & Director.

[2] Bradley Kersch appointed President & Director

[3] Aerock Fox appointed Secretary & Director

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of the date of this prospectus, the total number of shares owned beneficially by our sole officer and director, and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The table also reflects what this ownership will be assuming completion of the sale of all shares in this offering. The stockholder listed below has direct ownership of her shares and possesses sole voting and dispositive power with respect to the shares. The percent of class is based on 23,977,264 shares of common stock issued and outstanding as of August 31, 2017.

 

 

 

 

Name and

 

Amount and

 

 

 

 

 

 

 

Address

 

Nature of

 

 

 

 

 

 

 

Beneficial

 

Beneficial

 

 

Percent of

 

Title of Class

 

 

Owner [1]

 

Owner

 

 

Class

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Susan Fox

 

 

4,455,000

 

 

 

18.6

 

Common Stock

 

 

Bradley Kersch

 

 

4,164,597

 

 

 

17.4

 

Common Stock

 

 

Gabriele Jerousek

 

 

3,300,334

 

 

 

13.8

 

Common Stock

 

 

Tammy Kersch

 

 

3,300,333

 

 

 

13.8

 

Common Stock

 

 

CWB

 

 

1,820,000

 

 

 

7.6

 

Common Stock

 

 

Aerock Fox

 

 

994,000

 

 

 

4.1

 

Common Stock

 

 

Digital Pilot

 

 

868,000

 

 

 

3.6

 

Common Stock

 

 

All Officers & Directors as Group (2 persons)

 

 

6,026,597

 

 

 

25.1

 

______________

[1] The person named above may be deemed to be a “parent” and “promoter” of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct and indirect stock holdings. Mr. Person and Ms. Fox are the only “promoter” of our company.

 

[2] Beneficial ownership is determined in accordance with the Rule 13d3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group and includes shares that could be obtained by the named individual within the next 60 days. The amount of share held by Susan Fox does not include the amounts she beneficially owns as the sole shareholder of CWB Inc.

 

[3] Susan Fox is the sole shareholder of CWB Inc.

 

[4] Aerock Fox is the sole shareholder of Digital Pilot Inc.

 

 
29
 
 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

During the year ended August 31, 2018, the Company accrued management fee in the amount of $Nil (2017 - $9,925). The outstanding balance of management fees payable is $551 and $599 as of August 31, 2018 and 2017, respectively.

 

During the year ended August 31, 2018, the Company accrued rent expense in the amount of $Nil (2017 - $Nil) to a company with an officer in common.

 

As of August 31, 2018, related parties of the Company have provided a series of loans, totaling $70,673 (2017 - $70,673), for working capital purposes. These amounts are unsecured, interest-free and are due on demand.

 

Yuying Liang has contributed uncompensated financial accounting services to Apawthecary Pets USA.

 

On August 24, 2017 Apawthecary Pets USA entered into a license agreement with Solace Management Group Inc. a British Columbia corporation. The material terms of such license agreement are:

 

1. Upon execution of the Agreement, the Apawthecary Pets USA shall provide a non-refundable license fee in the amount of $100,000 (the "License Fee") to be held in an escrow account pursuant and subject to the terms of an escrow agreement whereby the License Fee will remain in the escrow account until the earlier of a $3,000,000 raise by the Licensee or after the Set-up Period.

 

2. Term of the License Agreement is 10 years with a 5 year renewal term.

 

3. The license is an exclusive, non-transferable, non-sub licensable license to manufacture, sell, represent, market, distribute and advertise the Licensed Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Management Group Inc.’s Licensed Products and Services, Marks, Manuals, brands, and the business format, formulations, methods, specifications, standards, and operating procedures.

 

4. Apawthecary Pets USA shall pay the Solace Management Group Inc. for all packaging and shipment expenses to the Licensee at the then current market rate plus 20%.

 

5. Royalties will commence to accrue when the Licensed Products are accepted by the Apawthecary Pets USA. Apawthecary Pets USA shall pay quarterly royalties in addition to the yearly royalty fee, 10% of sales based on the wholesale price of each item.

 

Solace Management Group Inc. owns the brand and intellectual property rights to Apawthecary Pets.

 

Apawthecary Pets Inc., a Canadian corporation licensed the brand and distribution rights for Apawthecary Pets for use in Canada from Solace Management Group Inc.

 

Solace Management Group Inc. and Apawthecary Pets USA have an officer and director in common, Bradley Kersch. Apawthecary Pets USA has negotiated a licensing and distribution agreement with Solace Management Group Inc. The $100,000 License fee has not been paid as of August 31, 2018.

 

Item 14. Principal Accounting Fees and Services.

 

During the fiscal year ended August 31, 2018 we incurred approximately $13,505 in fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended August 31, 2018 and reviews of our financial statements for the quarters ended November 30, 2017, February 28, 2018 and May 31, 2018.

 

During the fiscal year ended August 31, 2017 we incurred approximately $9,635 in fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended August 31, 2017 and reviews of our financial statements for the quarters ended November 30, 2016, February 28, 2017 and May 31, 2017.

 

During the fiscal years ended August 31, 2018 and 2017 we did not incur any other fees for professional services rendered by our principal independent accountants for all other non-audit services which may include, but not limited to, tax related services, actuarial services or valuation services.

 

 
30
 
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

The following exhibits are incorporated into this Form 10-K Annual Report:

 

Exhibit No.

 

Description

3.1

 

Certificate of Amendment [1]

3.2

 

By-Laws of Bookedbyus Inc. [2]

10.1

 

License Agreement [3]

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934*

32.1

 

Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

___________

[1] Incorporated by reference from the Company’s S-1 filed with the Commission on September 15, 2017.

 

[2] Incorporated by reference from the Company’s S-1 filed with the Commission on September 9, 2011.

 

[3] Incorporated by reference from the Company’s S-1 filed with the Commissin on Sepember 15, 2017.

 

* Included in Exhibit 31.1

** Included in Exhibit 32.1

 

 
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SIGNATURES

 

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

 

 

APAWTHECARY PETS USA.

       

Dated: December 14, 2018

By:

/s/ Brad Kersch

 

 

Brad Kersch

President and Director

Principal Executive Officer

Principal Financial Officer

 

 

 

32