UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

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

 

For the quarterly period ended February 29, 2020

 

000-55513

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)

 

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 tofile such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes    ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ Yes    ☐ No

 

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

 

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. ☒

 

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

 

APPLICABLE ONLY TO ISSUERS 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 Sections 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 ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 20, 2020, we had 24,827,264 shares of common stock outstanding.

 

  

 

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION				3
Item 1.	Financial Statements.			3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.			11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.			12
Item 4.	Controls and Procedures.			12
PART II—OTHER INFORMATION				13
Item 1.	Legal Proceedings.			13
Item 1A.	Risk Factors.			13
Item 2.	Unregistered Sales of Securities and Use of Proceeds.			13
Item 3.	Defaults Upon Senior Securities.			13
Item 4.	Mine Safety Disclosures.			13
Item 5.	Other Information.			13
Item 6.	Exhibits.			14

 

2

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Apawthecary Pets USA

Balance Sheets

(Stated in US dollars)

 

		February 29,				August 31,
		2020				2019
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	4,405			$	20,256
Total current assets			4,405				20,256
Total Assets		$	4,405			$	20,256
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable and accrued liabilities		$	13,855			$	9,957
Accounts payable  - related parties			2,522				2,522
Due to related parties			70,673				70,673
Total current liabilities			87,050				83,152
Total Liabilities			87,050				83,152
Stockholders' deficit
Authorized
75,000,000 of common shares, par value $0.001
Issued and outstanding
24,827,264 common shares issued and outstanding
as of February 29, 2020 and August 31, 2019			24,827				24,827
Additional paid in capital			349,223				349,223
Accumulated deficit			(456,695	)			(436,946	)
Total stockholders' deficit		$	(82,645	)		$	(62,896	)
Total Liabilities and Stockholders' Deficit		$	4,405			$	20,256

 

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

 

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Apawthecary Pets USA

Statements of Operations

(Stated in U.S. Dollars)

 

		For the				For the				For the				For the
		three months				three months				six months				six months
		ended				ended				ended				ended
		February 29,				February 28,				February 29,				February 28,
		2020				2019				2020				2019
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Operating Expenses
General and administrative		$	14,197			$	13,866			$	19,749			$	18,988
Total operating Expenses			14,197				13,866				19,749				18,988
Net loss		$	(14,197	)		$	(13,866	)		$	(19,749	)		$	(18,988	)
Basic and diluted net loss per common share - basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of common shares - basic and diluted			24,827,264				24,827,264				24,827,264				24,827,264

 

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

 

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Apawthecary Pets USA

Statements of Cash Flows

(Stated in US dollars)

 

		For the				For the
		six months				six months
		ended				ended
		February 29,				February 28,
		2020				2019
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net loss		$	(19,749	)		$	(18,988	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accounts payable and accrued liabilities			3,898				6,339
Cash flows used in operating activities			(15,851	)			(12,649	)
Net decrease in cash and cash equivalents			(15,851	)			(12,649	)
Cash and cash equivalents, beginning of period			20,256				42,594
Cash and cash equivalents, end of period		$	4,405			$	29,945
Supplemental disclosures of cash flow information:
Interest paid		$	-			$	-
Income tax paid		$	-			$	-

 

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

 

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Apawthecary Pets USA

Statements of Changes in Stockholders' Deficit

(Stated in U.S. Dollars)

For the three months ended February 29, 2020 and February 28, 2019

(Unaudited)

 

		Common stock								Additional				Accumulated
		Shares				Amount				paid-in capital				Deficit				Total
Balance at November 30, 2019			24,827,264			$	24,827			$	349,223			$	(442,498	)		$	(68,448	)
Net loss			-				-				-				(14,197	)			(14,197	)
Balance at February 29, 2020			24,827,264			$	24,827			$	349,223			$	(456,695	)		$	(82,645	)
Balance at November 30, 2018			24,827,264			$	24,827			$	349,223			$	(405,671	)		$	(31,621	)
Net loss			-				-				-				(13,866	)			(13,866	)
Balance at February 28, 2019			24,827,264			$	24,827			$	349,223			$	(419,537	)		$	(45,487	)

 

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

 

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Apawthecary Pets USA

Statements of Changes in Stockholders' Deficit

(Stated in U.S. Dollars)

For the six months ended February 29, 2020 and February 28, 2019

(Unaudited)

 

		Common stock								Additional				Accumulated
		Shares				Amount				paid-in capital				Deficit				Total
Balance at August 31, 2019			24,827,264			$	24,827			$	349,223			$	(436,946	)		$	(62,896	)
Net loss			-				-				-				(19,749	)			(19,749	)
Balance at February 29, 2020			24,827,264			$	24,827			$	349,223			$	(456,695	)		$	(82,645	)
Balance at August 31, 2018			24,827,264			$	24,827			$	349,223			$	(400,549	)		$	(26,499	)
Net loss			-				-				-				(18,988	)			(18,988	)
Balance at February 28, 2019			24,827,264			$	24,827			$	349,223			$	(419,537	)		$	(45,487	)

 

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

 

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Apawthecary Pets USA Notes to Financial Statements (Stated in U.S. Dollars)    (Unaudited)

 

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.

 

The Company’s financial statements as at February 29, 2020 and for the period 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 $19,749 for the six months ended February 29, 2020 and has a working capital deficit at February 29, 2020. 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 for the twelve months after the date the financial statements are issued. 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.

 

As of February 29, 2020, 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

 

Basis of presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the Company’s audited financial statement for the year ended August 31, 2019, as filed with the SEC on Form 10-K. In the opinion of management, all normal recurring adjustments which are necessary for a fair presentation of financial statements of the results for the interim period ended February 29, 2020, have been included.

 

The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended August 31, 2019, as reported in the Form 10-K have been omitted.

 

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Apawthecary Pets USA Notes to Financial Statements (Stated in U.S. Dollars)    (Unaudited)

  

3. Due to Related Parties and Related Party Transactions

 

The outstanding balance of management fees payable is $2,522 and $2,522 as of February 29, 2020 and August 31, 2019 respectively.

 

As of February 29, 2020, related parties of the Company have provided a series of loans, totaling $70,673 (August 31, 2019 - $70,673) for working capital purposes. These loans are unsecured, interest-free, and due on demand.

 

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 SolaceManagement 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 USA Notes to Financial Statements (Stated in U.S. Dollars)    (Unaudited)

 

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 February 29, 2020.

 

Aerock Fox provides consulting service to the Company without compensation.

 

Digital Pilot Inc., a company that has a common director (Aerock Fox) with Apawthecary Pets USA, provides an office located in 619 S. Ridgley, Los Angeles CA for an indefinite period of time.

 

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

 

Management’s Discussion and Analysis

 

This section of the Form 10-Q 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.

 

Apawthecary Pets USA (formerly Bookedbyus Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on December 27, 2007.  The Company intends to operate in the pet industry.We have commenced only limited operations, primarily focused on organizational matters. The Company has not yet implemented its business model.

 

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. 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.

 

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 "LicenseFee") 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 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 negotiateda licensing and distribution agreement with Solace Management Group Inc. The $100,000 License fee has not been paid as of February 29, 2020.

 

Digital Pilot Inc., a company that has a common director (Aerock Fox) with Apawthecary Pets USA, provides an office located in 619 S. Ridgley, Los Angeles CA for an indefinite period of time.

 

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 raised sufficient monies to implement our business model.

 

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The Company will need to seek capital from other resources such as private placements or in the Company’s sales of registered securities, 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.

 

As of February 29, 2020, we had $4,405 in cash as compared to $20,256 as at August 31, 2019. As of the date of this Form 10-Q, management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy twelve months after the date that the financial statements are issued. 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.

 

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

 

We had $nil in revenue for the three month period ended February 29, 2020 as compared to revenue of $nil for three month period ended February 28, 2019. We had $nil in revenue for the six month period ended February 29, 2020, as compared to revenue of $nil for six month period ended February 28, 2019.

 

Total expenses in the three month period ended February 29, 2020 were $14,197 as compared to total expenses of $13,866 for the three month period ended February 28, 2019, resulting in a net loss of $14,197 for the three month period ended February 29, 2020 as compared to a net loss of $13,866 for the three months ended February 28, 2019. The net loss for the three month period ended February 29, 2020 is a result of general and administrative expense of $14,197 as compared to the net loss of $13,866 for the three month period ended February 28, 2019 which was a result of general and administrative expense of $13,866.

 

Total expenses in the six month period ended February 29, 2020 were $19,749 as compared to total expenses of $18,988 for the six month period ended February 28, 2019, resulting in a net loss of $19,749 for the six month period ended February 29, 2020 as compared to a net loss of $18,988 for the six months ended February 28, 2019. The net loss for the six month period ended February 29, 2020 is a result of general and administrative expense of $19,749 as compared to the net loss of $18,988 for the six month period ended February 28, 2019 which was a result of general and administrative expense of $18,988.

 

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.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4.  Controls and Procedures.

 

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.

 

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In connection with this quarterly report, as required by Rule 15d-15 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 subject to the inherent limitations noted in this Part II, Item 9A(T) as of February 29, 2020, our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended February 29, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Currently we are not involved in any pending litigation or legal proceeding.

 

Item 1A. Risk Factors.

 

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

 

Item 2. Unregistered Sales of Securities and Use of Proceeds.

 

None

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosure.

 

None

 

Item 5. Other Information.

 

(a)     None

 

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Item 6. Exhibits.

 

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

 

Exhibit No.		Description
3.1		Certificate of Amendment as previously filed with the SEC on Form S-1 on September 15, 2017
3.2		By-Laws Inc. as previously filed with the SEC on Form S-1 on September 7, 2011
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**
101		Interactive data files pursuant to Rule 405 of Regulation S-T.

_________

*     Included in Exhibit 31.1

**   Included in Exhibit 32.1

 

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SIGNATURES*

 

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

 

	Apawthecary Pets USA
Date: April 20, 2020	By:	/s/ Brad Kersch
		Brad Kersch
		President and Director Principal Executive Officer Principal Financial Officer

 

Apawthecary Pets USA Reports 11/29/2013 - 10-K 12/15/2014 - 10-K 12/16/2015 - 10-K 12/02/2016 - 10-K 12/14/2017 - 10-K 12/14/2018 - 10-K 12/13/2019 - 10-K 01/21/2014 - 10-Q 04/14/2014 - 10-Q 07/15/2014 - 10-Q 01/16/2015 - 10-Q 04/14/2015 - 10-Q 07/20/2015 - 10-Q 01/19/2016 - 10-Q 04/11/2016 - 10-Q 07/15/2016 - 10-Q 01/13/2017 - 10-Q 04/07/2017 - 10-Q 07/20/2017 - 10-Q 01/22/2018 - 10-Q 04/23/2018 - 10-Q 07/23/2018 - 10-Q 01/14/2019 - 10-Q 01/21/2020 - 10-Q 04/20/2020 - 10-Q 07/15/2020 - 10-Q