UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1.           Financial Statements
   

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

Sirrus Corp.

Index

Balance Sheets at May 31, 2015 and at August 31, 2014 (unaudited)............................................................................F–1

Statements of Operations for the three and nine months ended May 31, 2015 and 2014 (unaudited).....................F–2

Statements of Cash Flows for the three and nine months ended May 31, 2015 and 2014 (unaudited).................... F–3

Notes to the Financial Statements (unaudited).................................................................................................................F–4

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SIRRUS CORP.

Balance Sheets

(Unaudited)

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

F-1

SIRRUS CORP.

Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these financial statements.
F-2

SIRRUS CORP.

Statements of Cash Flows

(Unaudited)

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

F-3

SIRRUS CORP.

Notes to the Financial Statements
(Unaudited)

NOTE 1.           NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

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

These financial statements have been prepared on a going concern basis which assumes the Company will continue to realize it assets and discharge its liabilities in the normal course of business.  As of May 31, 2015, the Company has incurred losses totaling $31,876 since inception, has not yet generated revenue from operations, and will require additional funds to maintain our operations.   These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company intends to finance operating costs over the next twelve months through continued financial support from its shareholders and private placements of common stock. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)       Basis of Presentation

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

b)       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 ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form S-1. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for 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 disclosure contained in the audited financial statements for the most recent fiscal year ended August 31, 2014 have been omitted.

c)       Estimates and Assumptions

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

F-4

d)       Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

e)       Foreign Currency Transactions

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

f)        Income Taxes

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

g)        Inventory 

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

h)       Revenue Recognition

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

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

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

·         The amount of revenue can be measured reliably;

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

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

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

Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At May 31, 2015, the Company has no potentially dilutive securities outstanding.

j)        Stock-Based Compensation

Compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period.  We did not grant any stock options during the nine months ended May 31, 2015. NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k)       Income Taxes

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

l)         Subsequent Events

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

m)     New Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the reporting period ended November 30, 2014. 

NOTE 3.           STOCKHOLDERS’ EQUITY

a)      The Company’s authorized capital consists of 100,000,000 shares of common stock with a par value of $0.00001 and 100,000,000 shares of preferred stock with a par value of $0.00001.

b)       At inception on May 7, 2014, 25,000,000 shares of common stock were issued to the sole director of the Company at $0.001 per share for cash proceeds of $25,000.

c)      On May 22, 2015, the Company issued a total of 10,763,339 shares of common shares at $0.003 per share for total cash proceeds of $32,290.

NOTE 4.                COMMITMENTS

On September 17, 2014, the Company entered into an exclusive distribution agreement with Shenzhen Kangxin Technology Co., Ltd to distribute e-cigarettes on behalf of the Company for the next five years.  This is an exclusive distribution agreement for the territories of Kenya, Uganda, Tanzania, Rwanda, Ethiopia, Burundi, and the Southern Sudan.  The Company is required to purchase a total of 100 devices as an initial order and an additional 100 devices in the first year of the agreement in order for the agreement to be extended.  The devices carry a manufacturer’s warranty of one year. As of May 31, 2015, the Company fulfilled its requirement to purchase a total of 100 devices with the manufacturer’s warranty for five years.

NOTE 5.           RELATED PARTY TRANSACTIONS

As of May 31, 2015, the Company owed $4,004 to its president and director, Ahmed Guled, for incorporation fees, product purchases, and travel expenses that he paid on the Company’s behalf.  The total amount is unsecured, non-interest bearing, and has no specific terms for repayment.  

F-6

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

Forward Looking Statements

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

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

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

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

You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Quarterly Report.

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

Overview

Sirrus Corp. is a start-up company that seeks to engage in the designing, marketing and distribution of electronic cigarettes (“e-cigarette”) in East Africa. Our goal is to become the leading e-cigarette marketer and distributor in the East Africa. We expect to achieve our goal by maximizing our points of distribution, maintaining our low-cost position and continuing to differentiate our products and brands in order to resonate with consumers in local markets around the region. Our strategy is to increase our future sales by penetrating new and emerging markets where we expect rising consumer incomes and an increase in demand for e-cigarettes.  Cigarette smokers in these emerging markets are our target demographic and will represent our primary source of future revenue growth.

We plan to focus on rapidly securing retail distribution in Kenya and East African markets through strategic partnerships with key retailers and distributors.  We believe strong consumer demand will lead retailers to allocate additional shelf space to smoking related products and we strive to offer our products at or near every point of distribution where traditional cigarettes are available in the markets we serve.  We believe e-cigarettes offer a compelling alternative for smokers, relative to traditional cigarettes. Our goal is to become the leading e-cigarette marketer and distributor in the East Africa. We expect to achieve our goal by maximizing our points of distribution,

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maintaining our low-cost position and continuing to differentiate our products and brands in order to resonate with consumers in local markets around the region.

Plan of Operations

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

We believe that we will be able to generate revenue once we secure 4 distribution contracts and through a direct public offering of our shares pursuant a registration statement that was declared effective by the Securities and Exchange Commission (the “SEC”) on February 26, 2015.  If we are able to establish additional contracts, we hope to generate additional revenue and prove our business model to be effective.   However, even if we are able to sell all of the shares being registered under the registration statement, we will still require an additional $180,000 in order to carry out our anticipated business operations for the next twelve months.  It is management’s goal to raise capital from this offering, we will be able to secure distribution contacts, generate revenues and attract additional financing.  However, there can be no assurance that we will be able to sell any of the shares under the registration statement, establish distribution contracts, or generate revenues from our operations.  There can also be no assurance that we will be able to raise the additional capital we require to operate our business for the next twelve months. 

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

*Management fees will consist of remuneration payable to any manager engaged to oversee the day to day operation of our business.

**Salaries will be paid to future employees or consultants retained to assist the Company with its sales and marketing efforts. Consultants may also be retained to contribute special expertise not possessed by the sole officer and director of the Company.

***General and administrative expenses are the costs which we will incur sustaining our day to day business. These include such costs such as rent, phone, utilities, insurance, business licenses and incidental expenses.

We believe that we will be able to maintain basic operations of meeting filing obligation and expenses relating to seeking additional financing if we raise 100%, 75%, 50% or 25% from our public offering. Our company will use the funds available to pay for the expenses related to our offering and the expenses to maintain our reporting status for twelve months after the effective date. Our plan of operations is based on the net proceeds from our offering (gross proceeds less expenses related to this offering, estimated at a fixed cost of $10,000 and expenses to maintain our report status for twelve months after effective date, estimated at a fixed cost of $17,500).

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

Results of Operations – For the Three-Month and Nine-Month Periods Ended May 31, 2015 and 2014

We have not earned any revenues from inception through May 31, 2015.

We incurred a net loss in the amount of $8,014 and $25,157 for the three-month and nine-month periods ended May 31, 2015, respectively. 

Our operating expenses for the three and nine month periods ended May 31, 2015 included $49 and $178 in bank charges, $1,557 and $6,930 in legal fees, $300 and $900 in rent expense, $1,498 and $9,698 in accounting fees, $nil and $26 in advertising expenses, $2,344 and $2,344 in travel expenses and $2,250 and $5,071 in consulting fees. Also for the three-month and nine-month periods ending May 31, 2015, we had a foreign exchange loss of $16 and $10, respectively.

We incurred a net loss in the amount of $1,546 for the three-month and nine-month periods ended May 31, 2014. 

Our operating expenses for the three-month and nine-month periods ended May 31, 2014 included $50 in bank charges, $1,196 in legal fees and $300 in rent expense.

Liquidity and Capital
 

As of May 31, 2015 and 2014, we had a working capital of $25,414 and $18,281, $35,551 and $20,183 in current assets and $10,137 and $1,902 in current liabilities, respectively. We used a total of $20,934 and $350 in operating activities and raised $34,762 and $25,300 through financing activities for the nine-month periods ended May 31, 2015 and 2014, respectively.  

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Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from the our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Inventory

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

Revenue Recognition

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

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

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

·         The amount of revenue can be measured reliably;

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

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3.           Quantitative and Qualitative Disclosures About Market Risks
  

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

Item 4.           Controls and Procedures
 

Management’s Report on Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
  

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not aware of any material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A.        Risk Factors
  

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

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

On February 26, 2015, our registration statement on Form S-1 (File No. 333-199818) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 10,763,339 shares of our common stock at $0.003 per share for a total of $32,290. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the Securities and Exchange Commission on February 17, 2015 pursuant to Rule 424(b).

Item 3.           Defaults Upon Senior Securities
  

None.

Item 4.           Mine Safety Disclosures
  

Not applicable.

Item 5.           Other Information
 

None.

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Item 6.       Exhibits 
  

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SIGNATURES

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

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