On November 6, 2015, the Company issued 957 shares as a result of share rounding on the reverse stock split. See Note 8.
On November 4, 2015, the holder of the convertible note dated April 30, 2015, converted $1,178 of accrued interest into 58,900 shares of common stock at a rate of $0.02 per share.
On November 13, 2015, the holder of the convertible note dated April 30, 2015, converted $980 of accrued interest into 49,000 share of common stock, at a rate of $0.02 per share.
On November 17, 2015, the holder of the convertible note dated April 30, 2015, converted $760 of accrued interest into 38,000 shares of common stock, at a rate of $0.02 per share.
On November 18, 2015, the holder of the convertible note dated April 30, 2015, converted $430 of accrued interest into 21,500 shares of common stock, at a rate of $0.02 per share.
On December 3, 2015, the holders of the convertible note dated April 30, 2015, converted $1,520 of accrued interest into 76,000 shares of common stock at a rate of $0.02 per share.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Neutra Corp. was incorporated in Nevada on January 11, 2011 to market and participate in the nutraceutical space by bringing products derived from all natural and organic origins. Along with participating in the actual nutraceutical products, we plan to research and bring new technology to the nutraceutical space. Nutraceutical natural medicine is an alternative system that focuses on natural remedies and the body’s vital ability to heal and maintain itself. One of the nutraceutical sub-markets is the new thriving medical cannabis market, in which we intend to participate. We intend to entrust the manufacturing to a nutraceutical contractor to private label all of our products and to sell them under our unique brand. We have established a fiscal year end of January 31.
We have not generated any revenues to date and our activities have been limited to developing our business plan, developing and launching our website, research and development of products and trial testing of our initial formulations. We will not have the necessary capital to fully develop or execute our business plan until we are able to secure additional financing. There can be no assurance that such financing will be available on suitable terms. We need to raise an additional financing to implement our business plan over the next twelve months. Our current cash on hand is insufficient to commercialize our products or fully develop our business strategy. If we are unable to raise adequate additional funds or if those funds are not available on terms that are acceptable to us, we will not be able to execute our business plan and we may cease operations.
On February 11, 2014, we acquired Diamond Anvil Designs, a developer of smoke-free nutraceutical delivery systems. Diamond Anvil Designs is a startup vapor pen company that is designing an all-purpose vapor pen. Currently most vapor pens are manufactured only to be used for tobacco, so we believe this an underdeveloped area of the market.
On October 5, 2015, we reincorporated from Florida to Nevada. The reincorporation was approved by our board of directors and by the holders of a majority of our common stock. Each shareholder received one share in the Nevada corporation for every 50 shares they held in the Florida corporation. Fractional shares were rounded up to the nearest whole share, and each shareholder received at least 5 shares. Our authorized shares increased to 480,000,000 shares of common stock and 20,000,000 shares of preferred stock.
Critical Accounting Policies
We prepare our Consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed Consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended January 31, 2015 on Form 10-K.
Results of Operations
Nine months ended October 31, 2015 compared to the nine months ended October 31, 2014.
General and Administrative Expenses
We recognized general and administrative expenses of $389,861 and $514,021 for the nine months ended October 31, 2015 and 2014, respectively. The decrease is primarily due to a reduction in our funding of joint ventures, which declined by $77,500 between the two periods. The remainder of the change is due to reductions in professional fees, travel & entertainment, and product samples.
Interest expense decreased from $806,102 for the nine months ended October 31, 2014 to $375,057 for the nine months ended October 31, 2015. During the nine months ended October 31, 2015, we amortized $358,328 of the discount on our convertible notes, compared to $737,365 for the comparable period of 2014. This was driven by fewer conversions of our convertible notes payable into common stock.
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This is offset by an increase in interest expense on our convertible notes, due to higher average debt balances.
Loss on Acquisition of Diamond Anvil
During the nine months ended October 31, 2014, we recognized a $100,000 loss on our acquisition of Diamond Anvil. In the comparable period of 2015, we made $30,000 of additional contractual payments toward the acquisition, which we recognized as a loss.
We incurred a net loss of $794,918 for nine months ended October 31, 2015 as compared to $1,420,123 for the comparable period of 2014. The decrease is driven by declines in interest expense and general and administrative expenses, as well as a decreased loss on our acquisition of Diamond Anvil.
Three months ended October 31, 2015 compared to the three months ended October 31, 2014.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $143,969 and $164,003 for the three months ended October 31, 2015 and ended 2014, respectively. The decrease is due to decreased professional fees and lower payments toward joint ventures in the latter period.
Interest expense decreased from $357,835 for the three months ended October 31, 2014 to $96,519 for the three months ended October 31, 2015. During the three months ended October 31, 2015, we amortized $92,773 of the discount on our convertible notes, compared to $338,962 for the comparable period of 2014. This decrease is due to fewer conversions of our convertible notes into common stock. This was augmented by a small decrease in interest expense on our convertible notes.
Loss on Acquisition of Diamond Anvil
During the three months ended October 31, 2014, we recognized a $10,000 loss on our acquisition of Diamond Anvil. In the comparable period of 2015, we made $0 of additional contractual payments toward the acquisition, which we recognized as a loss.
We incurred a net loss of $240,488 for the three months ended October 31, 2015 as compared to $531,838 for the comparable period of 2014. The decrease in the net loss was primarily due to decreased interest expense related to the amortization on our convertible notes. The remainder of the decrease resulted from lower professional fees and contributions to profit participation agreements.
Liquidity and Capital Resources
At October 31, 2015, we had cash on hand of $620. We have negative working capital of $339,557 . Net cash used in operating activities for the nine months ended October 31, 2015 was $383,647. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to us. We have no material commitments for capital expenditures as of October 31, 2015.
Additional financing is required to continue operations. Although actively searching for available capital, we do not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2015. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of October 31, 2015, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As of October 31, 2015, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
As of October 31, 2015, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
This item is not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the nine months ended October 31, 2015.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We have not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable to the Company.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
Articles of Incorporation (1)
Code of Ethics (1)
Subsidiaries of the Registrant (2)
Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2)
Section 1350 Certification of principal executive officer and principal financial accounting officer. (2)
XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (2),(3)
Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010
Filed or furnished herewith
In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”
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.
Date: December 21, 2015
BY: /s/ Christopher Brown
President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer, and Sole Director
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