Rainbow Coral Corp. - FORM 10-Q

Attached files

file	filename
EX-21 - SUBSIDIARIES OF THE REGISTRANT - Rainbow Coral Corp.	ex_21.htm
EX-32 - SECTION 1350 CERTIFICATION - Rainbow Coral Corp.	ex_32-1.htm
EX-31 - RULE 13(A)-14(A)/15(D)-14(A) CERTIFICATION - Rainbow Coral Corp.	ex_31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


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

For the quarterly period ended December 31, 2015


o	TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-55076

RAINBOW CORAL CORP.

(Exact name of registrant as specified in its charter)


Nevada		27-3247562
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

871 Coronado Center Dr, Suite 200 Henderson, Nevada		89052
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: 702-940-2345

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.

Yes þ No o

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.

Yes þ No o

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	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check is smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 3, 2016, 10,560,200 shares of common stock are issued and outstanding.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION	4

Item 1. Financial Statements	4

Consolidated Balance Sheets (Unaudited)	4

Consolidated Statements of Operations (Unaudited)	5

Statement of Stockholders’ Deficit (Unaudited)	6

Consolidated Statements of Cash Flows (Unaudited)	7

Notes to the Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures about Market Risk	17

Item 4. Controls and Procedures	17

PART II — OTHER INFORMATION	18

Item 1. Legal Proceedings	18

Item 1A. Risk Factors	18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3. Defaults upon Senior Securities	18

Item 4. Mine Safety Disclosures	18

Item 5. Other Information	18

Item 6. Exhibits	18

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to Rainbow Coral Corp., a Nevada corporation.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RAINBOW CORAL CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	December 31, 2015			March 31, 2015
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	1,372		$	5,180
Prepaid expenses		—			1,095
Inventory		2,736			1,139
Total current assets		4,108			7,414

Fixed assets net of accumulated depreciation of $4,473 and $2,795, respectively		2,236			3,914
Security deposits		350			—
TOTAL ASSETS	$	6,694		$	11,328

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	229,882		$	274,684
Bank overdraft		284			—
Related party advances payable		201,005			165,214
Current portion of convertible notes payable, net of discount of $116,664 and $0, respectively.		59,865			—
Short-term notes payable		844			13,734
Current portion of long-term notes payable		13,079			—
Current portion of accrued interest payable		17,574			—
Total current liabilities		522,533			453,632

Convertible notes payable, net of discount of $449,371 and $237,643, respectively		14,173			164,238
Notes payable		28,201			37,352
Accrued interest payable		12,452			14,127
TOTAL LIABILITIES		577,359			669,349

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT
Common Stock, $0.001 par value; 480,000,000 shares authorized; 10,440,782 shares and 342,106 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively		10,441			342
Preferred Stock, $0.001 stated value; 20,000,000 shares authorized; 1,000,000 and 0 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively		1,000			—
Additional paid-in capital		4,017,194			3,264,425
Accumulated deficit		(4,599,300	)		(3,922,788	)
Total stockholders’ deficit		(570,665	)		(658,021	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	6,694		$	11,328

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

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RAINBOW CORAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Nine months ended December 31,						Three months ended December 31,
	2015			2014			2015			2014

REVENUE	$	84,387		$	99,503		$	28,040		$	28,182
COST OF GOODS SOLD		34,097			48,327			9,183			10,592

GROSS PROFIT		50,290			51,176			18,857			17,590

OPERATING EXPENSES
Expenses related to joint ventures and business development activities		15,000			70,000			—			10,000
General and administrative expenses		583,814			408,144			157,049			137,213
Total operating expenses		598,814			478,144			157,049			147,213

LOSS FROM OPERATIONS		(548,524	)		(426,968	)		(138,192	)		(129,623	)

OTHER INCOME (EXPENSE)
Interest expense		(127,988	)		(360,550	)		(41,566	)		(121,858	)
Total other income (expense)		(127,988	)		(360,550	)		(41,566	)		(121,858	)

NET LOSS	$	(676,512	)	$	(787,518	)	$	(179,758	)	$	(251,481	)

NET LOSS PER COMMON SHARE – Basic and diluted	$	(0.09	)	$	(2.71	)	$	(0.02	)	$	(0.77	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic and diluted		7,183,130			290,241			10,260,906			325,418

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

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RAINBOW CORAL CORP.

STATEMENT OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)


	Common Stock			Series E Preferred Stock			Additional Paid In			Accumulated			Total
	Shares	Amount		Shares	Amount		Capital			Deficit			Deficit

BALANCE, March 31, 2015	342,106	$	342	—	$	—	$	3,264,425		$	(3,922,788	)	$	(658,021	)

Shares issued for conversion of notes payable	10,093,994		10,094	—		—		189,865			—			199,959
Discount on issuance of convertible note payable	—		—	—		—		423,909			—			423,909
Preferred stock issued for control	—		—	1,000,000		1,000		139,000			—			140,000
Share rounding on reverse split	4,682		5	—		—		(5	)		—			—
Net loss	—		—	—		—		—			(676,512	)		(676,512	)

BALANCE, December 31, 2015	10,440,782	$	10,441	1,000,000	$	1,000	$	4,017,194		$	(4,599,300	)	$	(570,665	)

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

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RAINBOW CORAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine months ended December 31,
	2015			2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(676,512	)	$	(787,518	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on convertible note payable		95,517			343,385
Depreciation		1,678			3,780
Preferred stock issued for control		140,000			—
Changes in operating assets and liabilities:
Inventory		(1,597	)		(3,073	)
Prepaid expenses		1,095			491
Security deposits		(350	)		—
Accounts payable and accrued liabilities		(44,802	)		128,616
Accrued interest payable		30,141			17,165
NET CASH USED IN OPERATING ACTIVITIES		(454,830	)		(297,154	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances		423,909			237,187
Proceeds from related party advances		35,791			21,926
Proceeds from issuance of notes payable		—			3,930
Repayments of notes payable		(8,962	)		—
Bank overdraft		284			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		451,022			263,043

NET DECREASE IN CASH		(3,808	)		(34,111	)

CASH, at the beginning of the period		5,180			65,373

CASH, at the end of the period	$	1,372		$	31,262

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	(2,330	)	$	—
Taxes	$	—		$	—

Noncash investing and financing transaction:
Refinance of accounts payable into convertible notes payable	$	—		$	125,059
Refinance of advances into convertible notes payable	$	423,909		$	386,640
Beneficial conversion discount on convertible note payable	$	423,909		$	360,299
Conversion of convertible notes payable.	$	199,959		$	369,322

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

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RAINBOW CORAL CORP.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

Note 1. General Organization and Business

Rainbow Coral Corp. (the “Company”), a Nevada corporation, was incorporated on August 13, 2010. The Company’s year-end is March 31.

We were formed to build a coral farm facility to develop and propagate (or grow) live coral, independent of the oceans, as a future farm reserve against the decline of natural wild reefs. We intend to grow, harvest, and distribute as many varieties of hard and soft sizes as possible of captive-bred corals that are attractive, to as many consumers as possible who can maintain them in a healthy ecosystem aquarium. We believe that coral and other marine aquarium livestock should be supplied by farms or captive breeders, rather than removed from the natural reefs. The additional uses for coral as a source of potential leading edge medical discoveries are an attractive opportunity for the Company’s coral farming activity. We believe that the world of bioresearch is a natural continuation of our core coral propagation business. Accordingly, on October 23, 2011, we formed a subsidiary, Rainbow Biosciences, LLC to look into the opportunities within the bioscience market. Rainbow Biosciences, LLC will continue to research opportunities into the bioscience markets.

On May 5, 2015, we reincorporated from Florida to Nevada. On May 29, 2015, each shareholder received one share in the Nevada company for each 100 shares they held in the Florida company. Fractional shares were rounded up, and each shareholder received at least five shares. The executive officers and directors of the Nevada company are unchanged from the executive officers and directors of the Florida company. All share and per share amounts have been retroactively restated to reflect the reverse split.

Joint Ventures

On March 13, 2012, the Company entered into a stock purchase agreement (“N3D Stock Purchase Agreement”) with Nano3D Biosciences, Inc. (“N3D”), a Texas corporation that has developed a unique concept in three dimensional cell research tools. Under the terms of the N3D Stock Purchase Agreement, the Company agreed to acquire 604 shares of common stock of N3D, representing approximately 5% of the outstanding shares on the date of the agreement, for a price of $413.62 per share. The total purchase price of $249,826 was to be paid by making weekly payments of $5,000 until fully paid. Under the terms of the N3D Stock Purchase Agreement, we could discontinue payment of the purchase price at any time by providing written notice to N3D. The Company invested $60,000 in N3D resulting in the acquisition of 145 shares of N3D’s common stock.

The Company suspended payments to N3D in May 2012 because of their delay in reaching certain milestones in the commercialization process. The Company wrote off the investment in full due to the uncertainty about whether the carrying amount is recoverable. During the nine months ended December 31, 2015, the Company paid and expensed $10,000 with N3D.

On February 1, 2013, the Company entered into a joint venture agreement with TheraKine Ltd. (“TheraKine”) in order to explore potential business opportunities to exploit TheraKine’s drug delivery technologies. TheraKine is the developer of a revolutionary, sustained-release drug delivery platform that could soon make local delivery of biologic agents and small molecules safer, more effective, and more convenient than ever before. During the nine months ended December 31, 2015, the Company made no payments toward this joint venture.

Note 2. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ended December 31, 2015, the Company had a net loss of $676,512 and negative cash flow from operating activities of $454,830. As of December 31, 2015, the Company had negative working capital of $518,425. Management does not anticipate having positive cash flow from operations in the near future.

These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or implement its business plan. Without additional capital, the Company will not be able to remain in business.

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Management has plans to address the Company’s financial situation as follows:

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.

Note 3. Summary of Significant Accounting Policies

Interim Financial Statements

The accompanying these unaudited financial statements have been prepared in accordance with accounting principles generally accepted accounting in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended March 31, 2015 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).

The results of operations for the nine month period ended December 31, 2015 are not necessarily indicative of the results to be expected for the full fiscal year ending March 31, 2016.

Basis of Presentation

The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The financial statements have been prepared using the accrual basis of accounting in accordance with GAAP.

Principles of Consolidation

The consolidated financial statements include the accounts and operations of Rainbow Coral Corp., and its wholly owned subsidiaries, Rainbow Biosciences, LLC and Father Fish Aquarium, Inc. (collectively referred to as the “Company”). All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Related Parties

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Recently Issued Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

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Note 4. Convertible Notes Payable

During the nine months ended December 31, 2015, Vista View Ventures, Inc. (“Vista View”) advanced $423,909 to the Company for working capital. Vista View paid the advances to KMDA, and subsequently KMDA paid them to the Company on behalf of Vista View. These advances are typically memorialized into a convertible note payable on a quarterly basis as discussed below.

Convertible notes payable consist of the following as of December 31, 2015 and March 31, 2015:


	December 31, 2015			March 31, 2015
Convertible note dated June 30, 2014, bearing interest at 10% per annum, maturing June 30, 2016 and convertible into shares of common stock at $0.02 per share		2,322			62,980
Convertible note dated September 30, 2014, bearing interest at 10% per annum, maturing September 30, 2016 and convertible into shares of common stock at $0.01 per share		80,133			80,133
Convertible note dated December 31, 2014, bearing interest at 10% per annum, maturing December 31, 2016 and convertible into shares of common stock at $0.01 per share		94,074			94,074
Convertible note dated December 31, 2014, bearing interest at 10% per annum, maturing December 31, 2016 and convertible into shares of common stock at $0.02 per share.		—			125,059
Convertible note dated March 31, 2015, bearing interest at 10% per annum, maturing March 31, 2017 and convertible into shares of common stock at $0.007 per share		39,635			39,635
Convertible note dated June 30, 2015, bearing interest at 10% per annum, maturing June 30, 2017 and convertible into shares of common stock at $0.25 per share.		54,006			—
Convertible note dated September 30, 2015, bearing interest at 10% per annum, maturing September 30, 2018, and convertible into shares of common stock at $0.25 per share.		267,558			—
Convertible note dated December 31, 2015, bearing interest at 10% per annum, maturing December 31, 2018 and convertible into shares of common stock at $0.09 per share		102,345			—
Total convertible notes payable	$	640,073		$	401,881

Less: current portion of convertible notes payable		(176,529	)		—
Less: discount on convertible notes payable		(449,371	)		(237,643	)
Convertible notes payable, net of discount	$	14,173		$	164,238

Current portion of convertible notes payable		176,529			—
Less: discount on current portion of convertible notes payable		(116,664	)		—
Current portion of convertible notes payable, net of discount	$	59,865		$	—

Convertible notes issued

During the nine months ended December 31, 2015, the Company signed Convertible Promissory Notes totaling $423,909 with Vista View Ventures, Inc. that memorialize non-interest bearing periodic advances into convertible notes payable. The Convertible Promissory Notes bear interest at 10% per annum and are payable along with accrued interest at maturity. The Convertible Promissory Note and unpaid accrued interest are convertible into common stock at the option of the holder. The holder of the notes may not convert the convertible promissory note into common stock if that conversion would result in the holder owning more than 4.99% of the Company’s outstanding common stock on the conversion date.


Date Issued	Maturity Date	Interest Rate	Conversion Rate		Note Amount
June 30, 2015	June 30, 2017	10%	$	0.25	$	54,006
September 30, 2015	September 30, 2018	10%		0.25		267,558
December 31, 2015	December 31, 2018	10%		0.09		102,345
Total					$	423,909

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The Company evaluated the terms of the notes in accordance with ASC Topic No. 815 – 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. We determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. We evaluated the conversion features for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized a discount for the beneficial conversion features of $423,909, in aggregate, on the date the notes were signed. We amortize the discounts for the notes dated June 30, 2015; September 30, 2015 and December 31, 2015 at effective interest rate of 277.49%; 222.23% and 224.88%, respectively. The beneficial conversion feature was recorded as an increase in additional paid-in capital and a discount to the convertible notes payable. The discount to the convertible notes payable will be amortized to interest expense over the life of the notes. During the nine months ended December 31, 2015 and 2014, the Company amortized discounts on convertible notes payable of $95,517 and $343,385, respectively, to interest expense.

Conversions to Common Stock

During the nine months ended December 31, 2015, Essen Enterprises, Inc. (“Essen”), the original payee of the Convertible Note Payable dated December 31, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.02 per share. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


Date	Amount Converted		Shares of Common Stock Issued
June 1, 2015	$	130,267	6,513,344
Total	$	130,267	6,513,344

As a result of this conversion, Essen became a significant shareholder of the Company.

During the nine months ended December 31, 2015, the holders of the Convertible Note Payable dated June 30, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.02 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


Date	Amount Converted		Shares of Common Stock Issued
June 5, 2015	$	13,600	680,000
July 8, 2015		1,400	70,000
July 16, 2015		7,520	376,000
July 22, 2015		3,220	161,000
July 23, 2015		995	49,750
July 24, 2015		4,920	246,000
August 3, 2015		2,200	110,000
August 11, 2015		3,860	193,000
August 18, 2015		2,040	102,000
August 26, 2015		4,280	214,000
September 11, 2015		5,560	278,000
September 24, 2015		4,000	200,000
September 29, 2015		7,449	372,450
October 1, 2015		5,940	297,000
October 8, 2015		789	39,450
Total	$	67,773	3,388,650

During the nine months ended December 31, 2015, the holders of the Convertible Note Payable dated September 30, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.01 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.

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Date	Amount Converted		Shares of Common Stock Issued
December 22, 2015	$	1,920	192,000
Total	$	1,920	192,000

In connection with the 1 for 100 reverse common stock split on May 29, 2015, the conversion rates of the outstanding convertible notes payable were not modified. As a result, in the event all potentially issuable shares were converted, the holders of the existing notes at December 31, 2015 would be issued 27,841,559 shares of common stock representing approximately 99% of the Company’s total shares outstanding on an if-converted basis. The holders of the notes are limited to holding no greater than 4.99% of the common stock at any time.

Note 5. Long-term Notes Payable

On December 30, 2013, we entered into a promissory note for $50,000 with a third party bearing interest at 5% per annum. Under the terms of the note payable, the Company is required to pay the note payable beginning on January 1, 2015 and over a period of 4 years. At December 31, 2015 and March 31, 2015, we owed the noteholder $41,280 and $48,150, respectively.

During the year ended March 31, 2015, we entered into a promissory note for $5,000 with a third party bearing interest at 5% per annum. Under the terms of the note payable, we are required to repay the note in twenty-six equal monthly installments beginning October 2014. At December 31, 2015 and March 31, 2015, we owed the noteholder $844 and $2,936, respectively.

Note 6. Related Party Transactions

During the nine months ended December 31, 2015 and 2014, the Company paid consulting fees of $47,115 and $49,500, respectively, to Kimberly Palmer for her services as CEO of the Company.

During the nine months ended December 31, 2015, Mr. Foxwell, the president of Father Fish, advanced $35,791 to our subsidiary, Father Fish, for working capital. As of December 31, 2015 and March 31, 2015, related party advances payable to Mr. Foxwell totaled $201,005 and $165,214, respectively. The advances bear no interest and are due on demand.

On July 22, 2015, we issued 1,000,000 shares of Series E Preferred stock to Essen Enterprises. See Note 7.

Services Provided by KM Delaney & Assoc.

During the nine months ended December 31, 2015 and 2014, KM Delaney & Assoc. (“KMDA”) has provided office space and certain administrative functions to us. The services provide include a furnished executive suite, use of office equipment and supplies, accounting and bookkeeping services, treasury and cash management services, financial reporting, and other support staffing requirements. As part of the services provided to the Company, KMDA receives the advances from the lender (See note 4.) and disburses those funds to us. During the nine months ended December 31, 2015 and 2014, KMDA billed us $142,881 and us $127,264, respectively, for those services. As of December 31, 2015 and March 31, 2015, we owed KMDA $174,760 and $245,365, respectively. These amounts are included in accounts payable and accrued liabilities on the balance sheet.

Note 7. Stockholders’ Equity

On May 29, 2015, the Company reincorporated from Florida to Nevada. The Company’s board of directors and majority shareholder consented to the reincorporation. Each of our shareholders on the record date received one share of the Nevada Company’s common stock for each 100 shares of common stock they own in the Florida company. The information contained herein gives retroactive effect to the stock split for all periods presented. Fractional shares were rounded up to the next whole share, and each shareholder received at least five shares. Following the reincorporation, the Company is authorized to issue 500 million shares of common stock and 20 million shares of preferred stock, each with a par value of $0.001 per share.

At December 31, 2015, the Company had 26,014,935 potentially issuable common shares with exercise prices ranging from $0.09 per share to $0.25 per share. The exercise prices of the convertible debt were not modified as a result of the reincorporation and the stock split. See Note 5.

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Preferred Stock

On July 22, 2015, we issued 1,000,000 shares of Series E Preferred stock to Essen Enterprises, Inc (“Essen”). The beneficial owner of Essen is Filipp Korolev. On that date, Essen owned 6,513,344 shares of our common stock, which constituted 63.55% of our outstanding common shares. The Series E Preferred stock is subordinate to our common stock and does not participate in dividends or equity distributions. The Series E preferred stock has ⅔ voting control of the company. The shares were issued so that Essen could retain stable control of the Company, which could have been lost as a result of expected issuance of common stocks resulting from conversion of our convertible notes. These shares were valued at $140,000 which was the estimated market value of the Series E Preferred Stock on the date of the transaction. The market value was determined by estimating the market value of the controlling interest in a public company.

Conversion of shares

During the nine months ended December 31, 2015, the holders of our convertible notes elected to convert principal and accrued interest of $199,959 into 10,093,994 shares of common stock.

Note 8. Business Segments

The Company has two reportable operating segments: (1) aquarium and aquarium supplies and (2) medical technology. These reportable segments are managed separately due to differences in their products.

The only segment that generates revenue is aquarium and aquarium supplies. Management evaluates and monitors performance of this segment primarily through, among other measures, gross profit. The medical technology segment is in the development stage and not begun to generate revenue.

The results of operations and financial position of the two reportable operating segments and corporate were as follows:

Results of Operations:


	Nine months ended December 31,				Three months ended December 31,
	2015		2014		2015		2014

REVENUE
Aquarium and aquarium supplies	$	84,387	$	99,503	$	28,040	$	28,182
Medical technology		—		—		—		—
Corporate		—		—		—		—
	$	84,387	$	99,503	$	28,040	$	28,182

GROSS PROFIT
Aquarium and aquarium supplies	$	50,290	$	51,176	$	18,857	$	17,590
Medical technology		—		—		—		—
Corporate		—		—		—		—
	$	50,290		51,176	$	18,857		17,590

GENERAL AND ADMINISTRATIVE EXPENSE
Aquarium and aquarium supplies	$	72,827	$	83,376	$	25,254	$	23,902
Medical technology		15,000		70,000		—		10,000
Corporate		510,987		324,768		131,795		113,311
	$	598,814	$	478,144	$	157,049	$	147,213

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Corporate operating expense includes general and administrative costs not allocated to operating segments.


	December 31, 2015		March 31, 2015

TOTAL ASSETS
Aquarium and aquarium supplies	$	5,528	$	6,800
Medical technology		—		—
Corporate		1,166		4,528
	$	6,694	$	11,328

Note 9. Subsequent Events

The Company evaluated material events occurring between the end of our fiscal year, March 31, 2016, and through the date when the consolidated financial statements were available to be issued for disclosure consideration.

On January 20, 2016, the holders of the convertible promissory note dated June 30, 2014 converted $2,388 of principal and accrued interest into 119,418 shares of common stock.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Rainbow Coral Corp. (the “Company”), a Nevada corporation, was incorporated on August 13, 2010. The Company’s year-end is March 31.

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 March 31, 2015 on Form 10-K.

Results of Operations

Nine months ended December 31, 2015 compared to the nine months ended December 31, 2014.

Revenue

Revenue decreased to $84,387 for the nine months ended December 31, 2015, compared to $99,503 for the nine months ended December 31, 2014 due to slower sales during the current period.

Cost of Goods Sold

Cost of goods sold decreased to $34,097 for the nine months ended December 31, 2015, compared to $48,327 for the comparable period in 2014 due to slower sales during the current period.

Gross Profit

Gross profit decreased to $50,290 for the nine months ended December 31, 2015, compared to $51,176 for the nine months ended December 31, 2014. This was a result of the decline in sales partially offset by the decline in cost of goods sold during the current period.

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General and Administrative Expenses

We recognized general and administrative expenses in the amount of $583,814 and $408,144 for the nine months ended December 31, 2015 and 2014, respectively. The increase was driven by the issuance of Series E Preferred stock for services, which were valued at $140,000. This was offset by a decrease in our investments in profit participation agreements.

Interest Expense

Interest expense decreased from $360,550 for the nine months ended December 31, 2014 to $127,988 for the nine months ended December 31, 2015. Interest expense for the nine months ended December 31, 2015 included amortization of discount on convertible notes payable in the amount of $95,517, compared to $343,385 for the comparable period of 2014. The remaining amount is the result of the Company entering into interest-bearing convertible notes payable.

Net Loss

We incurred a net loss of $676,512 for the nine months ended December 31, 2015 as compared to $787,518 for the comparable period of 2014. The decrease in the net loss was driven by the decline in interest expense, which was offset by the issuance of Series E Preferred stock for services that were valued at $140,000.

Three months ended December 31, 2015 compared to the three months ended December 31, 2014.

Revenue

Revenue decreased to $28,040 for the three months ended December 31, 2015, compared to $28,182 for the three months ended December 31, 2014. This was due to lower volumes which were offset by higher margins.

Cost of Goods Sold

Cost of goods sold decreased to $9,183 for the three months ended December 31, 2015, compared to $10,592 for the comparable period in 2014 due to lower sales at our fish store.

Gross Profit

Gross profit increased to $18,857 for the three months ended December 31, 2015, compared to $17,590 for the three months ended December 31, 2014 as a result higher margins on our sales.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $157,049 and $137,213 for the three months ended December 31, 2015 and ended 2014, respectively. This is a primarily due to increased professional fees and higher costs at our retail fish shop.

Interest Expense

Interest expense decreased from $121,858 for the three months ended December 31, 2014 to $41,566 for the three months ended December 31, 2015. Interest expense for the three months ended December 31, 2015 included amortization of discount on convertible notes payable in the amount of $27,461, compared to $117,026 for the comparable period of 2014. The remaining amount is the result of the Company entering into interest-bearing convertible notes payable.

Net Loss

We incurred a net loss of $179,758 for the three months ended December 31, 2015 as compared to $251,481 for the comparable period of 2014. The decrease in the net loss was primarily the result of lower interest expense related to the amortization of the discount on our convertible notes payable.

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Liquidity and Capital Resources

At December 31, 2015, we had cash on hand of $1,372. The company has negative working capital of $518,425. Net cash used in operating activities for the nine months ended December 31, 2015 was $454,830. 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 the Company. We have no material commitments for capital expenditures as of December 31, 2015.

Additional Financing

Additional financing is required to continue operations. Although actively searching for available capital, the Company does 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.

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 December 31, 2015. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 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.


	1.	As of December 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.

	2.	As of December 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 have a material effect, our internal controls over financial reporting.

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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

Not applicable to a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of unregistered equity securities during the nine months ended December 31, 2015.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has not defaulted upon senior securities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to the Company.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


3.1	Articles of Incorporation (1)

3.2	Bylaws (1)

14	Code of Ethics (1)

21	Subsidiaries of the registrant (2)

31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2)

32.1	Section 1350 Certification of principal executive officer and principal financial accounting officer. (2)

101	XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (2),(3)

__________


(1)	Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on September 23, 2010.

(2)	Filed or furnished herewith.

(3)	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.”

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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.


	Rainbow Coral Corp.


Date: February 19, 2016	BY: /s/ Kimberly Palmer
	Kimberly Palmer
	President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer and Sole Director.

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