UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2016

 

or

 

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

 

For the transition period from ______to______

 

Commission File Number: 333-169802

 

PRACO CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada		27-1497347
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employee Identification No.)

 

90122 Hoey Road

Chapel Hill, NC 27517

(Address of principal executive offices) (Zip code)

 

(919) 889-9461

(Registrants telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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 issuer was required to file 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐    No ☒

 

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

 

Large Accelerated Filer ☐	Accelerated Filer                   ☐
Non-Accelerated Filer   ☐ (Do not check if a smaller reporting company)	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 ☒    No ☐

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: As of May 12, 2016, there were 6,902,500 shares, par value $0.0001 per share, of Common Stock issued and outstanding.

 

 

 

PRACO CORPORATION

QUARTERLY REPORT ON FORM 10-Q

 

March 31, 2016

 

TABLE OF CONTENTS

 

PART I--FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16
PART II--OTHER INFORMATION
Item 1.	Legal Proceedings.	16
Item 1A.	Risk Factors.	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16
Item 3.	Defaults Upon Senior Securities.	16
Item 4.	Mine Safety Disclosures.	16
Item 5.	Other Information.	17
Item 6.	Exhibits.	17
SIGNATURE		18

 

 

PRACO CORPORATION

 

CONTENTS

 

PAGE	1	CONDENSED BALANCE SHEETS AS OF MARCH 31, 2016 (UNAUDITED) AND  JUNE 30, 2015
PAGE	2	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2016 AND 2015 (UNAUDITED)
PAGE	3	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE NINE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
PAGE	4	CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED  MARCH 31, 2016 AND 2015 (UNAUDITED)
PAGES	5 - 11	CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

 

Praco Corporation

Condensed Balance Sheets

 

		March 31, 2016				June 30, 2015
		Unaudited
ASSETS
Current Assets
Cash		$	61			$	953
Total Assets		$	61			$	953
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable		$	5,476			$	15,314
Notes Payable - Related Party			313,300				258,300
Note Payable			9,000				9,000
Total Liabilities			327,776				282,614
Commitments and Contingencies (See Note 4)
Stockholders' Deficit
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued and outstanding			-				-
Common stock, $0.0001 par value; 100,000,000 shares authorized, 6,902,500 and 6,902,500 shares issued and outstanding, respectively			690				690
Additional paid-in capital			335,300				313,637
Accumulated deficit			(663,705	)			(595,988	)
Total Stockholders' Deficit			(327,715	)			(281,661	)
Total Liabilities and Stockholders' Deficit		$	61			$	953

 

See accompanying notes to condensed unaudited financial statements

 

 

Praco Corporation

Condensed Statements of Operations

(Unaudited)

 

		For the Three Months Ended								For the Nine Months Ended
		March 31, 2016				March 31, 2015				March 31, 2016				March 31, 2015
Operating Expenses
Professional fees			11,033				15,280				38,803				56,633
General and administrative			2,961				2,920				11,108				10,803
Total Operating Expenses			13,994				18,200				49,911				67,436
Loss from Operations			(13,994	)			(18,200	)			(49,911	)			(67,436	)
Other Expense
Interest Expense			(6,387	)			(4,822	)			(17,806	)			(13,402	)
Total Other Expense			(6,387	)			(4,822	)			(17,806	)			(13,402	)
LOSS FROM OPERATIONS BEFORE INCOME TAXES			(20,381	)			(23,022	)			(67,717	)			(80,838	)
Provision for Income Taxes			-				-				-				-
NET LOSS		$	(20,381	)		$	(23,022	)		$	(67,717	)		$	(80,838	)
Net Loss Per Share - Basic and Diluted		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
Weighted average number of shares outstanding   during the period - Basic and Diluted			6,902,500				6,902,500				6,902,500				6,902,500

 

See accompanying notes to condensed unaudited financial statements

 

 

Praco Corporation

Condensed Statement of Changes in Stockholder's Deficit

For the nine months ended March 31, 2016

 

																		Additional								Total
		Preferred Stock								Common stock								paid-in				Accumulated				Stockholders'
			Shares				Amount				Shares				Amount				capital				Deficit				Deficit
Balance, June 30, 2015			-			$	-				6,902,500			$	690			$	313,637			$	(595,988	)		$	(281,661	)
In kind contribution of services and interest			-				-				-				-				21,663				-				21,663
Net loss for the nine months ended March 31, 2016			-				-				-				-				-				(67,717	)			(67,717	)
Balance, March 31, 2016 (unaudited)			-			$	-				6,902,500			$	690			$	335,300			$	(663,705	)		$	(327,715	)

 

See accompanying notes to condensed unaudited financial statements

 

 

Praco Corporation

Condensed Statements of Cash Flows

(Unaudited)

 

		For the Nine Months Ended
		March 31, 2016				March 31, 2015
Cash Flows Used in Operating Activities:
Net Loss		$	(67,717	)		$	(80,838	)
Adjustments to reconcile net loss to net cash used in operations
In-kind contribution of services and interest			21,663				17,302
Changes in operating assets and liabilities:
(Decrease) Increase  in accounts payable and accrued expenses			(9,838	)			4,161
Net Cash Used In Operating Activities			(55,892	)			(59,375	)
Cash Flows From Financing Activities:
Proceeds from a note payable - related party			55,000				62,722
Net Cash Provided by Financing Activities			55,000				62,722
Net (Decrease) Increase in Cash			(892	)			3,347
Cash at Beginning of Period			953				3,746
Cash at End of Period		$	61			$	7,093
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	60			$	-

 

See accompanying notes to condensed unaudited financial statements

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

 

It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

 

Effective February 21, 2012, the Company filed with the State of Nevada a Certificate of Amendment to the Articles of Incorporation changing the Company’s name from Hunt for Travel, Inc. to Praco Corporation.

 

(B) Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include valuation of equity based transactions and the valuation of deferred tax assets.

 

(C) Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2016 and June 30, 2015, the Company had no cash equivalents.

 

(D) Loss Per Share

 

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.” As of March 31, 2016 and 2015 there were no common share equivalents outstanding.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

(E) Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”).  Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(F) Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

(G) Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue derived from travel related transactions on the net basis when the Company is not the merchant of record and the prices and services are determined by and provided by third parties.

 

(H) Fair Value of Financial Instruments

 

The carrying amounts on the Company’s financial instruments including accounts payable and note payable, approximate fair value due to the relatively short period to maturity for these instruments.

 

(I) Recent Accounting Pronouncements

 

In April 2015, FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, is to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

In July 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In August 2015, FASB issued Accounting Standards Update (“ASU”) No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

NOTE 2

NOTES PAYABLE

 

(A) Notes Payable – Related Party

 

On January 29, 2015, the Company received $7,000 from a related party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the nine months ended March 31, 2016, the Company recorded $387 as an in-kind contribution of interest (See Note 3(A) and 5).

 

The Company received $30,000 on April 30, 2013, $30,000 on July 12, 2013, $25,000 on October 9, 2013, $25,000 on January 9, 2014, $25,000 on April 11, 2014 and $25,000 on July 10, 2014 from a related party. Total balance due is $160,000.  Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the nine months ended March 31, 2016, the Company recorded $9,629 as an in-kind contribution of interest (See Note 3(A) and 5).

 

The Company received $8,500 on June 25, 2012, $20,000 on September 14, 2012 and $27,578 on January 17, 2013 from a related party. Total balance due is $56,078. Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the nine months ended March 31, 2016, the Company recorded $3,628 as an in-kind contribution of interest (See Note 3(A) and 5).

 

On November 13, 2014, a related party paid operating expenses on behalf of the Company totaling $20,722, $10,000 on March 17, 2015, $4,500 on May 22, 2015, $20,000 on July 27, 2015, $20,000 on November 30, 2015 and $15,000 on February 11, 2016, in exchange for note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and due on demand. The Company recorded a total of $3,520 in imputed interest as in-kind contributions for the nine months ended March 31, 2016 (See Note 3(A) and 5).

 

(B) Note Payable

 

On June 5, 2012 the Company received $9,000 from an unrelated party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the nine months ended March 31, 2016, the Company recorded $599 as an in-kind contribution of interest (See Note 3(A)).

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

NOTE 3

STOCKHOLDERS’ EQUITY

 

(A) In-Kind Contribution of services and interest

 

For the nine months ended March 31, 2016, the Company recorded $17,763 as an in kind contribution of interest (See Note 2).

 

For the nine months ended March 31, 2016, a shareholder of the Company contributed services having a fair value of $3,900 (See Note 5).

 

NOTE 4

COMMITMENTS

 

On February 8, 2010, the Company entered into a consulting agreement with Europa Capital Investments, LLC to receive administrative and other miscellaneous consulting services. The Company is required to pay $5,000 a month. The agreement is to remain in effect unless either party desired to cancel the agreement. Effective March 1, 2012, the agreement was terminated but services were still provided as a contribution.

 

On April 1, 2012, the Company entered into a new consulting agreement with Europa Capital Investments, LLC for administrative and other miscellaneous services. The terms of the agreement remain the same as the prior agreement. Currently the Company is utilizing the consulting services on as needed basis.  

 

NOTE 5

RELATED PARTY TRANSACTIONS

 

For the nine months ended March 31, 2016, shareholders of the Company contributed services having a fair value of $3,900 (See Note 3(A)).

 

On January 29, 2015, the Company received $7,000 from a related party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. For the nine months ended March 31, 2016, the Company recorded $387 as an in-kind contribution of interest (See Note 2(A)).

 

The Company received $30,000 on April 30, 2013, $30,000 on July 12, 2013, $25,000 on October 9, 2013, $25,000 on January 9, 2014, $25,000 on April 11, 2014 and $25,000 on July 10, 2014, from a related party. Total balance due is $160,000.  Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the nine months ended March 31, 2016, the Company recorded $9,629 as an in-kind contribution of interest (See Note 2(A)).

 

The Company received $8,500 on June 25, 2012, $20,000 on September 14, 2012 and $27,578 on January 17, 2013 from a related party. Total balance due is $56,078. Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.  For the nine months ended March 31, 2016, the Company recorded $3,628 as an in-kind contribution of interest (See Note 2(A)).

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

(UNAUDITED)

 

On November 13, 2014, a related party paid operating expenses on behalf of the Company totaling $20,722, $10,000 on March 17, 2015, $4,500 on May 22, 2015, $20,000 on July 27, 2015, $20,000 on November 30, 2015 and $15,000 on February 11, 2016, in exchange for note payable. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and due on demand. The Company recorded a total of $3,520 in imputed interest as in-kind contributions for the nine months ended March 31, 2016 (See Note 2(A).

 

NOTE 6

GOING CONCERN

 

As reflected in the accompanying condensed unaudited financial statements, the Company has minimal operations, used cash in operations of $55,892 and has a net loss of $67,717 for the nine months ended March 31, 2016. The Company also has a working capital deficit and stockholders’ deficit of $327,715 as of March 31, 2016. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

 

 

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

 

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section 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.

 

Overview

 

Praco Corporation (the “Company”) was incorporated on December 15, 2009 as Hunt for Travel, Inc. to design and market travel excursions featuring entertainment, adventure, intellectual stimulation and access to experts on topics related to the destinations they visit. The Company is now a “shell company” as defined in Rule 12b-2 promulgated under the Exchange Act, as amended, as we have no operations. The Company no longer operates in the travel industry sector. Effective February 21, 2012, the Company filed with the State of Nevada a Certificate of Amendment to the Articles of Incorporation changing the Company’s name from Hunt for Travel, Inc. to Praco Corporation. Our current intention is to close the Exchange Agreement, as defined and described below. If the Exchange Agreement closes, we will, through our majority-owned subsidiaries, own and manage real estate around Philadelphia and the Delaware Valley.

 

On July 3, 2012, the Company entered into an Equity Exchange Agreement (the “Exchange Agreement”) with Hawk Opportunity Fund, LP, a Delaware limited partnership (“Hawk”), Philly Residential Acquisition LP, a Pennsylvania limited partnership (“Philly”), Green Homes Real Estate, LP, a Pennsylvania limited partnership (“GH”), Nidus, LP, a Delaware limited partnership (“Nidus”), and several other related parties. In the years since the Exchange Agreement was signed, the assets of Nidus have been sold and Nidus will no longer be a part of the transactions contemplated by the Exchange Agreement. Pursuant to the Exchange Agreement, the Company will issue 3,100,000 shares of its common stock, par value $0.0001 per share, to Hawk, and in connection therewith, the Company will receive 89% of the aggregate equity interest of each of Philly and GH.

 

The closing of the Exchange Agreement (the “Closing”) is still subject to certain conditions such as the completion of an audit of Philly and GH, and the approval of the transaction from a lender, if necessary. These conditions of Closing have not occurred and they may never be fulfilled, so the Closing may never occur. As the Closing has not yet occurred, the Company has no interest in Philly and GH or any real estate at this time.

 

Philly and GP own and manage real estate around Philadelphia and the Delaware Valley. Together these entities own approximately 225 separate properties with a current aggregate market value of approximately $15 million. These are primarily comprised of residential rental units which provide a steady stream of income.

 

If and when the Closing occurs, the Company will be the majority-owner and assume the operations of each of Philly and GP. Although in the years since the Exchange Agreement was signed, the assets of Nidus have been sold and Nidus will no longer be a part of the transactions contemplated by the Exchange Agreement, Philly and GP have acquired more rental properties. Due to these acquisitions, the total number of rental properties the Company will be the majority-owner and assume the operations of will still be approximately 225 separate properties (as it was when the Exchange Agreement was signed in 2012 and Nidus’ properties were included as part of the property count). Through these majority-owned subsidiaries, the Company will own and manage real estate around Philadelphia and the Delaware Valley.

 

 

Limited Operating History

 

We have generated no independent financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise including limited capital resources.

 

For the Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

 

Results of Operations

 

We had $0 in revenue for both the three months ended March 31, 2016 and the three months ended March 31, 2015. Operating expenses for the three months ended March 31, 2016 and March 31, 2015 totaled, respectively, $13,994 and $18,200. Interest expense for the three months ended March 31, 2016 and March 31, 2015, totaled, respectively, $6,387 and $4,822. These expenses resulted in a net loss of $20,381 for the three months ended March 31, 2016 and a net loss of $23,022 for the three months ended March 31, 2015.

 

For the Nine Months Ended March 31, 2016 Compared to the Nine Months Ended March 31, 2015

 

We had $0 in revenue for both the nine months ended March 31, 2016 and the nine months ended March 31, 2015. Operating expenses for the nine months ended March 31, 2016 and March 31, 2015 totaled, respectively, $49,911 and $67,436. Interest expense for the nine months ended March 31, 2016 and March 31, 2015, totaled, respectively, $17,806 and $13,402. These expenses resulted in a net loss of $67,717 for the nine months ended March 31, 2016 and a net loss of $80,838 for the nine months ended March 31, 2015.

 

Capital Resources and Liquidity

 

As of March 31, 2016, we had $61 of cash on hand.

 

The Company does not anticipate generating any revenues until the Closing. After the Closing, if the Closing occurs, the Company will re-position itself as an owner and manager of real estate. At such time, the Company anticipates that it will generate revenues through rental income from the real property owned by its future majority-owned subsidiaries.

 

We believe that our expenses will be very limited until the Closing and that we will obtain enough cash to support our daily operations until that time through future financings. However, if the Exchange Agreement is never consummated or if we fail to obtain financing, we may have difficulty continuing our daily operations. Should this occur, we will attempt to combine with another entity. If this is not possible, we may be forced to suspend or cease operations.

 

The foregoing represents our best estimate of our cash needs based on current planning and business conditions. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

 

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission.

 

As reflected in the accompanying condensed unaudited financial statements, the Company has minimal operations, used cash in operations of $55,892 and has a net loss of $67,717 for the nine months ended March 31, 2016. The Company also has a working capital deficit and stockholders’ deficit of $327,715 as of March 31, 2016. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 

 

 

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

 

Critical Accounting Policies

 

Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include valuation of equity based transactions and the valuation of deferred tax assets.

 

Loss Per Share

 

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.” As of March 31, 2016 and 2015 there were no common share equivalents outstanding.

 

Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Fair Value of Financial Instruments

 

The carrying amounts on the Company’s financial instruments including accounts payable and note payable, approximate fair value due to the relatively short period to maturity for these instruments.

 

Recent Accounting Pronouncements

 

In April 2015, FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, is to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In July 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In August 2015, FASB issued Accounting Standards Update (“ASU”) No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition

 

 All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2016 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are not designed to ensure that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The Company’s CEO and CFO came to this conclusion because the current CEO of the Company does not have signing powers with regard to the Company’s bank account.

 

(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

  

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

a)

Exhibits

 

31.1*		Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+		Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *		XBRL Instance Document
101.SCH *		XBRL Taxonomy Schema
101.CAL *		XBRL Taxonomy Calculation Linkbase
101.DEF *		XBRL Taxonomy Definition Linkbase
101.LAB *		XBRL Taxonomy Label Linkbase
101.PRE *		XBRL Taxonomy Presentation Linkbase

 

* Filed herewith

+ In accordance with SEC Release 33-8238, Exhibit 32.1 is deemed furnished and not filed.

 

 

SIGNATURES

 

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

 

	PRACO CORPORATION
Date: May 13, 2016	By:	/s/ R. Scott Williams
		R. Scott Williams Chief Executive Officer, President, Chief Financial Officer, Treasurer, and Secretary (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer)

 

 

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