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 September 30, 2017

 

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.)

 

159 North State Street

Newtown, PA 18940

(Address of principal executive offices) (Zip code)

 

(215) 968-1600

(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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	¨	Accelerated filer	☐
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: As of November 14, 2017, there were 522,558 shares, par value $0.0001 per share, of Common Stock issued and outstanding.

 

 

 

PRACO CORPORATION

QUARTERLY REPORT ON FORM 10-Q

 

September 30, 2017

 

TABLE OF CONTENTS

 

PART I--FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	12
Item 4.	Controls and Procedures.	13
PART II--OTHER INFORMATION
Item 1.	Legal Proceedings.	14
Item 1A.	Risk Factors.	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3.	Defaults Upon Senior Securities.	14
Item 4.	Mine Safety Disclosures.	14
Item 5.	Other Information.	14
Item 6.	Exhibits.	14
SIGNATURE		15

 

As used in this report, the term “the Company” means Praco Corporation unless the context clearly indicates otherwise.

 

Special Note Regarding Forward-Looking Information

 

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: the Company’s future financial performance, the Company’s business prospects and strategy, anticipated trends and prospects in the industries in which the Company’s businesses operate and other similar matters. These forward-looking statements are based on the Company’s management's expectations and assumptions about future events as of the date of this quarterly report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

 

Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect the Company’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this quarterly report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this quarterly report. The Company does not undertake to update these forward-looking statements.

 

In this quarterly report on Form 10-Q, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.

 

An investment in the Company’s common stock involves a number of very significant risks.  You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report on Form 10-Q in evaluating the Company and its business before purchasing shares of the Company’s common stock.  The Company’s business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks.  You could lose all or part of your investment due to any of these risks. You should invest in the Company’s common stock only if you can afford to lose your entire investment.

 

 

PRACO CORPORATION

 

CONTENTS

 

PAGE	2	CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2017 AND  JUNE 30, 2017 (UNAUDITED)
PAGE	3	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)
PAGE	4	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED SETPEMBER 30, 2017 (UNAUDITED)
PAGE	5	CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENEDED  SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)
PAGES	6 - 9	NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

 

PRACO CORPORATION

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

		September 30, 2017				June 30, 2017
ASSETS
Current Assets
Cash		$	5,167				2,041
Total Current Assets			5,167				2,041
TOTAL ASSETS		$	5,167			$	2,041
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable		$	53,217			$	25,298
Accrued expense			103,385				72,923
Note payable			9,000				9,000
Notes payable - related parties			384,266				374,266
Total Current Liabilities			549,868				481,487
Stockholders' Deficit
Preferred stock, $.0001 par value, 378,788 shares
authorized, none issued and outstanding			-				-
Common Stock, $.0001 par value, 7,575,758 shares
authorized, 522,558 shares issued and outstanding			52				52
Additional paid-in capital			343,895				343,895
Accumulated deficit			(888,648	)			(823,393	)
Total Stockholders' Deficit			(544,701	)			(479,446	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	5,167			$	2,041

 

See accompanying notes to condensed unaudited financial statements

 

 

PRACO CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		For the Three Months Ended
		September 30, 2017				September 30, 2016
Operating Expenses
Professional fees		$	32,138			$	17,500
General and administrative			2,655				478
Compensation expense			30,462				-
Total Operating Expenses			65,255				17,978
Loss Before Other Expenses			(65,255	)			(17,978	)
Other Expenses
Interest expense			-				(23	)
Total Other Expense			-				(23	)
Net Loss		$	(65,255	)		$	(18,001	)
Net Loss Per Share-Basic and Diluted		$	(0.12	)		$	(0.03	)
Weighted average number of shares outstanding
during the period-Basic and Diluted			522,558				522,558

 

See accompanying notes to condensed unaudited financial statements

 

 

PRACO CORPORATION

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(UNAUDITED)

 

																		Additional								Total
		Preferred Stock								Common Stock								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Deficit
Balance, June 30, 2017			-			$	-				522,558			$	52			$	343,895			$	(823,393	)		$	(479,446	)
Net loss			-				-				-				-				-				(65,255	)			(65,255	)
Balance, September 30, 2017			-			$	-				522,558			$	52			$	343,895			$	(888,648	)		$	(544,701	)

 

See accompanying notes to condensed unaudited financial statements

 

 

PRACO CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Three Months Ended
		September 30, 2017				September 30, 2016
Net loss		$	(65,255	)		$	(18,001	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Increase in accounts payable			27,919				5,311
Increase in accrued expenses			30,462				-
Net cash used in operating activities			(6,874	)			(12,690	)
Cash flows from financing activities
Proceeds from notes payable - related party			10,000				12,661
Net cash provided by financing activities			10,000				12,661
Net increase (decrease) in cash			3,126				(29	)
Cash, beginning of year			2,041				29
Cash, end of year		$	5,167			$	-
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	23

 

See accompanying notes to condensed unaudited financial statements

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

(UNAUDITED)

 

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) Organization and Basis of Presentation

 

Hunt for Travel, Inc. (the "Company") was incorporated in Nevada on December 15, 2009 to design and market enrichment excursions for U.S. travelers. The enrichment component of these trips can be educational, informational or experiential and is tailored to the travelers’ specific interests and tastes. Enrichment travel can also be referred to as adventure travel.

 

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. At the same time the Company ceased being a travel agency and became a Public Shell.

 

On April 19, 2017, the Company, entered into a Share Exchange Agreement, (the “Share Exchange Agreement”), by and among the Company, Arista Capital LTD. (“Arista”), and the holders of common stock of Arista (the “Arista Shareholders”). The closing of the Share Exchange (the “Closing”) shall take place sixty days after the execution of this Agreement (the “Closing Date”), conditioned upon the completion of due diligence by the Parties. 

 

On July 18, 2017, the Parties entered into the First Addendum to the Share Exchange Agreement, pursuant to which the Closing date for the transaction is scheduled for September 15, 2017. In addition, Arista has agreed to provide the Company with a $15,000 non-refundable deposit, and has the right to extend the closing date in intervals of thirty (30) days, and shall be required to deposit an additional non-refundable deposit of $10,000 per each requested extension interval. All non-refundable deposits are to be placed in an escrow account.

 

On September 15, 2017, Arista exercised its right to extend the closing for an additional thirty days. The non-refundable $10,000 deposit was put into the escrow account.

 

On October 6, 2017, the Company completed a 13.2 to 1 reverse stock split in accordance with the Share Exchange Agreement. As a result of the stock split, the number of the Company’s authorized shares of common stock was decreased from 100,000,000 to 7,575,758 shares and the number of its authorized shares of preferred stock was decreased from 5,000,000 to 378,788 shares. Upon the effectiveness of the stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 6.9 million shares to approximately 520,000 shares of common stock, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Fractional shares resulting from the stock split were rounded up to the next whole number.

 

The Company has recast the presentation of share and per share data in the accompanying condensed financial statements to reflect the reverse stock split, which occurred on October 6, 2017.

 

On October 15, 2017 Arista exercised its right to extend the closing for an additional thirty days. The Company has not received the $10,000 non-refundable deposit in conjunction with the extension yet.

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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.

 

While the Company believes that the disclosures presented are adequate to make the information not misleading, these unaudited condensed financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s annual Report on Form 10-K for the year ended June 30, 2017.

 

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

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

(UNAUDITED)

 

(B) Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”), 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 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 September 30, 2017 and June 30, 2017, the Company had cash and cash equivalents of $5,167 and $2,041, respectively.

 

(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 Financial Accounting Standards Board (“FASB”) ASC No. 260, “Earnings Per Share.” As of September 30, 2017 and 2016, there were no common share equivalents outstanding.

 

(E) Fair Value of Financial Instruments

 

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

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

(UNAUDITED)

 

NOTE 2

GOING CONCERN

 

As reflected in the accompanying unaudited condensed financial statements, the Company has minimal operations, used cash in operating activities of $6,874 and has a net loss of $65,255 for the three months ended September 30, 2017. The Company also has a working capital deficit and stockholders’ deficit of $544,701 as of September 30, 2017. 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 unaudited condensed 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. 

 

NOTE 3

NOTE PAYABLE

 

On June 5, 2012 the Company received $9,000 from a third party. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. Total balance due at September 30, 2017 and June 30, 2017 was $9,000.

 

NOTE 4

COMMITMENTS

 

On April 1, 2012, the Company entered into a consulting agreement with Europa Capital Investments, LLC for administrative and other miscellaneous services. The agreement is to remain in effect unless either party desired to cancel the agreement. During the three months ended September 30, 2017 and 2016, the fees incurred were $0 and $10,000, respectively.

 

On October 1, 2016, the Company signed two employment agreements, one with the CEO/President and the other with one of the Directors. Both agreements are the same which are effective October 1, 2016 to September 30, 2019. The agreements call for an annual salary of $48,000 each and if not paid by the end of the year, the compensation would be paid in Company stock at a 25% discount to the market value. All refinancing, fund raising, debt or equity sales, and acquisitions when completed by the individuals would be subject to a bonus payment of 10% of the gross proceeds. In connection with the two employment agreements, the Company has accrued $ 24,000 in compensation expense for the three months ended September 30, 2017.

  

NOTE 5

RELATED PARTY TRANSACTIONS

 

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 an entity owned by Scott Williams and David Callan. Total balance due at September 30, 2017 and June 30, 2017 was $157,000.  Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand. 

 

 

PRACO CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

(UNAUDITED)

 

NOTE 5

RELATED PARTY TRANSACTIONS (CONTINUED)

  

The Company received $8,500 on June 25, 2012, $20,000 on September 14, 2012 and $27,578 on January 17, 2013, $10,500 on January 11, 2017, $5,000 on April 5, 2017, $5,000 on April 24, 2017, $2,500 on May 24, 2017, $5,000 on July 31, 2017, and $5,000 on August 25, 2017 from Hawk Opportunity Fund, LP, an entity indirectly owned by Scott Williams and David Callan. Total balance due at September 30, 2017 and June 30, 2017 was $89,078 and $79,078, respectively. Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand. 

 

The Company received $12,500 on January 11, 2017, and $4,665 on April 11, 2017 from HWC, LLC, an entity indirectly owned by Scott Williams and David Callan. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. Total balance due at September 30, 2017 and June 30, 2017 was $17,165.

 

As needed, Green Homes Real Estate, LP, an entity indirectly owned by Hawk Opportunity Fund, LP, a 29% owner of the company which transfers funds to the Company to cover operating expenses. Those transfers are as follows: $20,722 on November 13, 2014, $10,000 on March 17, 2015, $4,500 on May 22, 2015, $20,000 on July 27, 2015, $20,000 on November 30, 2015, $15,000 on February 11, 2016, $5,000 on July 26, 2016, $3,830 on August 25, 2016 and $600 on December 31, 2016, in exchange for various notes payable. Total balance due at September 30, 2017 and June 30, 2017 was $99,652.  Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and due on demand.

 

As needed, Philly Residential Acquisition LP, an entity indirectly owned by Hawk Opportunity Fund, LP, a 29% owner of the company which transfers funds to the Company to cover operating expenses. Those transfers are as follows: $3,831 on August 25, 2016, $1,000 on October 19, 2016, $5,000 on December 1, 2016, $600 on December 15, 2016, $10,940 on March 8, 2017. Total balance due at September 30, 2017 and June 30, 2017 was $21,371. Pursuant to the terms of the notes, the notes are non-interest bearing, unsecured and are due on demand.

 

NOTE 6

INCOME TAXES

 

The Company recorded no income tax expense for the three months ended September 30, 2017 and 2016 because the estimated annual effective tax rate was zero. As of September 30, 2017, the Company continues to provide a valuation allowance against its net deferred tax assets especially since the Company believes it is more than likely than not that its deferred tax assets will not be realized.

 

NOTE 7

SUBSEQUENT EVENTS

 

On October 6, 2017, the Company completed a 13.2 to 1 reverse stock split in accordance with the Share Exchange Agreement. As a result of the stock split, the number of the Company’s authorized shares of common stock was decreased from 100,000,000 to 7,575,758 shares and the number of its authorized shares of preferred stock was decreased from 5,000,000 to 378,788 shares. Upon the effectiveness of the stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 6.9 million shares to approximately 520,000 shares of common stock, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Fractional shares resulting from the stock split were rounded up to the next whole number. All amounts presented in these financial statements have been adjusted for this stock split.

 

On October 15, 2017 Arista exercised its right to extend the closing for an additional thirty days. The Company has not received the $10,000 non-refundable deposit in conjunction with the extension yet.

 

 

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

 

The following is management’s discussion and analysis of the financial condition and results of operations of Praco Corporation (“Praco”, the “Company”, “we”, and “our”) for the quarter ended September 30, 2017. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as its plans, objectives, expectations and intentions. Its actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements. The following information should be read in conjunction with the interim financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Report”).

 

Overview

 

Praco Corporation (the “Company”), a Nevada corporation 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.

 

On April 19, 2017, the Company, entered into a Share Exchange Agreement, (the “Share Exchange Agreement”), by and among the Company, Arista, and the holders of common stock of Arista (the “Arista Shareholders”). The closing of the Share Exchange (the “Closing”) shall take place sixty days after the execution of this Agreement (the “Closing Date”), conditioned upon the completion of due diligence by the Parties. 

 

On July 18, 2017, the Parties entered into the First Addendum to the Share Exchange Agreement, pursuant to which the Closing date for the transaction is scheduled for September 15, 2017. In addition, Arista has agreed to provide the Company with a $15,000 non-refundable deposit, and has the right to extend the closing date in intervals of thirty (30) days, and shall be required to deposit an additional non-refundable deposit of $10,000 per each requested extension interval. All non-refundable deposits are to be placed in an escrow account.

 

On September 15, 2017, Arista exercised its right to extend the closing for an additional thirty days. The non-refundable $10,000 deposit was put into the escrow account.

 

On October 6, 2017, the Company completed a 13.2 to 1 reverse stock split in accordance with the Share Exchange Agreement. As a result of the stock split, the number of the Company’s authorized shares of common stock was decreased from 100,000,000 to 7,575,758 shares and the number of its authorized shares of preferred stock was decreased from 5,000,000 to 378,788 shares. Upon the effectiveness of the stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 6.9 million shares to approximately 520,000 shares of common stock, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Fractional shares resulting from the stock split were rounded up to the next whole number.

 

On October 15, 2017 Arista exercised its right to extend the closing for an additional thirty days. The Company has not received the $10,000 non-refundable deposit in conjunction with the extension yet.

  

Under the terms and conditions of the Share Exchange Agreement, at Closing, the Company will exchange two shares of Praco common stock in exchange for one common share of Arista common stock, which will equal 80% of the total outstanding shares of Praco, subject to the terms and conditions set forth in the Share Exchange Agreement.

 

Also, at Closing, the Praco Shareholders shall be issued 240,417 warrants on a pro rata basis exercisable at $2.00 per share and subject to the same terms and conditions as the warrants currently held by the Arista warrant holders except that a cashless exercise shall not be permitted. In addition, at Closing, Praco will offer to exchange each outstanding Arista warrant for new warrants issued by Praco entitling the holder to purchase an equal number of Praco shares and subject to the same terms and conditions as the Arista warrants except that a cashless exercise will not be permitted. Also, at Closing, Praco will offer to exchange each outstanding Arista convertible note into a convertible note issued by Praco convertible in to an equal amount of Praco shares, subject to the same terms and conditions as the convertible notes currently held by Arista convertible noteholders.

 

All Arista common share amounts and Praco common share amounts shall be adjusted accordingly if prior to Closing, any Arista noteholder or warrant holder converts or exercises their respective securities and agrees to exchange such Arista shares for Praco shares so as to allow Arista Shareholders to own 80% and Praco Shareholders to own 20% of the issued and outstanding shares on a non-diluted basis at Closing. Furthermore, at Closing, Arista will pay Praco $75,000 to be used to pay outstanding liabilities of Praco.

 

 

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.

 

Results of Operations

 

For the Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016

 

For the three months ended September 30, 2017 and September 30, 2016, we had $0 in revenue. Net loss for the three months ended September 30, 2017 and 2016 totaled $65,255 and $18,001, respectively. For each of the respective periods, professional fees amounted to $32,138 and $17,500; general and administrative expenses amounted to $2,655 and $478, compensation expense (including vacation time) amounted to $30,462 and $0, and interest expense amounted to $0 and $23. The increase in professional fee expenses are directly related to accounting and legal services provided in relation to required reporting. The increase in compensation expense is directly related to the accrual of the compensation and vacation time of Scott Williams and David Callan. The increase in net loss was primarily due to an increase in professional fees and general and administrative expenses.

  

Capital Resources and Liquidity

 

As of September 30, 2017, we had cash of $5,167 as compared to $2,041 as of June 30, 2017. The Company also has a working capital deficit and stockholders’ deficit of $544,701 as of September 30, 2017.

 

The ability of the Company to realize its business plan is dependent upon, among other things, the closing of the merger with Arista. If the closing of the merger does not occur, the Company does not anticipate generating any revenues until it can be acquired by another operational company.

 

If the closing of the merger with Arista does not occur, we believe that our expenses will be very limited until we can find another operational company to acquire or merge with us. As a result, we will have to raise funds by obtaining loans from related parties or issue common stock in exchange for cash.  However, we cannot make any assurance that we will be able to receive funds. If the closing on the merger never occurs, 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.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.   

 

 

Cash Flows

 

The following table summarized the sources and uses of cash for the periods then ended.

 

		September 30, 2017				September 30, 2016
Cash, beginning of year		$	2,041			$	29
Net cash used in operating activities			(6,874	)			(12,690	)
Net cash provided by financing activities			10,000				12,661
Cash, end of year		$	5,167			$	-

 

Net Cash Used in Operating Activities

 

Our cash used in operating activities was $6,874 for the three-month period ended September 30, 2017 as compared to $12,690 for the same period ended 2016. The primary reason for the difference in cash flows used in operating activities decreasing from the prior period is the Company has larger accounts payable and accrued expense balances than the prior period.

  

Net Cash Provided by Financing Activities

 

Our cash provided by financing activities was $10,000 for the three-month period ended September 30, 2017 as compared to $12,661 for the same period ended 2016. The primary reason for the difference in cash flows provided by financing activities is that in the current period the Company was not lent as much from related parties to pay down our accounts payable and accrued expense balances. 

 

Critical Accounting Policies

 

The unaudited condensed financial statements and accompanying footnotes included in this filing have been prepared in accordance with accounting principles generally accepted in the United States with certain amount based on management’s best estimates and judgments. To determine appropriate carrying values of assets and liabilities that are not readily available from other sources, management uses assumptions based on historical results and other factors that it believes are reasonable.  Actual results could differ from those estimates.

 

Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended June 30, 2017.  There have been no material changes to our critical accounting policies as of and for the three months ended September 30, 2017.

 

Recent Accounting Pronouncements

 

For information on recent accounting pronouncements, see Recent Accounting Pronouncements in note 1 to the unaudited condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

 

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

 

Evaluation of Disclosure Controls.

 

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.  Based on the existence of the material weakness in internal control over financial reporting discussed in our Form 10-K for the year ended June 30, 2017, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of September 30, 2017 to provide such reasonable assurances.

 

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.  Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.  Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs.  Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any.  The design of disclosure controls and procedures is also based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in internal control over financial reporting.

 

During the three months ended September 30, 2017, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are 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.

 

Not required for small reporting companies.

 

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.

 

On October 6, 2017, the Company completed a 13.2 to 1 reverse stock split in accordance with the Share Exchange Agreement. As a result of the stock split, the number of the Company’s authorized shares of common stock was decreased from 100,000,000 to 7,575,758 shares and the number of its authorized shares of preferred stock was decreased from 5,000,000 to 378,788 shares. Upon the effectiveness of the stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 6.9 million shares to approximately 520,000 shares of common stock, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Fractional shares resulting from the stock split were rounded up to the next whole number. All amounts presented in these financial statements have been adjusted for this stock split.

 

On October 15, 2017 Arista exercised its right to extend the closing for an additional thirty days. The Company has not received the $10,000 non-refundable deposit in conjunction with the extension yet.

  

Item 6. Exhibits.

 

10.1	Share Exchange Agreement, dated April 19, 2017, by and between the Company, Arista Capital, Ltd., a Nevada corporation, and the holders of the commons stock of Arista Capital, Ltd. (1)
10.2	First Addendum to the Share Exchange Agreement, by and between the Company, Arista Capital, Ltd., a Nevada corporation, and the holders of commons stock of Arista Capital, Ltd. (2)
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

 

(1)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2017

(2)

Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on August 24, 2017

 

* Filed herewith

 

 

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: November 14, 2017	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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