ITEM 1. FINANCIAL STATEMENTS
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 1
–
ORGANIZATION AND NATURE OF BUSINESS
Arax Holdings Corp. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012 with a business plan to sell hot dogs from mobile hot dog stands throughout the major cities in Mexico. As of the filing of the 10K for last year, the Company stated that Management believes that the best business model for our investors is to pursue business activity in the Life Sciences sector of the United States and internationally. We will continue to assess these opportunities and structures as well as the various pre-requisite actions needed to finalize and implement any new business model.
This new business model could entail a capital restructuring of the Company in order to provide new capital and a broader base of shareholders. Such a capital restructuring of the Company could involve a merger or acquisition of assets through various techniques, including a possible reverse-merger. Additional asset acquisitions and transfers may occur.
The Company is a majority-owned subsidiary of Thru Pharma, LLC, and these financials are presented on a stand-alone basis. All transactions with Thru Pharma have been identified in Note 4: Stockholders' Deficit and Note 5: Related party transactions.
Pursuant to a revision to a certain Consulting Agreement dated October 8, 2013, between Thru Pharma and Strategic Universal Advisors, LLC (“Strategic”), as amended effective January 17, 2014, on or about February 9, 2015, and most recently on October 20, 2015, with full effect as of April 1, 2015 (the “Consulting Agreement”), Thru Pharma and Strategic agreed that the intent of the Consulting Agreement ab initio was to provide Strategic with a 3% equity ownership of Thru Pharma in the event that a PUBCO M&A transaction did not occur prior to the end of the Consulting Agreement. Thru Pharma and Strategic agreed and stipulated that 753,504 shares of the Company would equal 3% of Thru Pharma as the equity payment under the Consulting Agreement, with transfer subject to the further provisions stated below. As Thru Pharma was the sole beneficiary of the services provided by Strategic under the Consulting Agreement, no part of the value of the consideration for services provided under the Consulting Agreement has been recognized as an expense by the Company.
In connection with earlier amendments to the Consulting Agreement, Strategic granted to Mr. Keough, a control person of the Company and Thru Pharma, an irrevocable proxy (the “Irrevocable Proxy”), to vote all of the common stock in the Company under certain conditions. That proxy no longer exists under the terms of the most recent amendment.
As part of the currently amended Consulting Agreement, Thru Pharma agreed to transfer 753,504 Company shares to Strategic upon the closing of a merger or acquisition (an “M&A Transaction”) of a public entity, resulting in Thru Pharma being the controlling owner of the entity that was the subject of the M&A Transaction, and Thru Pharma would cause such entity to also issue to Strategic a stock warrant to purchase 600,000 (six hundred thousand) shares of common stock of the entity that was the subject of the M&A Transaction. Such warrant will be of five-year duration, exercisable at $0.10 per share, and shall vest in four equal amounts of 150,000 shares with the first annual vesting to occur 60 (sixty) days following the completion of the PUBCO M&A Transaction, as well as other routine terms.
Notwithstanding anything to the contrary provided in the Consulting Agreement or elsewhere, in no event would Thru Pharma be directly and/or indirectly obligated to enter into or complete any particular M&A Transaction, including, but not limited to, any M&A Transaction with the Company.
Effective July 1, 2015, Arax and Catalyst Funding, LLC, entered into an Original Issue Discount Revolving Secured Convertible Promissory Note (the “Catalyst Note”) and a Securities Purchase Agreement (the “Catalyst SPA”). The transaction is secured by a grant of security interest to 100% of the Company stock held by or for Thru Pharma. The Catalyst Note and Catalyst SPA are intended to facilitate funding essential work relating to reporting and accounting costs. The total available funds are $200,000, and the Company has only drawn $75,000, and for which the Company is obligor. A Commitment Fee of Company stock in the amount of 35,294 shares was authorized for issue to Catalyst as part of the transaction recorded as an initial debt discount of $14,118. In the event that the Company is unable to timely make payments under this Agreement, Catalyst has the option of gaining control of the Thru Pharma shares in the Company.
On March 1, 2017, the Company’s majority shareholder, Thru Pharma LLC entered into a merger agreement with Kasten, Inc., a Nevada corporation (“Kasten”), whereby Kasten was the surviving corporation. As part of the merger agreement, the shares in the Company held by Thru Pharma were withheld from the agreement and the Company was no longer identified as a subsidiary of Thru Pharma thereby effectively spinning out the Company and excluding it from the surviving entity. Kasten has been identified as party to and co-guarantor of the Catalyst note. The Company is in the process of settling the note with Catalyst whereby funds used to satisfy the note are being provided by its Chief Executive Officer, Steven J. Keough whereas Mr. Keough will be effectively purchasing the 8,000,000 common shares in the Company and the Arax Holdings Corp receivable (listed on the books of the Company as a related party payable in the amount of $211,149 for the nine months ended July 31, 2016) in exchange for extinguishing the note. The 8,000,000 shares are currently collateralizing the Catalyst loan. Upon satisfaction of the note, the Company’s related party payable will be due to Mr. Keough, and he will become the majority shareholder in the Company.
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 1
–
ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
The Company’s status as a “shell company” as of the date of this report remains unchanged.
NOTE 2
–
GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not generated any revenues as of July 31, 2016. The Company has incurred losses since Inception (February 23, 2012) resulting in an accumulated deficit of $656,464 as of July 31, 2016 and stockholders’ deficit of $317,719. The Company currently has a working capital deficit, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it can be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
NOTE 3
–
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company has adopted an October 31 fiscal year end.
The accompanying unaudited financial statements have been prepared in accordance with the instructions from Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period, and to make the financial statements not misleading, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim period are not necessarily indicative of operations for a full year.
Development Stage Compan
y
The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities” and among the additional disclosures required as a development stage company that its financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of its Inception (February 23, 2012) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on the net loss or cash flows of the Company.
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of July 31, 2016 the Company had no cash equivalents.
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
|
|
·
|
Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
|
·
|
Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
·
|
Level 3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 2.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “
Accounting for Income Taxes.
” It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and State jurisdictions.
The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” (“ASC- 605”), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the nine months ended July 31, 2016.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity instruments. There were no such potentially dilutive debt or equity instruments issued or outstanding during the three and nine month ended July 31, 2016.
Recent Accounting Pronouncements
The Company has reviewed all the recent accounting pronouncements issued to date of the issuance of these financial statements, and does not believe any of these pronouncements will have a material impact on the company.
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 4
–
STOCKHOLDERS’ DEFICIT
Common Stock
The Company is authorized to issue 75,000,000 shares of common stock with a par value of $0.001 per share. The Company had 10,335,294 shares of common stock issued and outstanding as of July 31, 2016.
2016
For the nine months ended July 31, 2016, the Company issued 35,294 shares of common stock, valued at $11,881 ($0.337 per share) as part of an incentive to enter into convertible notes that were owed as of October 31, 2015.
2015
For the year ended October 31, 2015, the Company did not issue any common shares of Company stock.
Additional Paid in Capital
As of July 31, 2016, the Company owed $65,400 (50,000 common shares) for
stock subscription payable for payments to a consultant for work performed with Thru Pharma, a related party, for a value of $27,000 and was recorded as a related party expense. The remaining $38,400 was recorded during the year ended October 31, 2015 for the same consultant and was recorded as a related party expense.
NOTE 5
–
RELATED PARTY TRANSACTIONS
In support of the Company’s cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
The Company owes its principal shareholder, Thru Pharma, a total of $211,149 as of July 31, 2016, in the form of a related party payable. It is unsecured, due on demand and non-interest bearing.
NOTE 6
–
INCOME TAXES
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
As of July 31, 2016, the Company had a net operating loss carry-forward of approximately $656,464 that may be used to offset future taxable income and begins to expire in 2031. Because of the change in ownership that occurred on January 16, 2014, net operating loss carry forwards could be limited as to use in future years.
NOTE 7 – CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES
The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to a revolving convertible note in which the Company can borrow up to $200,000, which includes a 10% OID. The Company issued the first tranche of the convertible note totaling $75,000, of which $65,000 was paid in cash, $2,500 was paid for legal fees, and the OID of $7,500, which included a ratchet provision in the conversion price of the lower of $.95 or a price equal to 60% of the last equity transaction completed by the Company as part of a subscription agreement. The note had a maturity date of nine months after funding and also included a fifty percent premium which was added on 90 days after funding. The note was to be paid off in installments of $19,453 for the six months after the ninety day period.
The Company did not make the first installment payment under this agreement and was presented with a notice of default by noteholder on October 21, 2015. Upon default, the note began to accrue interest in the amount of 24% per annum as well as an 18% late payment penalty began to accrue on unpaid interest. As of July 31, 2016 total accrued interest and penalties under this note was $11,281.
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 7 – CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES (CONTINUED)
On November 30, 2015 and April 27, 2016, a related party made payments of $85,000 on the convertible note. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures using a multinomial lattice model as of July 31, 2016 and October 31, 2015.
The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $3,111 and derivative expense of $0 during the nine months ended July 31, 2016. As of July 31, 2016, the fair market value of the derivatives aggregated $2,389 using the following assumptions: estimated 0.6 month, estimated volatility of 92%, and a discount rate of 0.38%.
The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $19,934 and derivative expense of $25,434 during the year ended October 31, 2015. As of October 31, 2015, the fair market value of the derivatives aggregated $5,500 using the following assumptions: estimated 0.42 to 0.75-year term, estimated volatility of 133.49% to 243.69%, and a discount rate of 0.21% to 0.23%.
NOTE 8 – FAIR VALUE MEASUREMENT
The Company uses the
multinomial lattice
model to calculate the fair value of the derivative liability.
Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of July 31, 2016 and October 31, 2015 consisted of the following:
|
|
|
|
Fair Value Measurements Using
|
|
|
Description
|
|
|
Total Fair
Value at
July 31, 2016
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Derivative liability
|
|
|
$
|
2,389
|
|
|
$
|
—
|
|
|
$
|
2,389
|
|
|
$
|
—
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
Description
|
|
|
Total Fair
Value at
October 31, 2015
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Derivative liability
|
|
|
$
|
5,500
|
|
|
$
|
—
|
|
|
$
|
5,500
|
|
|
$
|
—
|
|
NOTE 9 - STOCK PURCHASE OPTIONS AND WARRANTS
During the nine months ended July 31, 2016, the Company did not issue any options.
During the year ended October 31, 2015, the Company issued options to purchase common shares for a total of 37,500 shares of the Company’s Common Stock. The Company issued 37,500 options in conjunction with a consulting agreement entered into in February 2015. According to the consulting agreement, the Company is to issue 5,000 common shares or 7,500 options per month during the duration of their agreement. The options were valued using the multinomial lattice pricing model under the assumptions noted below.
ARAX HOLDINGS CORP.
NOTE TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 9 - STOCK PURCHASE OPTIONS AND WARRANTS (CONTINUED)
During the nine months ended July 31, 2016, the Company did not issue any options
.
During the year ended October 31, 2015, the Company issued 37,500 stock purchase options for a value of $16,217 ($0.432 per share).
The following table presents the assumptions used to estimate the fair values of the stock warrants and options granted:
|
|
|
Nine Months Ended
July 31, 2016
|
|
Year ended October
31, 2015
|
|
|
Expected volatility
|
|
162%
|
|
202-213
|
%
|
|
Expected dividends
|
|
0%
|
|
0
|
%
|
|
Expected term
|
|
3 Years
|
|
3 Years
|
|
|
Risk-free interest rate
|
|
0.76%
|
|
0.80-1.09
|
%
|
The following table summarizes the changes in options outstanding of the Company during the nine months ended July 31, 2016.
|
|
Number
|
|
Weighted
|
|
Weighted
|
|
|
Expiration
|
|
Value if
|
|
|
|
of
|
|
Average
|
|
Average
|
|
|
Date (yrs)
|
|
Exercised
|
|
|
|
Options
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
Date Issued
|
|
|
Price
|
|
Fair Value
|
|
|
|
|
|
|
|
Balance as of October 31, 2015
|
|
|
37,500
|
|
|
$
|
0.80
|
|
|
$
|
0.41
|
|
|
|
2.47
|
|
|
$
|
30,000
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled/Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding as of July 31, 2016
|
|
|
37,500
|
|
|
$
|
0.80
|
|
|
$
|
0.41
|
|
|
|
1.72
|
|
|
$
|
30,000
|
|
The following table summarizes the changes in options outstanding of the Company during the year ended October 31, 2015.
|
Date Issued
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Expiration
Date (yrs)
|
|
|
Value if
Exercised
|
|
|
Balance as of October 31, 2014
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Granted
|
|
|
37,500
|
|
|
|
0.80
|
|
|
|
0.41
|
|
|
|
2.64
|
|
|
|
30,000
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled/Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding as of October 31, 2015
|
|
|
37,500
|
|
|
$
|
0.80
|
|
|
$
|
0.41
|
|
|
|
2.47
|
|
|
$
|
30,000
|
|
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 9 - STOCK PURCHASE OPTIONS AND WARRANTS (CONTINUED)
Stock Purchase Warrants
During the nine months ended July 31, 2016, the Company issued warrants to purchase a total of 200,000 shares at $0.01 per share for professional services rendered. The shares were valued at $58,000 ($0.29 per share).
During the year ended October 31, 2015, the Company issued warrants to purchase a total of 600,000 shares. The Company issued 600,000 warrants in conjunction with a consulting agreement entered into in July 2015. The warrants were valued using the multinomial lattice pricing model under the assumptions noted below for a value of $216,799.
The following table presents the assumptions used to estimate the fair values of the stock warrants and options granted:
|
|
|
Nine Months Ended
July 31, 2016
|
|
Year ended
October 31, 2015
|
|
|
Expected volatility
|
|
162%
|
|
212
|
%
|
|
Expected dividends
|
|
0%
|
|
0
|
%
|
|
Expected term
|
|
3 years
|
|
3 Years
|
|
|
Risk-free interest rate
|
|
0.76%
|
|
1.08
|
%
|
The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the nine months ended July 31, 2016.
|
|
|
Number
|
|
Weighted
|
|
Weighted
|
|
|
Expiration
|
|
Value if
|
|
|
|
|
of
|
|
Average
|
|
Average
|
|
|
Date (yrs)
|
|
Exercised
|
|
|
|
|
Warrants
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of October 31,
2015
|
|
|
600,000
|
|
|
$
|
0.80
|
|
|
$
|
0.36
|
|
|
|
2.73
|
|
|
$
|
480,000
|
|
|
Granted
|
|
|
200,000
|
|
|
|
0.01
|
|
|
|
0.29
|
|
|
|
5.79
|
|
|
|
2,000
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled/Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding as of July 31,
2016
|
|
|
800,000
|
|
|
$
|
0.60
|
|
|
$
|
0.34
|
|
|
|
2.93
|
|
|
$
|
482,000
|
|
The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the year ended October 31, 2015.
|
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Expiration
Date (yrs)
|
|
|
Value if
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of October 31, 2014
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Granted
|
|
|
600,000
|
|
|
|
0.80
|
|
|
|
0.36
|
|
|
|
2.73
|
|
|
|
480,000
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled/Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding as of October 31, 2015
|
|
|
600,000
|
|
|
$
|
0.80
|
|
|
$
|
0.36
|
|
|
|
2.73
|
|
|
$
|
480,000
|
|
ARAX HOLDINGS CORP.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016 AND 2015
NOTE 10 – SUBSEQUENT EVENTS
On March 1, 2017, the Company’s majority shareholder, Thru Pharma LLC entered into a merger agreement with Kasten, Inc., a Nevada corporation (“Kasten”), whereby Kasten was the surviving corporation. As part of the merger agreement, the shares in the Company held by Thru Pharma were withheld from the agreement and the Company was not identified as a subsidiary of Thru Pharma thereby effectively spinning out the Company and excluding it from the surviving entity. Kasten has been identified as party to and co-guarantor of the Catalyst note. The Company considers this note fully paid and is in the process of reclaiming shares pledged as collateral from Catalyst. Funds used to satisfy the note are being provided by its Chief Executive Officer, Steven J. Keough whereas Mr. Keough will be effectively purchasing the 8,000,000 common shares in the Company and the Arax Holdings Corp receivable (listed on the books of the Company as a related party payable in the amount of $211,149 for the nine months ended July 31, 2016) in exchange for extinguishing the note. The 8,000,000 shares are currently collateralizing the Catalyst loan. Upon satisfaction of the note, the Company’s related party payable will be due to Mr. Keough and he will become the majority shareholder in the Company.