UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from _____________ to _____________
Commission File Number
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☐ |
☒ | Smaller reporting company | ||
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| 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)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES ☐ NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
TABLE OF CONTENTS
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Item 1. | Financial Statements |
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Management’s Discussion and Analysis of Financial Condition or Plan of Operation |
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PART I - FINANCIAL INFORMATION
CARO HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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ASSETS |
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Current Assets |
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Cash |
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Other receivable |
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Promissory note receivable |
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Interest receivable |
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Total Current Assets |
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Software |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued interest payable |
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Due to related parties |
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Promissory notes payable |
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Convertible notes payable |
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Total Current Liabilities |
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TOTAL LIABILITIES |
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Stockholders' Deficit |
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Preferred stock: |
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Common stock: |
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Additional paid in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total Stockholders' Deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents |
CARO HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
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Operating Expenses |
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General and administration |
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Professional fees |
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Management consulting fees - related party |
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Software and website development |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Interest expense |
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Interest income |
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Foreign exchange gain |
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Total other income (expense) |
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Net loss before taxes |
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Provision for income taxes |
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Net loss |
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Other comprehensive loss |
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Comprehensive Loss |
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Net Loss Per Common Share – Basic and Diluted |
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Weighted Average Common Shares Outstanding |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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CARO HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Unaudited)
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| Other |
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| Comprehensive Loss |
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Balance - March 31, 2023 |
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Other comprehensive loss |
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Net loss |
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Balance - June 30, 2023 |
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| Accumulated Deficit |
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Balance - March 31, 2022 |
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Net loss |
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Balance - June 30, 2022 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents |
CARO HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Loss on convertible notes |
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Changes in operating assets and liabilities: |
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Interest receivable |
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Other receivable |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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Accrued interest payable |
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Net Cash Used in Operating Activities |
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Cash Flows from Investing Activities: |
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Advancement on loan receivable |
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Net Cash Used in Investing Activities |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of promissory note |
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Proceeds from issuance of convertible notes |
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Advancement from related party |
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Net Cash Provided by Financing Activities |
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Effects on changes in foreign exchange rate |
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Net Changes in Cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental Disclosure Information: |
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Cash paid for interest |
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Cash paid for taxes |
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Non-Cash Investing and Financing Activities: |
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Operating expenses paid by related parties |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6 |
Table of Contents |
CARO HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Caro Holdings Inc. (the “Company”) was incorporated in the State of Nevada on March 29, 2016 and engaged in the subscription box business with initial focus on offering sock subscriptions to its customers. The Company changed its business during the year and is now engaged in the development of its Direct To Consumer systems and methodologies where the Company analyzes the marketplace and works with mid-size brands that have a strong bricks and mortar presence, and have a desire to increase their digital presence.
Effective April 28, 2022, Rozh Caroro, the previous sole director, CEO and majority shareholder of the Company, entered into a stock purchase agreement for the sale of
On September 21 2022, the Company incorporated a subsidiary Caro Holdings International Ltd. in the UK to streamline operations, hire employees, consultants and contractors including the payment of payroll taxes and the collection of local VAT. The subsidiary is currently enhancing the ecommerce software that will allow the Small and Medium sized Business (SMB) community to sell, market and distribute their products. The company intends to create subsidiaries in markets where it perceives a significant sales opportunity.
The Company is located at 7 Castle Street, Sheffield, UK.
NOTE 2 – GOING CONCERN UNCERTAINTY
As reflected in the accompanying financial statements, the Company has an accumulated deficit of $
Management believes that the current actions to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. There are no assurances that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles used in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.
This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended March 31, 2023 included in the Company’s Annual Report on Form 10-K as filed with the SEC on July 14, 2023.
Basis of Consolidation
These unaudited interim consolidated financial statements include the accounts of the Company and the wholly-owned subsidiary Caro Holdings International, Ltd.. All material intercompany balances and transactions have been eliminated.
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The Company’s functional and reporting currency is the U.S. dollar. Caro Holdings International, Ltd.’s functional currency is the Great British Pounds (GBP). All transactions initiated in GBP are translated into U.S. dollars in accordance with ASC 830-30, ”Translation of Financial Statements,” as follows:
| 1) | Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date. |
| 2) | Equity at historical rates. |
| 3) | Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss). Gains and losses from foreign currency transactions are included in earnings in the period of settlement.
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Spot GBP: USD exchange rate |
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Average GBP: USD exchange rate |
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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 period amounts have been reclassified to conform with the current period presentation. The reclassification had no impact on net loss and financial position.
Intangible Assets
The Company accounts for intangible assets (including trademarks and formula) in accordance with ASC 350 “Intangibles-Goodwill and Other.”
ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted. (Note 4)
Related Parties
We follow ASC 850, ”Related Party Disclosures”, for the identification of related parties and disclosure of related party transactions. (Note 8)
Fair Value of Financial Instruments
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including accounts payable and accrued liabilities. are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
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Level 1 - | quoted prices in active markets for identical assets or liabilities |
Level 2 - | quoted prices for similar assets and liabilities in active markets or inputs that are observable |
Level 3 - | inputs that are unobservable (for example cash flow modeling inputs based on assumptions) |
Convertible Note
The Company follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives. The Company records each convertible note as a liability at the fixed monetary amount by measuring and recording a premium, as applicable, on the note issuance date with a charge to interest expense in the accompanying consolidated statements of operations and comprehensive loss.
Software Development
The Company accounts for all software purchased and software development costs in accordance with FASB ASC 985-20 “Software”. Accordingly, all costs incurred prior to establishing technological feasibility are expensed and software purchased or developed with established technological feasibility are capitalized. Software purchased is recorded at cost and depreciated using the straight-line method upon implementation with an estimated useful life of seven years.
As of June 30, 2023, purchased software of $
Web Development Cost
In accordance with FASB ASC 350-50 “Web Development Costs”, all costs incurred during the website planning stage are incurred. During the website application and infrastructure development stage, software tool costs and internet domain costs are capitalized, and website hosting costs are expensed. Cost incurred in the graphics development, content development and operating stage are generally expensed unless the costs are software related and should then be capitalized. During the three months ended June 30, 2023 and 2022, the Company incurred $
Net Income (Loss) per Share
The Company computes basic and diluted net loss per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Diluted loss per share reflects the potential dilution that could occur if convertible notes to issue common stock were converted resulting in the issuance of common stock that could share in the loss of the Company.
For the three ended June 30, 2023 and 2022, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive.
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Convertible notes payable |
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In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
NOTE 4 – INTANGIBLE ASSETS PURCHASE
On December 29, 2022, the Company entered into a software purchase agreement with Noise Comms Ltd. for the acquisition of software for a Unified Communications Platform which enables multi-party communications between brands and consumers in consideration of
The software will be amortized over estimated useful life of seven years following launch of the service planned during the 4th quarter of year 2023. As of June 30, 2023 and March 31, 2023, the intangible asset was $
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Thereafter |
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NOTE 5 – PROMISSORY NOTE RECEIVABLE
On March 20, 2023, the Company signed an agreement with an unaffiliated company for a loan receivable amount of up to $
On June 1, 2023, the Company signed an agreement with an unaffiliated company for a loan receivable amount of up to $
As of June 30, 2023 and March 31, 2023, the total loan receivable was $
NOTE 6 – PROMISSORY NOTES PAYABLE
On October 9, 2022, the Company issued a $
On April 3, 2023, the Company issued a $
As of June 30, 2023 and March 31, 2023, the promissory note payable was $
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Table of Contents |
NOTE 7 – CONVERTIBLE NOTES PAYABLE
As of June 30, 2023 and March 31, 2023, the total principal balance of the convertible notes payable was $
On October 13, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On November 8, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On November 19, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On February 22, 2023, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On April 19, 2023, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On May 22, 2023, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
Accrued interest on convertible notes
During the three months ended June 30, 2023 and 2022, interest expense of $
NOTE 8 – RELATED PARTY TRANSACTIONS
On January 9, 2023, the Company issued
During the three months ended June 30, 2023 and 2022, the director and Chief Executive Officer (“CEO”) of the Company paid $
During the three months ended June 30, 2023, the Company incurred $
As of June 30, 2023 and March 31, 2023, there was $
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NOTE 9 – EQUITY
Authorized Stock
The Company’s authorized common stock consists of
Common Stock
On January 9, 2023, the Company issued
As of June 30, 2023 and March 31, 2023, the issued and outstanding common stock was
NOTE 10 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to the June 30, 2023 to the date these financial statements were issued and has determined that it has the following material subsequent events:
On December 31, 2022, the Company entered into a board resolution with the director and CEO of the Company for the cancellation of
On July 31, 2023, the Company agreed to issue
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Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Caro Holdings Inc., unless otherwise indicated.
General Overview
Our company was incorporated on March 29, 2016 in the State of Nevada. We had been engaged in the subscription box business with our initial focus on offering sock subscriptions to our customers. Our subscription box was a package of a pair of socks sent directly to a customer on a recurring basis. In April of 2022, the Company underwent a change in ownership.
Effective April 28, 2022, Rozh Caroro, the previous sole director, CEO and majority shareholder of the Company, entered into a stock purchase agreement for the sale of 36,795,000 shares of Common Stock of the Company to Christopher McEachnie. As a result of the stock transfer, Mr. McEachnie holds approximately 92% of the issued and outstanding shares of Common Stock of the Company, and as such he is able to unilaterally control the election of our board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of our Company. Also effective April 25, 2022, the previous sole officer and director of the Company, Rozh Caroro, resigned her positions with the Company. Upon her resignation, Mr. McEachnie was appointed as Chief Executive Officer, Treasurer and Secretary, and sole Director of the Company.
On September 21 2022, the Company incorporated a subsidiary Caro Holdings International Ltd. in the UK. To streamline operations, hire employees, consultants and contractors including the payment of payroll taxes and the collection of local VAT, Caro Holdings International Ltd, has been established. The subsidiary is currently enhancing the ecommerce software that will allow the Small and Medium sized Business (SMB) community to sell, market and distribute their products. The company intends to create subsidiaries in markets where it perceives a significant sales opportunity.
Prior to September 2022, our company’s activities have been limited to the sourcing of our advertising channels, initial branding efforts, and in our formation and the raising of equity capital.
Our Current Business
We are now engaged in the development of our Direct to Consumer (D2C) systems and methodologies where we analyze the marketplace and work with mid-size brands that have a strong bricks and mortar presence, and have a desire to increase their digital presence.
Our D2C system is designed to be a fully integrated, end-to-end system that allows control of data that provides insight from multiple channels to facilitate successful marketing decisions based on a client’s entire business’ performance. Based on these analytics, the system can immediately deploy personalization and optimization independently, and enhance understanding of how customer interactions vary across different regions. Furthermore, our infrastructure is designed to take advantage of growth opportunities with minimal additional costs.
Since September 2022, the company has identified all of the components that it needs to provide service. It has been actively either acquiring or building these core components, plus additional features. It has engaged in a number of marketing activities, and has example clients in multiple industries using, testing and providing feedback for our system. The Company is also looking to provide its marketplace platform for the sale of products and services to the pet care industry via primary national suppliers in the United States. The Company is also engaging in social media campaigns, making businesses aware of our services. Our marketing strategies are expected to include attending trade shows and fairs, online conferences, and utilizing identified experts in affiliate marketing, pay per click, organic, search, engine, optimization, and social media marketing to promote D2C commerce.
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On December 29, 2022, the Company entered into a software license agreement with Noise Comms Ltd. for the acquisition of a Unified Communications Platform which enables multi-party communications between brands and consumers in consideration of 20,000,000 shares of common stock valued at $258,000.
We are a small early-stage development company. We have no revenues and have limited cash on hand. We have sustained losses since inception and have relied upon loans from directors and officers and the sale of our securities for funding. We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.
Marketing, Advertising, and Promotion
We believe that our systems will become one of our most important assets. Our ability to successfully create brand awareness is dependent upon our ability to address the changing needs and priorities of each brand’s target customers. To that end, we plan to focus much of our marketing efforts to recruit partners. We will then apply our methodologies to better understand their customers and their needs and ensure we align our brand messages in the marketing, and the channels through which we deliver these messages, to the target customers.
Results of Operations
Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022
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| Three Months Ended |
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| |||||||
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| June 30, |
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| Change |
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| Change |
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| 2023 |
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| 2022 |
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| Amount |
|
| Percentage |
| ||||
Operating expenses |
| $ | 112,180 |
|
| $ | 10,572 |
|
|
| 101,608 |
|
|
| 961 | % |
Loss from operations |
|
| (112,180 | ) |
|
| (10,572 | ) |
|
| (101,608 | ) |
|
| 961 | % |
Other expenses |
|
| (34,066 | ) |
|
| - |
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|
| (34,066 | ) |
|
| 100 | % |
Net Loss |
| $ | (146,246 | ) |
| $ | (10,572 | ) |
| $ | (135,674 | ) |
|
| 1,283 | % |
Net loss increased from $10,572 for the three months ended June 30, 2022 to $146,246 for the three months ended June 30, 2023 due to the increase in operating expenses and other expenses.
During the three months ended June 30, 2023 and 2022, we did not generate revenues.
Operating expenses for the three months ended June 30, 2023 consisted of audit and accounting fees, software development expense, legal fees, consulting fees and website development expense. The increase in operating expenses was primarily a result of an increase in development activities, audit fees, legal fees and consulting fees.
During the three months ended June 30, 2023, the Company incurred other expenses of $34,066 mainly consist of loss on convertible notes of $37,680.
Liquidity and Financial Condition
Working Capital (Deficiency) |
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| ||
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|
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| ||
|
| June 30, 2023 |
|
| March 31, 2023 |
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Current Assets |
| $ | 14,580 |
|
| $ | 8,292 |
|
Current Liabilities |
|
| 548,238 |
|
|
| 391,054 |
|
Working Capital (Deficiency) |
| $ | (533,658 | ) |
| $ | (382,762 | ) |
Our total current assets as of June 30, 2023 were as $14,580 compared to total current assets of $8,292 as of March 31, 2023. The increase was primarily due to an increase in promissory note receivable.
Our total current liabilities as of June 30, 2023 were $548,238 as compared to total current liabilities of $2391,054 as of March 31, 2023. The increase was mainly attributed to the increase in convertible notes and accounts payable and accrued liabilities.
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Working capital deficiency increased from $382,762 as of March 31, 2023 to $533,658 as of June 30, 2023 mainly due to the increase in convertible notes and accounts payable and accrued liabilities.
The report of our auditors on our audited financial statements for the fiscal year ended March 31, 2023, contains a going concern qualification as we have suffered losses since our inception. We have minimal assets and have achieved limited operating revenues since our inception. We have been dependent on sales of equity securities to conduct operations. Unless and until we commence material operations and achieve material revenues, we will remain dependent on financings to continue our operations.
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| Three Months Ended |
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| June 30, |
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| 2023 |
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| 2022 |
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Cash used in Operating Activities |
| $ | (43,739 | ) |
| $ | - |
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Cash used in Investing Activities |
|
| (7,305 | ) |
|
| - |
|
Cash provided by Financing Activities |
|
| 53,900 |
|
|
| 500 |
|
Effects on changes in foreign exchange rate |
|
| (4,176 | ) |
|
| - |
|
Net changes in cash during period |
| $ | (1,320 | ) |
| $ | 500 |
|
Operating Activities
For the three months ended June 30, 2023, net cash used in operating activities was $43,739, related to our net loss of $146,246, decreased by loss on convertible notes of $33,333 and net changes in operations assets and liabilities of $69,175.
For the three months ended June 30, 2022, net cash used in operating activities was $0, related to our net loss of $10,572, offset by net changes in operations assets and liabilities of $10,572.
Investing Activities
For the three months ended June 30, 2023, net cash used in financing activities was $7,305 from advancement on loan receivable.
We did not use any funds for investing activities for the three months ended June 30, 2022.
Financing Activities
For the three months ended June 30, 2023, net cash provided by financing activities was $53,900 from issuance of a promissory note of $39,000 and issuance of convertible notes of $50,000. For the three months ended June 30, 2022, net cash provided by financing activities was $500 from advancement from related party.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
Basis of Presentation
The financial statements are prepared in accordance with generally accepted accounting principles used in the United States of America (“US GAAP”).
Use of Estimates
In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.
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Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.
Our Company’s financial instruments include cash and cash equivalents and accrued liabilities. It is management’s opinion that the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available.
Management believes it is not practical to determine the fair value of accounts payable and accrued liabilities, and note payable to related parties and lease and management arrangement with related parties, if any, because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Recently Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon 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. Based on her evaluation as of the end of the period covered by this report, Meriesha Rennalls, our President, Chief Operating Officer, Secretary and Director, has concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting.
As disclosed in our Quarterly Report on Form 10-Q for the three months ended June 30, 2023, based on management’s assessment of the effectiveness of our internal controls over financial reporting, management concluded that our internal controls over financial reporting were not effective as of June 30, 2023, due to inadequate segregation of duties and ineffective risk management, and insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. Management believes the above weakness constitute material weaknesses in our internal control over financial reporting. Until such time, if ever, that we remediate the material weakness in our internal control over financial reporting we expect that the material weaknesses in our disclosure controls and procedures will continue.
Changes in Internal Control over Financial Reporting
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.
Item 1A. Risk Factors
As a “smaller reporting company”, we 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
Exhibit Number |
| Description of Exhibits |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CARO HOLDINGS INC. | |||
| (Registrant) |
| |
Dated: August 21, 2023 | By: | /s/ Meriesha Rennalls | |
|
| Meriesha Rennalls | |
President, Chief Operating Officer, | |||
Secretary (Principal Executive Officer) |
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