Arax Holdings (OTC: ARAT) revenue falls as 2024 loss hits $3.6M and cash drops
Rhea-AI Filing Summary
Arax Holdings Corp. is a Nevada-based software and blockchain holding company focused on its Core Blockchain "BaaP" ecosystem, trade finance, logistics and age-verification platforms. Its stock trades on the OTC Pink and is not listed on a national exchange.
For the year ended October 31, 2024, Arax generated revenue of $613,636, down from $909,176 in 2023, with $301,750 from related party Gut Moravia. Net loss narrowed to $3,564,336 from $6,586,491, mainly due to sharply lower operating expenses.
Cash fell to $119,157 from $1,448,769, total assets declined to $902,220, and stockholders’ equity moved to a deficit of $(521,414). The company has a working capital deficit, relies on convertible notes and related-party advances, and its auditor and management highlight substantial doubt about its ability to continue as a going concern. Prior-year financials were restated to correct common-control accounting and software capitalization.
Positive
- None.
Negative
- None.
Insights
Arax is progressing its blockchain strategy but under clear going-concern pressure.
Arax shifted into a blockchain-focused software model, integrating acquisitions like Core Business Holdings and Cilandro SA to build its BaaP ecosystem, trade finance, and age-verification platforms. Revenue in 2024 was $613,636, with a meaningful related-party component.
Despite cutting operating expenses by about half to $3.9M, the company still posted a net loss of $3.56M. Cash dropped sharply to $119,157 and total assets to $902,220, while equity turned to a deficit of $(521,414). Operations are currently funded by convertible notes and a related-party advance of $157,756.
The audit report and Note 3 explicitly raise substantial doubt about going concern. Restatement of 2023 financials under ASC 805-50 and ASC 350-40 cleaned up prior errors but did not change cash flows. Future filings for periods after October 31, 2024 will be key to see whether new BaaP use cases translate into scalable revenue and relieve financing pressure.
Key Figures
Key Terms
going concern financial
Blockchain as a Platform (BaaP) technical
common-control transfer financial
ASC 350-40 financial
Central Business Digital Currencies (CBDCs) financial
convertible promissory notes financial
Earnings Snapshot
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the fiscal year ended
For the transition period from ___________ to ___________
COMMISSION
FILE NO.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
6770
(Primary Standard Industrial Classification Code Number)
(IRS Employer Identification No.)
(Address and telephone number of registrant’s executive office)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| None | N/A | N/A |
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ No
Securities
registered pursuant to Section 12(g) of the Act:
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 shorter period that the registrant as 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 | ☐ |
| ☒ | 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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of June 9, 2026,
was approximately $
As of June 9, 2026 the Registrant had shares of common stock issued and outstanding.
TABLE OF CONTENTS
| PART I | ||
| Item 1 | Description of Business | 1 |
| Item 1A | Risk Factors | 2 |
| Item 1B | Unresolved Staff Comments | 2 |
| Item 1C | Cybersecurity Risk Management and Strategy | 3 |
| Item 2 | Properties | 3 |
| Item 3 | Legal Proceedings | 3 |
| Item 4 | Mine Safety Disclosures | 3 |
| PART II | ||
| Item 5 | Market for Common Equity and Related Stockholder Matters | 3 |
| Item 6 | Selected Financial Data | 4 |
| Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 7A | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| Item 8 | Financial Statements and Supplementary Data | F-1 |
| Item 9 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 11 |
| Item 9A | Controls and Procedures | 11 |
| Item 9B | Other Information | 11 |
| PART III | ||
| Item 10 | Directors, Executive Officers, and Corporate Governance | 12 |
| Item 11 | Executive Compensation | 12 |
| Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 13 |
| Item 13 | Certain Relationships and Related Transactions, and Director Independence | 14 |
| Item 14 | Principal Accountant Fees and Services | 14 |
| PART IV | ||
| Item 15 | Exhibits and Financial Statement Schedules | 14 |
PART I
ITEM 1. DESCRIPTION OF BUSINESS
As used in this annual report, the terms “we”, “us”, “our”, “the Company”, mean Arax Holdings Corp. unless otherwise indicated.
Cautionary Note Regarding Forward Looking Statements’
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our ability to locate and acquire an operating business and the resources and efforts we intend to dedicate to such an endeavor, our development of a viable business plan and commencement of operations, and our ability to locate sources of capital necessary to commence operations or otherwise meet our business needs and objectives. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include those described in Item 1A. – Risk Factors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
Description 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 2016, the Company stated that it was re-evaluating its business plan.
We were dormant from May 2005 through October 31, 2020. As of the date of this Report, we have and intend to engage in synergistic acquisitions or joint ventures with companies that we believe will enhance our business plan as a software and technology holding company.
On December 30, 2020, as a result of a custodianship in Clark County, Nevada, Case Number: A-20-825346-B, Custodian Ventures LLC (“Custodian”) was appointed custodian of the Company. On the same date, Custodian appointed David Lazar as the Company’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer and Chairman of the Board of Directors.
On June 24, 2021, as a result of a private transaction, 10,000,000 shares of Series A Preferred Stock, $0.001 par value per share (the “Shares”) of Arax Holdings Corp., a Nevada corporation (the “Company”), were transferred from Custodian Ventures, LLC to Michael Pieter Loubser (the “Purchaser”). As a result, the Purchaser became an approximately 90.6% holder of the voting rights of the issued and outstanding share capital of the Company on a fully-diluted basis of the Company, and became the controlling shareholder. In connection with the transaction, David Lazar released the Company from all debts owed to him and/or Custodian Ventures, LLC.
On June 24, 2021, the existing director and officer resigned immediately. Accordingly, David Lazar, serving as a director and an officer, ceased to be the Company’s Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and a Director. At the effective date of the transfer, Michael Pieter Loubser consented to act as the new Chairman of the Board of Directors of the Company, Ockert Cornelius Loubser consented to act as the new Chief Executive Officer of the Company, and Rastislav Vašička consented to act as the new Chief Information Officer of the Company.
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On August 31, 2021, the Company appointed Christopher D. Strachan as its Chief Financial Officer. The Company began a transition into a software and technology holding company.
On December 30, 2022, the Company acquired Core Business Holdings (“CBH”) through a share swap agreement. Because this was a common-control transfer under ASC 805-50, the equity issued was recorded at the carrying amount of the net assets transferred (zero), with the difference recorded directly in additional paid-in capital and no income-statement impact. This acquisition provided key intellectual property assets to enhance the Company’s Blockchain as a Platform (BaaP) ecosystem.
On May 3, 2023, the Company acquired 100% of Cilandro SA registered under Swiss law (“Cilandro”). The acquisition did not qualify as a business combination and, as a result, was accounted for as an asset acquisition as the fair value of the gross assets acquired was primarily related to a single asset. The Company issued 110,000 shares of the Company’s common stock to Cilandro, and a convertible promissory note with the principal of $58,000, and assumed approximately $100,000 in accrued liability for Cilandro, reflecting an aggregate purchase price of $268,000.
The Company has operations from a continuing business providing software and logistics services to a company in South Africa. The Company intends to develop this relationship while expanding in other areas of the world. The Company has acquired financial licenses in Switzerland under the entity Cilandro and is currently working to provide Central Business Digital Currencies for various entities worldwide. The Company will continue to develop software solutions that work exclusively on the Core Blockchain to maximize its potential for revenue generation in this new technology released in May of 2022. The Company has entered into consulting and design agreements from continuing business and is in the process of evaluating additional acquisitions of software technologies.
Competition and Market Conditions
We will face substantial competition in our efforts to identify and pursue a business venture. The primary source of competition is expected to be from other companies organized and funded for similar purposes, including small venture capital firms, blank check companies, and wealthy investors, many of which may have substantially greater financial and other resources than we do. In light of our limited financial and human resources, we are at a competitive disadvantage compared to many of our competitors in our efforts to obtain an operating business or assets necessary to commence our operations in a new field. Additionally, with the economic downturn caused by the coronavirus pandemic, many venture capital firms and similar firms and individuals have been seeking to acquire businesses at discounted rates, and we therefore currently face additional competition and resultant difficulty obtaining a business. We expect these conditions to persist at least until such time as the economy recovers. Further, even if we are successful in obtaining a business or assets for new operations, we expect there to be enhanced barriers to entry in the marketplace in which we decide to operate as a result of reduced demand and/or increased raw material costs caused by the pandemic and other economic forces that are beyond our control.
Regulation
As of the date of this Report, we are required to file reports with the Securities and Exchange Commission (the “SEC”) by Section 13 of the Securities Exchange Act of 1934 (the “Exchange Act”).
Depending on the direction management decides to take and a business or businesses we may acquire in the future, we may become subject to other laws or regulations that require us to make material expenditures on compliance including the increasing state-level regulation of privacy. Any such requirements could require us to divert significant human and capital resources on compliance, which could have an adverse effect on our future operating results.
Employees
As of the date of this Report, we do not have employees. However our Chief Executive Officer, Chief Financial Officer and Chief Information Officer provide part-time consulting services to us with deferred compensation fees.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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ITEM 1C. CYBERSECURITY RISK MANAGEMENT AND STRATEGY
| ● |
| ● |
| ● |
| ● | Governance |
| ● |
| ● |
| ● | We engage qualified external cybersecurity consultants when needed to supplement internal capabilities and ensure independent assessment of our program. |
| ● | This disclosure complies with Item 106 of Regulation S-K. We continue to evaluate and enhance our cybersecurity practices in line with regulatory requirements and industry best practices. |
ITEM 2. PROPERTIES
The Company’s principal business and corporate address is 820 E Park Ave, Bldg. F100, Tallahassee FL 32301.
ITEM 3. LEGAL PROCEEDINGS
We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our Common Stock is not listed on any securities exchange and is quoted on the OTC Pink Market under the symbol “ARAT” Because our Common Stock is not listed on a securities exchange and its quotations on OTC Pink are limited and sporadic, there is currently no established public trading market for our Common Stock.
Holders
As of June 9, 2026 there were 138 shareholders of record of the Company’s Common Stock based upon the records of the shareholders provided by the Company’s transfer agent. The Company’s transfer agent is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598, Telephone # 212-828-8436.
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Dividends
We have never paid or declared any dividends on our Common Stock and do not anticipate paying cash dividends in the foreseeable future.
Securities Authorized For Issuance Under Equity Compensation Plans
We currently do not have any equity compensation plans.
Unregistered Sales of Equity Securities
We have previously disclosed all sales of securities without registration under the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Arax Holdings Corp. (the “Company”, “we”, “our”, or “us”) was incorporated under the laws of the State of Nevada on February 23, 2012. Our financial statements accompanying this Report have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We have a limited operating history and have generated modest revenues to date, primarily from our software and logistics services and emerging blockchain-based offerings.
Business Operations and Strategic Developments
The Company has established operations providing software and logistics services to a client in South Africa, generating consistent revenue streams. We are actively working to strengthen this relationship while pursuing expansion opportunities in other global markets. Our strategic focus has shifted toward leveraging blockchain technology to deliver innovative financial and technological solutions, as evidenced by our recent acquisitions and platform developments.
On December 30, 2022, the Company completed the acquisition of Core Business Holdings through a share swap agreement. The transaction was between entities under common control and, therefore, was accounted for under ASC 805-50 using carryover basis. The net assets acquired had a carrying amount of zero in the transferor’s records. Accordingly, no new basis of accounting was established, and no impairment expense or gain was recognized in the income statement. The equity issued was recorded at the carrying amount of the net assets transferred (zero), with the difference recorded directly in additional paid-in capital.
On May 3, 2023, we acquired 100% of Cilandro SA, a Swiss entity holding financial licenses, for $268,000, accounted for as an asset acquisition. This acquisition enhances our ability to offer Central Business Digital Currencies (CBDCs) and other blockchain-based financial solutions globally, positioning us to meet growing demand for digital financial infrastructure.
In 2025, we achieved a major milestone with the successful development of our BaaP Ecosystem—a Core Blockchain-based enterprise platform designed for seamless interoperability between our in-house technologies and third-party platforms through multiple connectors. Later that year, we launched the first solution platforms within the ecosystem: the Commodity Trade and Trade Finance platforms. These releases marked a significant step forward in advancing our blockchain strategy. These platforms facilitate secure and transparent commodity trade transactions and trade finance solutions, leveraging blockchain’s immutability and efficiency. We are currently onboarding a commodities test Use Case to validate the platform’s functionality, with initial results indicating strong potential for scalability and client adoption.
Additionally, we are advancing our age verification services, which utilize blockchain technology to provide secure and privacy-compliant identity verification solutions, targeting industries requiring robust compliance frameworks, such as finance and e-commerce.
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Our revenue model is centered on subscription fees and transaction fees derived from our BaaP solutions, including software subscriptions, consulting, and integration services. We are also exploring co-investment opportunities with government and enterprise partners to share initial infrastructure costs, which we believe will accelerate market penetration and reduce capital requirements.
Plan of Operation
Our plan of operation focuses on expanding our blockchain-based offerings while continuing to grow our existing software and logistics services. Key initiatives include:
Scaling Blockchain Solutions: We are prioritizing the commercialization of our Trade Finance platform and age verification services, with ongoing efforts to onboard additional Use Cases and clients globally. The Core Blockchain, released in May 2022, serves as the backbone for these solutions, and we are developing additional software modules to enhance functionality and revenue potential.
Global Expansion: Building on our South African operations, we are targeting new markets in Europe, Asia, and North America, leveraging Cilandro’s financial licenses to offer stablecoins, stable tokens and CBDC and other digital financial solutions. Strategic partnerships and co-investment models will be critical to this expansion.
Strategic Acquisitions: We continue to evaluate opportunities to acquire complementary software technologies or businesses to bolster our BaaP portfolio. Our management is exploring potential business combinations, including reverse mergers or asset purchases, particularly in the U.S., to access capital markets and enhance shareholder value. Given our limited capital resources, we anticipate focusing on a single, high-impact acquisition, which may involve entities in early-stage development or facing financial challenges.
Operational Efficiency: We aim to optimize our cost structure by streamlining operations and leveraging our existing assets. This includes continued investment in software development under ASC 350-40 (internal-use software), where qualifying application-development-stage costs are capitalized while preliminary project and post-implementation costs are expensed as incurred. In fiscal 2024, $1,372,620 of software development expenditures were evaluated, resulting in the expensing of non-qualifying pre-feasibility costs and capitalization/amortization of qualifying costs (see Note 6).
Our Chief Executive Officer’s experience in business consulting guides our strategic direction, but we acknowledge the challenges in identifying and implementing a viable business strategy. Risks such as economic downturns, technological disruptions, and competitive pressures, including those exacerbated by the lingering effects of the coronavirus pandemic, may hinder our ability to execute our plan. We face competition from venture capital firms, blank check companies, and other entities seeking similar acquisition opportunities, many of which have greater financial resources.
Financial Condition and Results of Operations
Year Ended October 31, 2024 Compared to Year Ended October 31, 2023
Restatement of Prior Period Financial Statements
As discussed in Note 2, the Company restated its October 31, 2023, financial statements to correct the accounting for the common-control asset acquisition of Core Business Holdings under ASC 805-50 and to reclassify certain software development costs from ASC 985-20 (external-use) to ASC 350-40 (internal-use). The acquisition was originally recorded with an impairment loss; it has now been recharacterized as a direct equity adjustment with no income-statement impact. In addition, adjusting journal entries were recorded to reclassify previously expensed software development costs, resulting in changes to general and administrative expenses, research and development expenses, and amortization expense for the year. The non-cash restatement reduced 2023 assets by $4,982,519 and stockholders’ equity by $5,082,519 (recharacterization to equity), impacting year-over-year comparability of asset balances but not 2024 operations, liquidity, or cash flows. Management enhanced internal controls over common-control acquisitions and software capitalization accounting to prevent recurrence.
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| ARAX HOLDINGS CORP. | ||||||||||||
| BALANCE SHEETS | ||||||||||||
| October 31, 2023 | Adjustments | October 31, 2023 (As Restated) | ||||||||||
| ASSETS: | ||||||||||||
| Current Assets: | ||||||||||||
| Cash | $ | 1,448,769 | $ | — | $ | 1,448,769 | ||||||
| Accounts Receivable | 226,951 | (226,951 | ) | — | ||||||||
| Total current assets | 1,675,720 | (226,951 | ) | 1,448,769 | ||||||||
| Property, plant and equipment, net | 1,510 | — | 1,510 | |||||||||
| Software development | 5,033,332 | (4,755,569 | ) | 277,763 | ||||||||
| Long-term investments | 437,372 | (437,372 | ) | — | ||||||||
| Intangible assets, net | — | 268,000 | 268,000 | |||||||||
| Other assets | — | 169,373 | 169,373 | |||||||||
| TOTAL ASSETS | $ | 7,147,934 | $ | (4,982,519 | ) | $ | 2,165,415 | |||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable | $ | — | $ | 100,000 | $ | 100,000 | ||||||
| Accrued expenses | 100,378 | — | 100,378 | |||||||||
| Due to related party | 57,756 | 100,000 | 157,756 | |||||||||
| Other current liabilities | 100,000 | (100,000 | ) | — | ||||||||
| Notes payable | — | — | — | |||||||||
| Total current liabilities | 258,134 | 100,000 | 358,134 | |||||||||
| TOTAL LIABILITIES | 258,134 | 100,000 | 358,134 | |||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||||||
| Preferred Stock Series A, par value $0.001, 10,000,000 shares authorized, 10,000,000 shares issued and outstanding as of October 31, 2023. | 10,000 | — | 10,000 | |||||||||
| Common stock, par value $0.001, 950,000,000 shares authorized, 126,160,534 issued and outstanding as of October 31, 2023. | 126,160 | (113,544 | ) | 12,616 | ||||||||
| Common stock to be issued | — | 33,142 | 33,142 | |||||||||
| Additional paid-in-capital | 26,176,224 | (16,959,205 | ) | 9,217,019 | ||||||||
| Accumulated deficit | (19,422,584 | ) | 11,957,088 | (7,465,496 | ) | |||||||
| TOTAL STOCKHOLDERS’ DEFICIT | 6,889,800 | (5,082,519 | ) | 1,807,281 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 7,147,934 | $ | (4,982,519 | ) | $ | 2,165,415 | |||||
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| ARAX HOLDINGS CORP. | ||||||||||||
| STATEMENT OF OPERATIONS | ||||||||||||
| October 31, 2023 | ||||||||||||
| October 31, 2023 | Adjustments | (As Restated) | ||||||||||
| Revenues | ||||||||||||
| Revenues | $ | 909,176 | $ | — | $ | 909,176 | ||||||
| Cost of sales | — | — | — | |||||||||
| Gross Profit (Loss) | 909,176 | — | 909,176 | |||||||||
| Operating expenses: | ||||||||||||
| Administrative expenses | 811,639 | (811,639 | ) | — | ||||||||
| Administrative expenses -officers | 90,000 | (90,000 | ) | — | ||||||||
| General and administrative expenses | — | 7,445,821 | 7,445,821 | |||||||||
| Depreciation and amortization expense | — | 49,097 | 49,097 | |||||||||
| Total operating expenses | 901,639 | 6,593,279 | 7,494,917 | |||||||||
| Loss from operations | 7,537 | (6,593,278 | ) | (6,585,741 | ) | |||||||
| Other income (expense): | ||||||||||||
| Impairment of assets | (18,550,285 | ) | 18,550,285 | — | ||||||||
| OID (expense) | (830 | ) | 80 | (750 | ) | |||||||
| Total other income (expense) | (18,551,115 | ) | (80 | ) | (67,779,270 | ) | ||||||
| Net loss before taxes | (18,543,578 | ) | (11,957,088 | ) | (6,586,491 | ) | ||||||
| Income tax provision (benefit) | — | — | — | |||||||||
| Net loss | $ | (18,543,578 | ) | $ | 11,957,088 | $ | (6,586,491 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.22 | ) | $ | (0.10 | ) | ||||||
| Weighted average shares outstanding, basic and diluted | 82,811,424 | 67,779,270 | ||||||||||
Revenue
For the year ended October 31, 2024, we generated revenue of $613,636, of which $301,750 was from Gut Moravia, a related party, compared to $909,176 in 2023. The decline was primarily due to timing of project completions in software and logistics services. We expect revenue growth to resume as we onboard new Use Cases for our Trade Finance platform and expand age-verification services.
Operating Expenses
We had total operating expenses of $3,905,200 and $7,494,917 for the years ended October 31, 2024 and 2023, respectively, a decrease of $3,589,717 or 47.9%. This decrease is primarily due to a $2,368,146 reduction in general and administrative expenses and a $1,238,434 reduction in stock-based compensation expense. The changes in consulting and development services and accounting services reflect the timing of certain projects performed in the prior year. Depreciation and amortization of $65,960 is presented as a separate line below stock-based compensation.
Other Expense
Other expenses increase from $750 in 2023 to $272,773 in 2024, primarily due to the $169,373 impairment expense to capitalized software, and a $103,400 loss on short-term borrowing settlement, and minor other items.
Net Loss
Our net loss for 2024 was $3,564,336, a substantial improvement from $6,586,491 in 2023, primarily due to reduced software development expenses. The 2024 net loss reflects ongoing operating expenses, limited revenue growth, and stock-based compensation, underscoring the need for additional capital to support our growth initiatives.
Liquidity and Capital Resources
Net cash used in operating activities was $2,351,356 in fiscal 2024, primarily reflecting operating losses adjusted for non-cash items including software amortization of $65,356 and software impairment of $169,373 (see Note 6). Net cash used in investing activities was $0 in fiscal 2024. Net cash provided by financing activities was $983,430. Management continues to monitor liquidity closely given ongoing development efforts and limited cash resources.
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ARAX HOLDINGS CORP.
SUMMARY TABLE
| October 31, 2023 | |||||||||||
| Description | 31-Oct-2024 | (As Restated) | Variance | ||||||||
| Total operating expenses | $ | 3,905,200 | $ | 7,494,917 | Decrease $3,589,717 (47.90%) | ||||||
| Net cash used in operating activities | (2,351,356 | ) | (4,449,501 | ) | Improvement $2,098,145 | ||||||
| Net cash used in investing activities | — | (497,742 | ) | Improvement $497,742 | |||||||
| Net cash provided by financing activities | 983,430 | 6,355,010 | Decrease $5,371,580 | ||||||||
| Cash and cash equivalents, end of year | 119,157 | 1,448,769 | Decrease $1,329,612 | ||||||||
| Total assets | 902,220 | 2,165,414 | Decrease $1,263,194 | ||||||||
| Total Stockholders’ equity (deficit) | (521,414 | ) | 1,807,280 | Decrease $2,328,693 |
Our current working capital is insufficient to sustain operations over the next 12 months, necessitating additional financing through debt or equity issuances. We are dependent on convertible debt financing and advances from an entity controlled by our Chairman, which amounted to $157,756 as of October 31, 2024. Future issuances of equity or convertible debt may result in significant dilution to existing shareholders and could involve securities with preferential rights. If adequate funds are not available on acceptable terms, our ability to pursue new business opportunities or acquisitions will be restricted, potentially materially impacting our operations.
Off Balance Sheet Arrangements
As of the date of this Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Going Concern
The independent registered public accounting firm’s report accompanying our October 31, 2024, consolidated financial statements includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. This uncertainty arises from our limited operating history, ongoing losses, and dependence on external financing. To address this, we are actively pursuing revenue growth through our blockchain platforms, seeking strategic acquisitions, and exploring financing options to bolster our capital position.
Risks and Challenges
Our prospects must be considered in light of the risks inherent in our early-stage development, including:
Evolving Business Model: Our shift toward blockchain-based solutions, including Trade Finance and age verification services, requires significant investment and market acceptance, with no assurance of profitability.
Competitive Landscape: We face competition from well-funded firms seeking similar acquisition opportunities, which could limit our access to viable targets.
Regulatory Compliance: Increasing state-level privacy regulations and SEC reporting obligations may require substantial resources, potentially straining our limited capital.
8
Technological Risks: Rapid advancements in blockchain and financial technology could render our platforms obsolete if we fail to innovate.
Capital Constraints: Our limited resources may restrict our ability to diversify, increasing the risk of losses from a single venture or market.
To mitigate these risks, we are focusing on developing a robust marketing strategy, enhancing our technological capabilities, and attracting qualified personnel to execute our business plan. However, there can be no assurance that we will successfully address these challenges, and failure to do so could materially adversely affect our business prospects, financial condition, and results of operations.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. The most significant estimates and assumptions relate to revenue recognition (ASC 606), capitalization and amortization of internal-use software costs (ASC 350-40), impairment of long-lived assets (ASC 360-10), fair value of equity instruments issued, and the allowance for credit losses (ASC 326). Actual results could differ from these estimates.
Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Internal-use software development costs are capitalized under ASC 350-40 once technological feasibility has been established and the software is placed in service, and are amortized over the estimated useful life of the related asset.
Critical Accounting Estimates
Significant estimates include the recoverability of capitalized software development costs and the fair value of common stock issued for non-cash consideration. The Company evaluates capitalized software for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Forward-Looking Statements
This discussion contains forward-looking statements regarding our ability to expand our blockchain platforms, onboard new Use Cases, pursue acquisitions, and secure financing. These statements are subject to risks and uncertainties, including those described in Item 1A – Risk Factors (not required for smaller reporting companies but relevant for context). We undertake no obligation to update these statements unless required by law.
Related Party Transaction
The Company had the following material related-party transactions (see Notes 4, 5, 8, 11, and 12):• Revenue from Gut Moravia (related party): $301,750 (2024) / $0 (2023).
•Advances from entity controlled by Chairman: $157,756 outstanding (2024 and 2023).
• Core Business Holdings acquisition (common-control transfer): In December 2022, the Company acquired Core Business Holdings through a share-swap agreement. Because this was a transfer between entities under common control, the transaction was recorded at the transferor’s historical carrying amount of zero in accordance with ASC 805-50. No new basis of accounting was established, no impairment expense was recognized, and the difference between the equity issued and the carrying amount of the net assets transferred was recorded directly in additional paid-in capital.
All transactions were on terms consistent with arm’s-length dealings.
9
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company and is not required to provide the information required by this Item. However, for informational purposes, the Company notes the following:
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and equity prices. The Company’s primary market risk exposures are as follows:
| ● | Interest rate risk: The Company’s outstanding convertible promissory notes bear fixed interest rates (10% per annum). Therefore, the Company does not have material exposure to interest rate fluctuations on its debt. |
| ● | Foreign currency risk: The Company has limited international operations, including activities in South Africa (related-party revenue) and Switzerland (Cilandro SA). A portion of future revenues and expenses may be denominated in foreign currencies. However, the Company does not currently hedge foreign currency exposure and does not believe such risk is material to its financial condition or results of operations. |
| ● | The Company does not enter into derivative financial instruments for trading or speculative purposes and does not have significant exposure to commodity prices or other market-driven rates. |
The Company will continue to monitor its market risk exposures as its business evolves.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| Report of Independent Registered Public Accounting Firm | F-2 |
| Consolidated Balance Sheets as of October 31, 2024 and 2023 (Restated) | F-3 |
| Consolidated Statements of Operations for the Years Ended October 31, 2024 and 2023(Restated) | F-4 |
| Consolidated Statements of Changes in Stockholders’ (Deficit) for the Years Ended October 31, 2024 and 2023 (Restated) | F-5 |
| Consolidated Statements of Cash Flows for the Years Ended October 31, 2024 and 2023 (Restated) | F-7 |
| Notes to Consolidated Financial Statements | F-8 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Arax Holdings Corp.
Opinion on the Financial Statements
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 with the financial statements, the Company has a working capital deficit and an accumulated deficit. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of a Matter – Restatement of Previously Issued Financial Statements
As discussed in Note 2 to the financial statements, the Company has restated its previously issued financial statements for the year ended October 31, 2023, to correct errors related to accounting for a transaction with a company under common control and the classification of certain software development costs. Our opinion on the financial statements as of October 31, 2023, is not modified with respect to this matter.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
We have served as the Company’s auditor since 2024.
June 10, 2026
F-2
PART 1 – FINANCIAL INFORMATION
Item 1. – Financial Statements
CONSOLIDATED BALANCE SHEETS
(Audited)
| October 31, 2024 | October 31, 2023 (As Restated) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Capitalized Software, net | ||||||||
| Intangible assets | ||||||||
| Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Due to related party | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES :- | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Preferred Stock Series A, par value $, shares authorized, shares issued and outstanding as of October 31, 2024 and October 31, 2023, respectively | ||||||||
| Common stock, par value $, shares authorized, and issued and outstanding as of October 31, 2024 and October 31, 2023, respectively | ||||||||
| Common stock to be issued | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The 2023 amounts have been restated to reflect the accounting corrections described in Note 2 — Restatement of Prior Period Financial Statements. The accompanying notes are an integral part of these audited consolidated financial statements.
F-3
ARAX HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2024 AND 2023
(Audited)
| Year Ended October 31, 2024 | Year Ended October 31, 2023 (As Restated) | |||||||
| Revenue | ||||||||
| Revenue | $ | $ | ||||||
| Revenue- related party | ||||||||
| Cost of revenue | ||||||||
| Gross Profit (Loss) | ||||||||
| Operating expenses: | ||||||||
| General and administrative expenses(including stock-based compensation of $ and $, respectively) | ||||||||
| Depreciation and amortization | ||||||||
| Total Operating Expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Impairment expense | ( | ) | ||||||
| Loss on short-term borrowing settlement | ( | ) | ||||||
| OID expense | ( | ) | ||||||
| Total Other Expense | ( | ) | ( | ) | ||||
| Net loss before taxes | ( | ) | ( | ) | ||||
| Income tax provision (benefit) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding, basic and diluted | ||||||||
The 2023 amounts have been restated to reflect the accounting corrections described in Note 2 — Restatement of Prior Period Financial Statements. The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
ARAX HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S (DEFICIT)
FOR THE YEAR ENDED OCTOBER 31, 2024 AND 2023 (As Restated)
(Audited)
| Common | Additional | |||||||||||||||||||||||||||||||
| Preferred Stock | Common Stocks | Stocks to be issued | Additional Paid | Accumulated | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Amount | In Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance as of October 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of common stock for services | — | |||||||||||||||||||||||||||||||
| Reduction of common stock to be issued for acquisition | — | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock for debt treated as a capital contribution | — | |||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of convertible promissory notes | — | |||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of convertible promissory notes settlement of short-term borrowings | — | |||||||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of October 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
The 2023 amounts have been restated to reflect the accounting corrections described in Note 2 — Restatement of Prior Period Financial Statements. The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
ARAX HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S (DEFICIT)
FOR THE YEAR ENDED OCTOBER 31, 2024 AND 2023 (As Restated)
(Audited)
| Preferred Stock | Common Stocks | Stocks to be issued | Additional Paid | Accumulated | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Amount | In Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance as of October 31, 2022 | $ | $ | $ | $ | $ | ( | ) | ( | ) | |||||||||||||||||||||||
| Change in par value of common stock 0.001 to 0.0001 | — | — | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common stock for acquisitions | — | ( | ) | |||||||||||||||||||||||||||||
| Impairment of Core Business Holdings acquired asset (related party acquisition – Note 5) | — | — | ||||||||||||||||||||||||||||||
| Reduction of common stock to be issued for acquisition | — | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock for debt treated as a capital contribution | — | |||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of convertible promissory notes | — | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of convertible promissory notes settlement of short-term borrowings | — | |||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of October 31, 2023 | $ | $ | $ | $ | $ | ( | ) | |||||||||||||||||||||||||
The 2023 amounts have been restated to reflect the accounting corrections described in Note 2 — Restatement of Prior Period Financial Statements. The accompanying notes are an integral part of these audited consolidated financial statements.
F-6
ARAX HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 2024 AND 2023
(Audited)
| For the year ended October 31, 2024 | For the year ended October 31, 2023 (As Restated) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on settlement of debt | ||||||||
| Depreciation | ||||||||
| Amortization expense | ||||||||
| Amortization of debt issuance expense | ||||||||
| Equity based compensation expense - stock | ||||||||
| Impairment loss on Software | ||||||||
| Provision for credit losses (allowance) | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable- related party, net | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capitalized software and development costs | ( | ) | ||||||
| Purchase of property, plant and equipment, net | ( | ) | ||||||
| Capitalized software and development costs | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of the year | ||||||||
| Cash and cash equivalents, end of the year | $ | $ | ||||||
| Supplemental disclosure of Noncash financing and investing activities: | ||||||||
| Issuance of common stock upon conversion of convertible promissory notes | ||||||||
| Non-cash proceeds from short-term borrowings | ||||||||
| Issuance of common stock upon settlement of debt | ||||||||
| Issuance of common stock for debt treated as a capital contribution | ||||||||
| Issuance of common stock for intangible assets related to the Cilandro acquisition | $ | $ | ||||||
The 2023 amounts have been restated to reflect the accounting corrections described in Note 2 — Restatement of Prior Period Financial Statements. The accompanying notes are an integral part of these audited consolidated financial statements.
F-7
ARAX HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Arax Holdings Corp. (“the Company”) is a Nevada corporation incorporated on February 23, 2012.
The Company currently has operation from a growing business in the software development and integration marketplace.
Management intends to explore and identify business opportunities within North America, Europe, Asia and Africa including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our executives have experience in business consulting, although no assurances can be given that they can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position as of October 31, 2024, and the results of its operations and its cash flows for the year ended October 31, 2024 and 2023. The balance sheet as of October 31, 2023 (as restated), is derived from the Company’s audited financial statements.
The consolidated financial statements include the accounts of Arax Holdings Corp. and its wholly owned subsidiaries, Core Business Holdings and Cilandro SA. All intercompany transactions and balances have been eliminated in consolidation.
All amounts are presented in whole dollars. Minor differences due to rounding may exist
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may differ from management’s estimates and assumptions. Included in these estimates are assumptions used to estimate collection of accounts receivable, fair value of intangible assets, fair value of capitalized software, deferred income tax asset valuation allowances.
Capitalized Software Development Costs: The Company capitalizes internal-use software development costs under ASC 350-40 once technological feasibility is established and the software is placed in service (February 10, 2023). Costs incurred prior to technological feasibility are expensed as incurred. See Note 6 for the complete roll forward, amortization, and AJE details
Cash
The
Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or
less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed
federally insured limits. The Company has not experienced any losses related to these balances as of October 31, 2024. The Company
has cash equivalents of $
F-8
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. We generate revenue from the following activities:
The Company provides a range of services through various formats, including subscription-based access to browser- based software platforms. These platforms facilitate interactions between customers, enterprise clients, and other entities, utilizing blockchain technology for secure and transparent transactions.
● Service Offerings: Include software subscriptions that require secure access, enabling user interactions via blockchain networks
● Use Cases: The Company develops tailored solutions, known as Use Cases, which can incorporate both physical inventory and software components. These are customized for each client
● Cost Sharing: In some instances, the Company co-invests in the initial setup infrastructure costs with government or enterprise partners.
● Revenue Model: Primarily, revenue is derived from subscription fees and transaction fees associated with blockchain interactions, rather than from the initial infrastructure investments
Contract Assets
The Company does not have any contract assets. All trade receivables on the Company’s condensed consolidated balance sheet are from contracts with customers.
Accounts Receivable
On November 1, 2023, the Company adopted ASC 326, “Financial Instruments – Credit Losses.” In accordance with ASC 326, an allowance for credit losses is maintained for estimated lifetime expected credit losses on accounts receivable.
The
Company’s accounts receivable consists entirely of a related-party receivable from Gut Moravia. Management assesses collectability
based on the customer’s financial condition, payment history, and known factors regarding the individual receivable. The
Company has recorded an allowance for credit losses of $
Past-due status is determined based on contractual payment terms. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company generally does not require collateral.
Property and Equipment
Property
and equipment is stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful
life using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated
remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant
a revision to the remaining periods of depreciation. Maintenance and repairs are charged to expense as incurred. Depreciation
expense for the years ended October 31, 2024 and 2023 was $
Concentration of Credit Risk and Significant Customers and Vendors
For the year ended October 31, 2024, three customers accounted for approximately 100% of total revenue (Gut Moravia 49%, Fashion 57 Ave Inc. 41%, and Kent Devries Trust 10%). For the year ended October 31, 2023, the Company had only one customer that accounted for 100% of total revenue.
F-9
Research and Development
The Company expenses research and development costs, including costs as incurred in accordance with ASC 730-10. Software development costs for internal-use software are accounted for under ASC 350-40. Qualifying application development stage costs are capitalized and amortized over five years; preliminary project and post-implementation costs are expensed as research and development.
In
2024, the Company re-evaluated costs previously classified under ASC 985-20 and determined they should be accounted for as internal-use
software under ASC 350-40. As a result, $
Advertising and Marketing Costs
The Company expenses all advertising and marketing costs as incurred. Advertising and marketing costs were not material for the years ended October 31, 2024 and 2023, respectively.
Fair Value of Financial Instruments and Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (ASC 820).
The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses, notes payable, and, in prior periods, derivative liabilities associated with convertible notes. Cash is measured at fair value on a recurring basis. All other financial instruments are carried at amortized cost, which approximates fair value due to their short-term nature.
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of October 31, 2024 and 2023:
| Description | Level 1 | Level 2 | Level 3 | Total | ||||
| Cash – October 31, 2024 | $ | $ | $ | $ | ||||
| Cash – October 31, 2023 | ||||||||
| Derivative liabilities – October 31, 2024 | ||||||||
| Derivative liabilities – October 31, 2023 |
There were no transfers between Level 1, Level 2, or Level 3 during the years ended October 31, 2024 and 2023. The Company did not elect the fair value option for any financial instruments.
ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.
Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.
F-10
Level 3 - Unobservable inputs for the asset or liability
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company’s investment in available for sale securities and warrant derivative liabilities are measured at fair value. The securities are measured based on current trading prices using Level 1 fair value inputs. The Company’s derivative instruments are valued using Level 3 fair value inputs. In fair valuing these instruments, the income valuation approach is applied, and the valuation inputs include the contingent payment arrangement terms, projected revenues and cash flows, rate of return, and probability assessments. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and loans payable represent fair value based upon their short -term nature.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The tables below summarize the fair values of our financial assets and liabilities as of October 31, 2023.
For the Company’s derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balance for each category therein, and gains or losses recognized during the year ended October 31, 2023:
| Ending balance, October 31, 2022 | $ | |||
| Initial recognition of derivative liability: | ||||
| Re-measurement adjustments: | ||||
| Change in fair value of derivative liability | ( | ) | ||
| Ending balance, October 31, 2023 | $ |
The fair value of the derivative liability was estimated using binomial option-pricing model with the following assumptions:
| October 31, 2023 | ||||
| Stock Price on Valuation Date | $ | |||
| Risk-Free Rate | % | |||
| Volatility | % | |||
| Term | ||||
| Conversion price | $ | |||
Business Combinations
The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.
Acquisitions meeting the definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
Intangible Assets
The
Company has intangible assets with indefinite useful lives obtained as a result of assets acquisitions from Cilandro SA (see Note
6) in the second quarter of 2023, which includes financial license in aggregate amount of $
F-11
The Company does not amortize its intangible assets with indefinite useful lives, rather such assets are tested for impairment are tested for impairment annually, or more frequently if events or changes in circumstances indicate the asset may be impaired in accordance with ASC 350 Intangibles-Goodwill and Other. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the condensed consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited.
Software Development Costs
The costs incurred for the development of computer software to be sold, leased, or otherwise marketed are capitalized in accordance with ASC 350-40 (Internal use Software) As per the GAAP guidance Arax’s BaaP documentation (e.g., URS for vehicle diagnostics/DePIN integration), we concur that ASC 350-40 is the appropriate codification. BaaP operates as a hosted SaaS platform where customers access services without taking possession or running the software independently, aligning with internal-use criteria.
We reject our prior external-use classification under ASC 985-20, as it assumed customer “marketing rights” or independent operation, which does not apply to BaaP’s service model. This memo outlines the rationale, required adjustments to FY2024 financials (e.g., capitalization stages, amortization over 5-year life), impairment implications, and proposed journal entries. Restatement of prior periods (e.g., FY2023) may be needed if material; we defer to your assessment.
ASC 350-40 applies to costs for software developed/obtained for internal use, including hosted arrangements where the entity (Arax) controls operations and customers access via service contracts (e.g., API integrations for DePIN/carbon trading). Key factors confirming applicability:
| ● | No Customer Possession: SaaS/blockchain platforms like BaaP—where users interact remotely without downloading/running code—fall under internal-use, not ASC 985-20 (which requires deliverable copies for sale/lease). BaaP’s URS (Apr 2024) describes client access via Core Blockchain connectors/oracles, not independent execution. |
| ● | Development Stages: ASC 350-40 structures costs into: (1) Preliminary project (expense all); (2) Application development (capitalize qualifying post-feasibility costs); (3) post-implementation (expense). Our prior ASC 985-20 memo (timeline: pre-2022 R&D expensed; post-Dec 2022 capitalized) aligns partially, but BaaP’s service-oriented design fits internal-use better. |
| ● | GAAP Precedents: FASB ASU 2025-06 (effective FY2026, early adoptable) clarifies non-sequential stages and capitalization thresholds for internal software, including cloud/SaaS (e.g., implementation costs capitalized if enhancing functionality). Examples: Manufacturing firms capitalizing ERP platforms; blockchain DePIN tools as internal infrastructure. SEC Reg S-X (Rule 5-02) supports net presentation without reclassification mandates. |
| ● | Rejection of Prior Position: Our indefinite-life/external-use memos (FY2024 and FY2023) emphasized “market longevity” and post-feasibility, but overlooked the hosted model—customers do not “take possession”. Indefinite life is rare for tech (rapid obsolescence); we now adopt a finite 5-year useful life (ASC 350-40-35-4: based on BaaP’s adaptive but evolving blockchain/AI/IoT integration, per design memo). |
F-12
Related Party Transactions
Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to the related party.
The Company considers all officers, directors, senior management personnel, and senior level consultants to be related parties to the Company.
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income
The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties, if any, related to income tax matters in income tax expense.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with various accounting standards.
ASC 480 “Distinguishing Liabilities From Equity” provides that instruments convertible predominantly at a fixed rate resulting in a fixed monetary amount due upon conversion with a variable quantity of shares (“stock settled debt”) be recorded as a liability at the fixed monetary amount.
ASC 815 “Derivatives and Hedging” generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”
F-13
ASC 815-40 provides that generally if an event is not within the entity’s control and could require net cash settlement, then the contract shall be classified as an asset or a liability.
The Company follows ASC 260 “Earnings Per Share” for calculating the basic and diluted earnings (or loss) per share. Basic earnings (or loss) per share are computed by dividing earnings (or loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings (or loss) per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if the additional shares were dilutive.
The
conversion of Series A preferred shares (
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in Accounting Standards Update (“ASU”) 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It will apply to trade receivables, loans, and held-to-maturity debt securities. Entities will be required to estimate lifetime expected credit losses. This may result in earlier recognition of credit losses. In November 2019 the FASB issued ASU No. 2019-10, which delays this standard’s effective date for SEC smaller reporting companies to the fiscal years beginning on or after December 15, 2022. The Company determined that this update did not have a material impact on the financial statements upon adoption on November 1, 2023.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this guidance did not have any impact on the Company’s segment reporting.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Entities will be required to disclose additional information in specified categories in the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. The standard also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold and eliminates certain existing disclosures. In addition to new disclosures associated with the rate reconciliation, the standard requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The standard will be effective for annual periods in fiscal years beginning after December 15, 2024, and for interim periods for fiscal years beginning after December 15, 2025 with early adoption permitted. The Company is continuing to assess the potential impacts of the standard, and it does not expect this pronouncement to have a material effect on its financial statements, other than the required changes to the income tax disclosures.
Segment reporting
The Company reports its segment information to reflect the manner in which the CODM reviews and assesses performance. The Company’s Chief Executive Officer serves as the CODM and reviews and assesses the performance of the Company as a whole (single reportable segment). This reflects our integrated operations centered on software, blockchain, and fintech solutions, as described on our websites (arax.cc and codetech.cc), including traditional software/logistics services (e.g., to South African clients), Blockchain as a Platform (BaaP) ecosystem (e.g., Core Blockchain platforms for tokenization, digital identity via Core Pass, and integrations with AI/IoT/ERP), and fintech offerings (e.g., CBDCs via Cilandro licenses, commodity trade/finance platforms, age verification, and sector-specific solutions in financial services, government, manufacturing, energy, healthcare, agriculture, and e-commerce).
F-14
The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODM uses net income (loss) to assess overall financial health, including non-operating impacts (e.g., impairments), and operating income (loss) for core operational efficiency, as part of internal planning, forecasting, and resource allocation (e.g., prioritizing blockchain R&D over legacy services based on growth potential). Information on net income (loss) and operating income (loss) is disclosed in the Consolidated Statements of Operations. Segment expenses and other items are provided to the CODM on the same basis as the consolidated financial statements, without intersegment eliminations.
The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented.
Significant Segment Expenses and Other Items (Single Segment)
The Company operates as a single operating segment. The Chief Operating Decision Maker (CODM) reviews consolidated financial information, including net loss, to make decisions about resource allocation and assess performance. Significant segment expenses regularly provided to the CODM are as follows:
| Description | 2024 | 2023 (As Restated) | ||||||
| General and administrative expenses | $ | $ | ||||||
| Stock-based compensation | $ | $ | ||||||
Other
segment items primarily consist of non-cash impairment loss on capitalized software development costs ($
| ● | Operating
loss: $( |
| ● | Plus
non-cash impairment and debt settlement loss: $ |
| ● | Net
loss: $( |
NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
As discussed in Note 5, the Company restated its October 31, 2023, financial statements to correct the accounting for the common-control asset acquisition of Core Business Holdings under ASC 805-50. The acquisition was originally recorded with an impairment loss; it has now been recharacterized as a direct equity adjustment with no income-statement impact. The non-cash restatement reduced 2023 assets by $4,982,519 and stockholders’ equity by $5,082,519 (recharacterization to equity), impacting year-over-year comparability of asset balances but not 2024 operations, liquidity, or cash flows. Management enhanced internal controls over common-control acquisitions to prevent recurrence
Effects on October 31, 2023, balance sheet:
| Line Item | As Previously Reported | Adjustment | As Restated | |||||||||
| Capitalized Software Development Costs, net | $ | ( | ) | $ | ||||||||
| Total Assets | ( | ) | ||||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||||||
| Stockholders’ Equity | ( | ) | ||||||||||
Management concluded these errors were material to the prior period but do not impact the current year’s results beyond comparatives. No fraud or intentional misconduct was involved
F-15
The following table set forth the effects of the adjustments on affected items within the Company’s previously reported consolidated balance sheet as of October 31, 2023.
| ARAX HOLDINGS CORP. | ||||||||||||
| BALANCE SHEETS | ||||||||||||
| October 31, 2023 | Adjustments | October 31, 2023 (As Restated) | ||||||||||
| ASSETS: | ||||||||||||
| Current Assets: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Accounts Receivable | ( | ) | ||||||||||
| Total current assets | ( | ) | ||||||||||
| Property, plant and equipment, net | ||||||||||||
| Software development | ( | ) | ||||||||||
| Long-term investments | ( | ) | ||||||||||
| Intangible assets, net | ||||||||||||
| Other assets | ||||||||||||
| TOTAL ASSETS | $ | $ | ( | ) | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable | $ | $ | $ | |||||||||
| Accrued expenses | ||||||||||||
| Due to related party | ||||||||||||
| Other current liabilities | ( | ) | ||||||||||
| Notes payable | ||||||||||||
| Total current liabilities | ||||||||||||
| TOTAL LIABILITIES | ||||||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||||||
| Preferred Stock Series A, par value $0.001, 10,000,000 shares authorized, 10,000,000 shares issued and outstanding as of October 31, 2023. | ||||||||||||
| Common stock, par value $0.001, 950,000,000 shares authorized, 126,160,534 issued and outstanding as of October 31, 2023. | ( | ) | ||||||||||
| Common stock to be issued | ||||||||||||
| Additional paid-in-capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ( | ) | $ | |||||||
F-16
The following table set forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statement of operations for the year ended October 31, 2023.
| ARAX HOLDINGS CORP. | ||||||||||||
| STATEMENT OF OPERATIONS | ||||||||||||
| October 31, 2023 | ||||||||||||
| October 31, 2023 | Adjustments | (As Restated) | ||||||||||
| Revenues | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of sales | ||||||||||||
| Gross Profit (Loss) | ||||||||||||
| Operating expenses: | ||||||||||||
| Administrative expenses | ( | ) | ||||||||||
| Administrative expenses -officers | ( | ) | ||||||||||
| General and administrative expenses | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Total operating expenses | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||
| Impairment of assets | ( | ) | ||||||||||
| Other income (expense) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||
| Net loss before taxes | ( | ) | ( | ) | ||||||||
| Income tax provision (benefit) | ||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||
F-17
The following table set forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statements of cash flow for the year ended October 31, 2023
| ARAX HOLDINGS CORP. | ||||||||||||
| CASH FLOWS | ||||||||||||
| October 31, 2023 | Adjustments | October 31, 2023 (As Restated ) | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Amortization of debt issuance costs | ||||||||||||
| Depreciation and amortization expense | ||||||||||||
| Equity based compensation expense - stock | ||||||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Accounts receivable | ( | ) | ||||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Capitalized software and development costs | ( | ) | ( | ) | ||||||||
| Purchase of property, plant and equipment, net | ( | ) | ( | ) | ||||||||
| Long-term investments | ( | ) | ( | ) | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from notes payable | ||||||||||||
| Proceeds from short-term borrowings | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
| Net Increase in cash and cash equivalents | ||||||||||||
| Cash and cash equivalents, beginning of the year | ||||||||||||
| Cash and cash equivalents, end of the year | $ | $ | $ | |||||||||
| Supplemental disclosure of Noncash financing and investing activities: | ||||||||||||
| Issuance of common stock upon conversion of convertible promissory notes | ||||||||||||
| Purchase of intangible assets related to the Cilandro acquisition | ||||||||||||
| Issuance of common stock for intangible assets related to the Cilandro acquisition | $ | $ | $ | |||||||||
Supplemental cash flow information
| October 31, 2024 | October 31, 2023 | |||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | ||||||||
F-18
NOTE 3 – GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of.
The
Company has incurred operating losses since inception. As of October 31, 2024, the Company had a working capital deficit of $(
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include revenue growth from blockchain platforms, strategic acquisitions, and additional financing. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - REVENUES
Revenues
Revenue
is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services (ASC 606).For the year ended October 31, 2024, the
Company reported total revenue of $
Service Offerings and Revenue Recognition
| ● | Service Offerings: The Company provides software subscriptions that grant customers secure, ongoing access to the BaaP blockchain platform, enabling user interactions via blockchain networks. The primary performance obligation is the continuous delivery of platform access and related support services, which is satisfied ratably over the subscription term. |
| ● | Use Cases: The Company develops tailored solutions, known as Use Cases, which can incorporate both physical inventory and software components and are customized for each client. Performance obligations include the delivery of the customized software solution, implementation services, and any ongoing support, satisfied over time as the work is performed or upon client acceptance and go-live. |
| ● | Cost Sharing Arrangements: In certain cases, the Company co-invests in initial setup infrastructure costs with government or enterprise partners. These arrangements are evaluated to determine whether they represent a contract with a customer under ASC 606 or a collaborative arrangement; when they qualify as customer contracts, the related performance obligations are satisfied over time as the infrastructure is deployed and made available. |
| ● | Revenue Model: Revenue is primarily derived from subscription fees for platform access (recognized ratably over the subscription term) and transaction fees associated with blockchain interactions (recognized at the time the transaction is processed). Typical payment terms are net 30 days from the date of invoice. Related-party receivables are subject to ongoing monitoring and collection efforts consistent with the Company’s credit loss policy. |
F-19
Disaggregation of Revenue
The following tables provide a disaggregation of revenue by major product line and timing of revenue recognition for the periods presented:
| Product Line | October 31, 2024 | October 31, 2023 | ||||||
| BaaP Software Modules | $ | $ | ||||||
| Consulting and Integration Services | ||||||||
| Subscription Services | ||||||||
| Software and Logistics Services | ||||||||
| Total | $ | $ | ||||||
NOTE 5 – ASSETS ACQUSITION
Core Business Holdings Acquisition
On December 30, 2022, the Company completed the acquisition of Core Business Holdings through a share swap agreement. The transaction was between entities under common control and, therefore, was accounted for as a common-control transfer under ASC 805-50 using carryover basis. The net assets acquired had a carrying amount of zero in the transferor’s records. Accordingly, no new basis of accounting was established, and no gain, loss, or impairment expense was recognized in the income statement. The equity issued was recorded at the carrying amount of the net assets transferred (zero), with the difference recorded directly in additional paid-in capital.
This acquisition is further discussed in Note 2 – Restatement of Prior Period Financial Statements.
Cilandro SA Acquisition
On
May 3, 2023, the Company acquired
| Consideration | ||||
| Issuance of common stock | $ | |||
| Issuance of convertible note | ||||
| Liability assumed | ||||
| Total consideration | $ | |||
| Asset Acquired | ||||
| Financial license | $ | |||
NOTE 6 - CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company capitalizes qualifying internal-use software development costs under ASC 350-40. Costs incurred during the application development stage are capitalized and amortized on a straight-line basis over the estimated useful life of five years once the software is placed in service.
Amortization
expense related to capitalized software for the years ended October 31, 2024 and 2023 was $
F-20
Roll forward-
| Description | Gross Carrying | Accumulated Amortization | Accumulated Impairment | Net Carrying | ||||||||||||
| Balance 10/31/2023 (As restated) | ( | ) | ||||||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||||||
| Amortization expense | ( | ) | ( | ) | ||||||||||||
| Balance 10/31/2024 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
NOTE 7 – INTANGIBLE ASSETS
As
of October 31, 2024 and October 31, 2023, respectively, the Company had $
| ● | Undo Studios SA (Nemesis Project) – Abandoned Letter of Intent and Related Advances |
In August 2023, the Company entered into a non-binding letter of intent (“LOI”) with Undo Studios SA regarding its Nemesis Project, with subsequent addendums executed throughout 2023. The LOI contemplated various potential transaction structures, including equity investments, token purchases, and service arrangements. However, the parties were unable to reach agreement on definitive transaction terms.
During
fiscal year 2023, the Company advanced a total of $
By the fourth quarter of fiscal year 2024, it became evident that the contemplated transaction would not proceed. Contributing factors included the lack of access to promised technology, absence of required financial information from Undo Studios SA, and the inability to establish a clear path toward transaction completion. Consequently, management determined to abandon the LOI and cease pursuit of the transaction.
NOTE 8 - DEBT
Convertible Notes
During
the year ended October 31, 2024, the Company issued convertible promissory notes for total cash proceeds of $
During
the year ended October 31, 2024, holders converted $
As
of October 31, 2024, the outstanding principal balance on the remaining convertible notes is $
F-21
Short-Term Borrowings
On
May 1, 2024, the Company received a short-term borrowing of $
On
August 3, 2024, the Company received $
NOTE 9 – EQUITY
Preferred Stock
The Company has authorized shares of $ par value, preferred stock. As of October 31, 2024 and October 31, 2023 there were shares of preferred stock issued and outstanding.
On
March 31, 2021, the Company issued shares of Series A Preferred Stock with a par value of $. The Series A shares
are convertible into common stock on a 10 for 1 basis and were issued in return for a reduction of $
Common Stock
The Company has authorized shares of $ par value, common stock. As of October 31, 2024, and October 31, 2023 there were and shares of common stock issued and outstanding.
During the year ended October 31, 2023, the Company amended its Articles of Incorporation to change the par value of its common stock from $ to $ per share. This change had no effect on the number of shares authorized, issued, or outstanding, nor on the total stockholders’ equity. All prior-period share and per-share amounts have been retroactively adjusted to reflect the new par value.
2024 Activity
During the year ended October 31, 2024, the Company issued shares of common stock, as follows:
| ● | shares for services, recognized as stock-based compensation expense of $. |
| ● |
shares (valued at $ |
| ● |
shares upon conversion of $ |
| ● |
shares to settle a short-term borrowing (fair value $ |
| ● |
shares upon conversion of $ |
All transactions are fully reflected in the Consolidated Statement of Changes in Stockholders’ Equity.
2023 Activity
| ● | Issuance
of common stock in connection with acquisition — The Company issued shares of common stock and agreed to
issue additional shares valued at $ |
| ● | Issuance of common stock for debt treated as a capital contribution — The Company issued shares of common stock in settlement of debt treated as a capital contribution. |
F-22
| ● | Issuance
of common stock upon conversion of convertible promissory notes — The Company issued |
| ● | Issuance
of common stock for services — The Company issued |
NOTE 10 – COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company enters into various agreements containing standard indemnification provisions. The Company’s indemnification obligations under such provisions are typically in effect from the date of execution of the applicable agreement through the end of the applicable statute of limitations. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain. As of October 31, 2024, and October 31, 2023, no amounts have been accrued related to such indemnification provisions.
NOTE 11 – ADVANCES FROM RELATED PARTY
An
entity controlled by the Company’s Chairman has advanced an aggregate of $
In determining the transaction price allocated to performance obligations, the Company considers the terms of the contracts and its customary business practices. Significant judgment is required in determining whether performance obligations are satisfied over time or at a point in time, and the measurement of progress toward complete satisfaction of performance obligations.
NOTE 12 – ALLOWANCE FOR CREDIT LOSSES
The Company applies ASC 326-20 to accounts receivable. The allowance for credit losses is based on specific risk characteristics of individual receivables, including payment history and financial condition.
As
of October 31, 2024, accounts receivable totaled $
Past due status is determined based on contractual payment terms. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company generally does not require collateral.
NOTE 13 – SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, Subsequent Events, the Company has evaluated events occurring subsequent to October 31, 2024, through the date these financial statements were issued (June 10, 2026).
Subsequent
to October 31, 2024, the Company issued additional convertible promissory notes totaling $
In addition, pursuant to an advisory agreement and extensions with Victor Vega for board advisory services, the Company issued shares of common stock as compensation for services rendered.
No other events have occurred that require recognition or disclosure in the financial statements.
F-23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On May 27, 2026, the Company dismissed BF Borgers CPA, P.C. (“BF Borgers”) as its independent registered public accounting firm and engaged Fruci & Associates II, PLLC as its new independent registered public accounting firm for the audit of the financial statements for the fiscal year ended October 31, 2024.
The decision to change auditors was necessitated by the Securities and Exchange Commission’s enforcement action against BF Borgers and its principal, Benjamin F. Borgers, CPA (SEC Release Nos. 11283, 100053, and Accounting and Auditing Enforcement Release No. 4500, dated May 3, 2024). In that action, the Commission barred BF Borgers from appearing or practicing before the Commission as an accountant.
During the fiscal years ended October 31, 2023 and 2024 and the subsequent interim periods through the date of dismissal, there were no disagreements with BF Borgers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that, if not resolved to the satisfaction of BF Borgers, would have caused it to make reference to the subject matter of the disagreement in its report on the Company’s financial statements.
The dismissal of BF Borgers and the engagement of Fruci & Associates II, PLLC were approved by the Company’s Board of Directors.
ITEM 9A. CONTROLS AND PROCEDURES
Management evaluated internal control over financial reporting using the COSO 2013 framework. Material weaknesses were noted, including limited segregation of duties due to small staff size, the absence of an independent audit committee, lack of formal written policies and procedures, and financial reporting prepared with the assistance of external consultants. The Company’s remediation plan includes hiring additional accounting personnel following a significant acquisition or financing event, adopting formal policies and procedures, and establishing an audit committee.
As of October 31, 2024, the end of the period covered by this Annual Report, we carried out 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 the Company’s disclosure controls and procedures and internal control over financial reporting.
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2024, our disclosure controls and procedures were not effective due to material weaknesses in our control environment and financial reporting process.
A “material weakness” is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). In evaluating the effectiveness of our internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).
Management identified material weaknesses consisting of: (1) insufficient segregation of duties due to limited staff, (2) no independent audit committee, (3) lack of written internal control policies and procedures, and (4) financial reporting conducted with external consultant assistance. Management also noted a material weakness in the initial accounting for software costs (ASC 985-20 misclassification), which led to FY2024 adjustments. Remediation includes enhanced ASC 350-40 training and consultant review procedures for FY2025.
The Company plans to rectify these weaknesses by implementing an independent board of directors, establishing written policies and procedures for internal control over financial reporting, and hiring additional accounting personnel following a significant financing or acquisition event.
ITEM 9B. OTHER INFORMATION
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PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the name, position, and principal occupation of each of our current directors and executive officers as of the date of this report:
| Name | Age | Position |
| Michael Pieter Loubser | 67 | Chairman of the Board and Chief Executive Officer |
| Ockert Cornelius Loubser | 41 | Chief Operations Officer and Director |
| Christopher D. Strachan | 62 | Chief Financial Officer and Director |
| Rastislav Vašička | 41 | Chief Information Officer / Chief Technology Officer and Director |
Family Relationships
Michael Pieter Loubser is the father of Ockert Cornelius Loubser.
Involvement in Certain Legal Proceedings
During the past ten years, none of our directors or executive officers have been involved in any legal proceedings that would be material to an evaluation of their ability or integrity to serve as a director or executive officer.
Corporate Governance
The Company is a smaller reporting company and does not have a separately designated audit committee, compensation committee, or nominating committee. The Board of Directors performs the functions typically assigned to these committees. The Board currently consists of two directors. The Company has not adopted a formal code of ethics or whistleblower policy at this time due to its small size and limited resources. Management intends to adopt appropriate governance policies as the Company grows.
Delinquent Section 16(a) Reports
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth the compensation accrued or paid to our named executive officers for the fiscal year ended October 31, 2024. Due to limited working capital, substantially all executive compensation has been deferred and remains unpaid, with compensation accrued during the period. No cash payments were made to any named executive officer in fiscal 2024
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Other Compensation | Total | |||||||||||||||||||||
| Michael Loubser Chief Executive Officer | 2024 | — | — | — | — | — | — | |||||||||||||||||||||
| Christopher Strachan Chief Financial Officer | 2024 | 180,000 | * | — | — | — | — | 180,000 | ||||||||||||||||||||
| Ockert Loubser Chief Operations Officer | 2024 | — | — | — | — | — | — | |||||||||||||||||||||
| Rastislav Vasicka Chief Information/Technology Officer | 2024 | — | — | — | — | — | — | |||||||||||||||||||||
| Michael Loubser Chief Executive Officer | 2023 | — | — | — | — | — | — | |||||||||||||||||||||
| Christopher Strachan Chief Financial Officer | 2023 | 90,000 | * | — | — | — | — | 90,000 | ||||||||||||||||||||
| Ockert Loubser Chief Operations Officer | 2023 | — | — | — | — | — | — | |||||||||||||||||||||
| Rastislav Vasicka Chief Information/Technology Officer | 2023 | — | — | — | — | — | — | |||||||||||||||||||||
* Represents amounts accrued but not paid during fiscal 2024 and 2023. All compensation for named executive officers has been deferred due to the Company’s limited cash resources.
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The Company has not finalized employment agreements with any named executive officer. Compensation for our executives has been limited and primarily deferred due to working capital constraints. During fiscal 2024, the following compensation was accrued (but remains unpaid):
| ● | Chief Financial Officer: $180,000 |
No bonuses, equity awards, or other incentives were granted or paid.
The Company intends to accrue executive compensation beginning in fiscal 2025 at the following annual rates, subject to available funding and board approval: Chief Executive Officer $350,000; Chief Financial Officer $250,000; Chief Operations Officer $300,000; and Chief Information/Technology Officer $250,000. Actual payments remain subject to the Company’s financial condition and cash flow priorities.
We do not maintain any pension, retirement, or nonqualified deferred compensation plans for executives at this time.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of the Company’s common stock as of May 10, 2026 (the most recent practicable date), by (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of common stock, (ii) each director and named executive officer, and (iii) all directors and executive officers as a group.
Beneficial ownership is determined in accordance with SEC rules. Shares issuable upon conversion of the Series A Preferred Stock are deemed outstanding for purposes of computing the percentage ownership of the holder but are not deemed outstanding for computing the percentage ownership of any other person.
| Name of Beneficial Owner | Number of Shares Beneficially owned (1) | Percent of Class (2) | ||||||
| Michael Pieter Loubser, Ockert Cornelius Loubser, and Rastislav Vasicka – MORR Investments (3) | 189,344,805 | 63.423 | % | |||||
| Christopher D. Strachan - Strachan @ Associates | 1,786,896 | 0.900 | % | |||||
| Victor Vega | 14,050,433 | 7.077 | % | |||||
| Maximilian Willmann | 23,196,658 | 11.684 | % | |||||
| All directors and executive officers as a group (4 persons) | 191,131,701 | 64.022 | % | |||||
(1) Includes shares issuable upon conversion of securities exercisable or convertible within 60 days of June 9, 2026.
(2) Based on 201,585,818 shares of common stock issued and outstanding as of June 9, 2026.
(3) Includes all 10,000,000 shares of Series A Preferred Stock, convertible on a 10-for-1 basis into 100,000,000 shares of common
stock, which together provide significant voting control of the Company.
Equity Compensation Plans
The Company does not maintain any equity compensation plans as of October 31, 2024.
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ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The Company had the following material related-party transactions during the years ended October 31, 2024 and 2023 (see Notes 4, 5, 8, 11 and 12):
| ● | Revenue from Gut Moravia (related party): $301,750 (2024) and $0 (2023). |
| ● | Advances from an entity controlled by the Chairman: $157,756 outstanding as of both October 31, 2024 and October 31, 2023. |
| ● | Acquisition of Core Business Holdings accounted for as a common-control transfer under ASC 805-50 (see Note 5). |
All related-party transactions were on terms consistent with arm’s-length dealings and were approved by the Board of Directors.
Director Independence
The Company is a smaller reporting company and currently has four directors: Michael Pieter Loubser Christopher D. Strachan., Ockert Cornelius Loubser, and Rastislav Vasicka No director is considered independent under the independence standards of NASDAQ or the NYSE because of their executive officer positions and significant shareholdings. The Board performs the functions of the audit, compensation, and nominating committees.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents the aggregate fees billed by Fruci & Associates II, PLLC for professional services rendered to the Company for the years ended October 31, 2024 and 2023:
| Category | 2024 | 2023 | ||||||
| Audit fees plus xx Fruci | $ | 49,657 | $ | 26,500 | ||||
| Audit - Related fees | — | — | ||||||
| Tax fees | — | — | ||||||
| All other fees | — | — | ||||||
| Total | $ | 49,657 | $ | 26,500 | ||||
All services were pre-approved by the Board of Directors in accordance with the Company’s pre-approval policy.
PART IV.
ITEM 15. Exhibits and Financial Statement Schedules
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1a. Risk Factors
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities And Use Of Proceeds
None.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Arax Holdings Corp | ||
| (Registrant) | ||
| Date: June 10, 2026 | By: | /s/ Michael Loubser |
| Michael Loubser, Chief Executive Officer (Principal Executive Officer) | ||
| Date: June 10, 2026 | By: | /s/ Christopher Strachan |
| Christopher Strachan, Chief Financial Officer (Principal Financial Officer) | ||
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