Item 1. Description of Business
BUSINESS HISTORY
Joey New York, Inc. ("the Company") was incorporated under the laws of the State of Nevada on December 22, 2011.
On May 12, 2014, the Company acquired RAR Beauty, LLC, a Florida Limited Liability Company formed on July 13, 2009 ("RAR"). RAR does business as and sells its beauty and skin care products under the name Joey New York.
BUSINESS DESCRIPTION
Introduction
The Company through its wholly owned subsidiary, RAR Beauty, LLC doing business under the name Joey New York, distributes natural skin care and beauty products on wholesale and retail levels.
The Company's headquarters is based in Sunny Isles Beach, Florida. The Company seeks to increase market share and introduce its product line through multiple channel markets. The Company faces competition from nationally recognized firms that may have greater resources of personnel, capitalization, and reputation. The Company has therefore concentrated its efforts on product quality and performance.
Joey New York product lines include skin care treatments and beauty enhancements that are health conscious, effective and affordable. In keeping with our beauty mission, we have utilized the water from tender young green coconuts, blended with Indian ginseng extract, into our new fast-acting QUICK RESULTS skincare collection.
Principal Products
In the early 1990's the Joey New York brand pioneered the "instant visible results spa at home concept" and was the innovator of producing topical beauty products to complement and enhance the results of dermatological procedures to the prestige market.
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Skincare expert and Founder Joey Chancis has reinvented the Joey New York brand. One of the new and recently launched collections is the quick results coconut water product line. These products are designed to deliver amazing results in a healthy new way with the help of one of nature's most healing, soothing ingredients: Young Green Tender Coconut Water.
Joey New York® formulates and develops trendsetting products that don't currently exist and fills a void in today's marketplace. Joey is known for creating new market niches by constantly launching innovative new products utilizing the latest skin care technology and best raw materials available on the planet. Joey New York® products are designed for at home use as topicals which are marketed to use in between dermatological procedures and spa treatments such as peels, microdermabrasion and laser treatments.
The Joey New York® product line is a curated collection of "Hero Items" that instantly address specific skin needs. These products are not meant to compete with other skin care products or brands on the market, but to complement them.
They are specifically designed to amplify any skin care regimen enhancing results. The Quick Results® collection represents the culmination of 20+ years of experience in formulation and meeting the needs of Joey's loyal customers. All products have been created with the "health conscious", ingredient savvy, and results-oriented consumer in mind.
THE COCONUT REVOLUTION: The Hawaiians call Coconut Water "NEOLANI" which means "Dew from the Heavens". Through new technology, Joey New York® has formulated Coconut Water harvested from young, tender, green coconuts and integrated it with other active ingredients to develop its Quick Results® collection of skin care products.
Women take great interest in preserving their youthful appearances and good health. Fresh Coconut Water offers unparalleled nutritional value that is rich in vitamins, minerals and protein. It provides trace amounts of Calcium, Potassium, Folic Acid, Magnesium and Zinc, as well as protein for added moisturization to the skin. Coconut Water naturally replenishes the skin with these nutrients restoring a healthy, youthful glow.
Marketing & Distribution Methods
SALES AND MARKETING STRATEGY. Joey New York® will directly target certain vertical markets primarily driven by age, education and the demand for health and natural products. Positioning is determined by developing small collections as opposed to being too "SKU" intensive in one category allowing diversity of product amongst a cross-section of the consumer base. Joey fills a void in the market with items that previously were nonexistent and continually expanding a foothold in this space. Efforts focused on advertising, editorial events, and training will help Joey remain relevant and current while being an innovative visionary. Also, Joey will capitalize on retail relationships in the founder's rolodex developed through past commercial success.
SALES AND SUPPORT RESOURCES: At present Joey Chancis is responsible for overseeing retail sales accounts in the professional and salon industry, as well as, boutique chain stores in the U.S. Some of these stores have sold Joey's original collection in the past.
SHORT-TERM MARKETING STRATEGY: Joey New York® currently has a proven collection, called Quick Results®, with a strategy of having a strong retail presence in Masstige and specialty stores in the U.S. and internationally.
INTERNET MARKETING STRATEGY: Joey New York has plans to enhance its website and will add other technology components including: Quick response (QR) codes on all packaging that will revert back to the site and with product information, tutorials and "how to" videos for quick reference.
* JNY Mobile App.
* Strong social media campaigns through Instagram, YouTube, Twitter, Facebook and LinkedIn.
* Working with a website and SEO agency to complete the initial project utilizing the latest platform.
* "Pay Per Click" marketing program.
Background of Industry & Market Analysis
THE GLOBAL COSMECEUTICALS INDUSTRY: The global cosmetics market was approximately $233 billion in 2012 and is expected to reach $292 billion worldwide by 2017 with a Compound Annual Growth Rate (CAGR) of 4.6%. Cosmeceuticals are capturing an ever-growing share of this market from 13% in 2012 to an expected market share of 16% in 2017 with "skin care" cosmeceuticals as the largest vertical market dominating the category with a 60% share. Despite the ongoing economic difficulties in many parts of the world, the beauty industry continues to defy the downturn. NPD, R&D and the creation of new brands in the beauty sector is outperforming many other consumer industries and the outlook from analysts is largely positive.
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"The resilience of the beauty industry is clear to see," says Mary-Ellen Field, Chairman of Brand Finance. "If you compare it to other industries it's holding up very well. Fashion for instance, with the exception of a few retailers, is really suffering."
The beauty industry's ability to weather the financial storm can be attributed to a number of factors: burgeoning consumerism in developing markets is providing demand for personal care and cosmetic products; while in more mature markets spending on discretionary items such as beauty products has increased at the expense of the bigger ticket items. Luxury brands, in particular, have enjoyed a renewed uptake.
Leading business intelligence provider GBI Research states that the global cosmeceuticals market will be driven by "technological advances and consumer awareness" and will "boost commercial potential for innovative and premium-priced products" through 2018. GBI found that the global cosmeceuticals market was estimated to be worth $30.9 billion in 2011, having grown at a CAGR of 3.6% from $24.1 billion in 2004 and trending to conservatively reach $36.88 billion by 2016. In 2011, the top five European countries accounted for almost 65% of the overall cosmeceuticals market, followed by the US as the single largest market. This is mainly driven by the obsession with maintaining a youthful appearance, better results of cosmeceuticals, heavy marketing, slow economic improvement, and rising per-capita disposable income.
Cosmeceutical brand growth is further driven by expanded markets in Asia-Pacific, digital marketing and the offer of personalized customer experiences and e-commerce. Demand is driven by the emergence of the urban middle class with increased incomes, affordability and urbanization who demand efficient products and luxury brands. Anti-oxidants remain one of the most popular ingredients for skin care and are now being included in other healthcare regimens for their perceived benefits to overall health.
THE COSMECEUTICAL SKIN CARE MARKET: According to IBISWorld from 2008 to 2013, the market has experienced a CAGR of 11% and the current market size is estimated to $5 billion employing nearly 6800 people in 238 companies. Over the past 5 years, strong investment in research and development and an aging population have underpinned rapid growth, even during the recession. While growth is expected to slow slightly over the next four years as the market approaches saturation and competition heats up, higher demand from mass merchandisers and value-priced products will keep demand for the industry strong. The cosmeceutical skincare production industry is in a growth stage of its life cycle. Its contribution to the US economy - measured by its industry value added (IVA) - has far outpaced general economic growth and is expected to continue in this manner through the foreseeable future. Over the 10 years to 2018, IBISWorld has experienced and anticipates IVA growth at an average annual rate of 8.1%; meanwhile, U.S. GDP is forecast to increase at an annualized 2.1%.
Industry-wide, cosmeceutical skin care is the most robust and highest growth vertical market. As with the overall cosmeceuticals industry, strong research and development investment, coupled with technological advances, not only have underpinned the industry's expansion during the recession but more importantly will drive growth through 2018.
THE ORGANIC PERSONAL CARE MARKET: According to Transparency Market Research, the global demand for organic personal care products was over $7.6 billion in 2012 is expected to reach $13.2 billion by 2018, growing at a Compound Annual Growth Rate (CAGR) of 9.6% from 2012 to 2018. More importantly, skin care products dominated the demand in the global organic personal care products market niche in 2011, with a 32.1% share, followed by hair care and cosmetics segments.
The industry is witnessing significant growth in terms of sales and technological advancements over the past few years because of increasing consumer awareness towards personal hygiene and health. Growing concern regarding skin care is particularly fuelling the robust growth across all market segments and geographies. Increasing demand for organic and natural cosmetic and toiletries products is creating new growth opportunities in this field which is encouraging the emergence of new market players in this arena.
Competitive Business Conditions and Methods of Competition
According to ranker.com, while many of the Global Beauty large-cap competitors in the beauty industry provide broad-base, SKU-intensive product lines, many of the smaller companies enjoy fierce customer loyalty amongst their brands. They state that once customers find the perfect beauty or makeup product, they tend to stick to their favorites. Because consumers have such strong brand loyalty, people are often more willing to pay a price premium for their favorites. There are also many inexpensive, quality beauty brands that are affordable for the average consumer.
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Skin Care Competition: According to LiveStrong.com, a non-profit and unbiased healthy living organization, they rank the Top 10 Skin Care product lines as:
1. Proactiv: According to the Tanning Advisor website, Proactiv is the most popular acne product. Proactiv is effective at removing blemishes and fighting acne flare-ups. The Proactiv product line contains a cleanser, toner, repair treatment, moisturizer and mask.
2. Kiehl's: Offers a complete line of cleansers, toners and moisturizers designed to work together to provide healthy skin. The Cosmetics Cop website claims that the best product to clean your face is Kiehl's Ultra Facial Cleanser. It is free from fragrance and gentle, yet can still remove most of your makeup.
3. Sephora: Carries a variety of product lines, including their own brand of skin care and makeup. The Cosmetics Cop recommends Sephora's FACE Waterproof Eye Makeup Remover. This product has no fragrance added, and will take all your makeup off, including mascara that is waterproof.
4. Mary Kay: Offers skin care products as well as makeup that are designed to work together in an overall beauty regime. Before you apply your makeup and after you remove it, use an eye cream to help decrease the number of wrinkles around your eyes. Mary Kay's Instant Action Eye Cream will help smooth out the lines and give you a youthful, bright-eyed look. If you are pressed for time, choose Mary Kay's Timewise 3-in-1 Cleanser. You can clean, exfoliate and freshen your skin in one step. According to the Tanning Advisor website, you'll have the extra benefit of the antioxidant vitamin E.
5. Neutrogena: Offers a wide variety of cleansers, creams, lotions and self-tanners that are easily found in drugstores. The Neutrogena Norwegian Formula Hand Cream will give you soft hands without making them feel oily. Neutrogena also has self-tanning products that condition your skin as they give you a bronze glow.
6. Estee Lauder: Owns several companies with skin care lines, including Estee Lauder, Aramis, Clinique, Prescriptives, Origins, M-A-C, Aveda, Smashbox and Bobbie Brown. Each of the Estee Lauder companies' skin care lines specialize in a specific demographic. The Estee Lauder brand of skin care is designed to help keep skin youthful and glowing, with some repair creams and wrinkle reducing elixirs in the product line. Clinique offers fragrance-free products for all skin types. Presciptives has a line of skin care that works with personalized color-matching makeup.
7. Olay: Offers a complete product line designed to clean, moisturize and tone your skin. The company's Regenerist product line is formulated to repair and minimize the damage cause by aging.
8. Avon: Offers complete skin care for the mature woman under the Avon brand, and a line for younger women and teens under the Mark brand. Most Avon representatives offer testers and samples to help select the products that work for you.
9. Queen Helene: Offers a variety of skin care products, including scrubs, masks and moisturizers. If you need a deep cleaning facial mask, try the Queen Helene Mint Julep Face Mask. You can get rid of pimples and blackheads while you refresh your skin.
10. Burt's Bees: Offers a complete line of all natural skin care products, including cleansers, toners and moisturizers. Marie Claire Magazine has the Burt's Bees Lemon Poppy Seed Facial Cleanser on their list of top six skin care products.
While there is a wide range of competitors globally, Joey New York® is once again establishing itself as unique and innovative.
Materials and Suppliers
Our materials are sourced from various suppliers, products are manufactured under contract and distributed from a central contracted facility that processes orders and ships direct for a per transaction fee.
Certain Agreements
We currently rely on the products and services of a small number of suppliers and service providers. The failure of these suppliers to perform to our standards could adversely affect the quality of our products and our ability to perform timely in delivery. We believe that the loss of any of these providers could impact our operations in the short term while the impacted operations are transitioned to a new provider.
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Research and Development
The Company has not incurred significant expense for research and development activities. Research and development activities have been conducted by our CEO Joey Chancis utilizing her longstanding relationships with her preferred lab facilities and support staff. We may incur significant expense for research and development activities in the future as we continue to develop.
Patents and Licenses
We do not currently own and patents or licenses. We do hold certain trademarks related to our products.
Government Regulation
The two most important laws pertaining to cosmetics marketed in the United States are the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA). FDA regulates cosmetics under the authority of these laws.
The FD&C Act defines cosmetics by their intended use, as "articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body...for cleansing, beautifying, promoting attractiveness, or altering the appearance" (FD&C Act, sec. 201(i)). Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup, cleansing shampoos, permanent waves, hair colors, and deodorants, as well as any substance intended for use as a component of a cosmetic product.
The FD&C Act prohibits the marketing of adulterated or misbranded cosmetics in interstate commerce. "Adulteration" refers to violations involving product composition--whether they result from ingredients, contaminants, processing, packaging, or shipping and handling. "Misbranding" refers to violations involving improperly labeled or deceptively packaged products. Under the FD&C Act, a product also may be misbranded due to failure to provide material facts. This means, for example, any directions for safe use and warning statements needed to ensure a product's safe use.
In addition, under the authority of the FPLA, FDA requires a list of ingredients for cosmetics marketed on a retail basis to consumers (Title 21, Code of Federal Regulations (CFR), section 701.3). Cosmetics that fail to comply with the FPLA are considered misbranded under the FD&C Act. (FPLA, section 1456) This requirement does not apply to cosmetics distributed solely for professional use, institutional use (such as in schools or the workplace), or as free samples or hotel amenities.
FDA can take action against cosmetics on the market that are in violation of these laws, as well as companies and individuals who market such products.
FDA's legal authority over cosmetics is different from their authority over other products they regulate, such as drugs, biologics, and medical devices. Under the law, cosmetic products and ingredients do not need FDA premarket approval, with the exception of color additives. However, FDA can pursue enforcement action against products on the market that are not in compliance with the law, or against firms or individuals who violate the law.
We follow best practices guidelines and utilize quality suppliers that comply with all regulatory requirements.
Cost of Compliance with Environmental laws
We do not incur any significant costs resulting from our operations to comply with environmental Laws.
Employees
The Company currently has a total of three officers and employees including its corporate management, sales and operational employees. We also have two non-executive directors.
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Item 1A.
Item 1A. Risk Factors.
Not Applicable.
Item 1B.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 2.
Item 2. Properties.
We own no properties related to our operations. We operate from business offices provided by our executive officers and we contract our warehouse and fulfilment facilities.
Item 3.
Item 3. Legal Proceedings.
We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is quoted on the OTC Bulletin Board under the symbol "JOEY". The following table sets forth, for the fiscal quarters indicated, the high and low closing sale prices per share of our common stock. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The closing sale price of our common stock on May 27, 2016 was $0.007.
Note: The average trading volume per day of our common stock was less than 500 shares for the prior 12 month period.
Holders
As of May 28, 2016, there were approximately 26 record holders of our common stock. This does not include the holders of our common stock who held their shares in street name as of that date.
Dividends
We have never paid or declared any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future but rather intend to retain future earnings, if any, for reinvestment in our future business. Any future determination to pay cash dividends will be in compliance with our contractual obligations and otherwise at the discretion of the board of directors and based upon our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.
Transfer Agent
Our registrar and transfer agent is VStock Transfer, LLC.
Recent Sales of Unregistered Securities
In January 2016, the Company received stock subscriptions for 250,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,000.
Equity Compensation Plan Information
We currently have no Equity Compensation plans in place.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
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Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Joey New York, Inc. for the years ended February 28, 2016 and 2015.
Forward-Looking Statements
The following Management's Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risks Factors" in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The reported financial results and disclosures were determined using the significant accounting policies, practices and estimates described below:
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company had no cash equivalents at February 28, 2016 and February 28, 2015, respectively.
Earnings (Loss) Per Share
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of February 28, 2015 the company had no potential dilutive shares outstanding.
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Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by valuation allowances when necessary.
Assessing whether deferred tax assets are realizable requires significant judgment. The Company considers all available positive and negative evidence, including historical operating performance and expectations of future operating performance. The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain. To the extent the Company believes it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against the Company's deferred tax assets, which increase income tax expense in the period when such a determination is made.
Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position. Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining new information on particular tax positions may cause a change to the effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the statements of operations. There were no unrecognized tax benefits for the years ended February 2016 and 2015.
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board ("FASB") ASC 820-10, "Fair Value Measurements" , as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from m 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 to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
●
Level 1 - quoted market prices in active markets for identical assets or liabilities.
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Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
●
Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of the Company's short-term financial instruments, including cash and accounts payable - related party approximate fair value due to the relatively short period to maturity for these instruments.
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Financial Condition and Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Year ended February 28, 2016 compared to year ended February 28, 2015
Our net loss for the year ended February 28, 2016 was $323,242 compared to a net loss of $477,001 during the year ended February 28, 2015. These losses are attributable primarily to general and administrative expenses, but in 2015 we experienced a decrease in non-recurring professional fees. We expect these expenses to continue to increase as we push to develop increased sales volumes and increase distribution channels for our products.
During fiscal year ended February 28, 2016 we generated $54,388 in revenue compared to $156,146 in revenue during the fiscal year ended February 28, 2015.
Liquidity and Capital Resources
As of February 28, 2016, our current assets were $51,361 consisting of inventory, accounts receivable and cash and our total liabilities were $4,172,673 primarily consisting of long term debt of $3,015,600 (principally related to notes issued to our two majority shareholders) and advances from related parties in the amount of $656,063.
Cash Flows from Operating Activities
We have not yet generated significant cash flows from operating activities. For the fiscal year ended February 28, 2016, net cash used in operating activities was $160,098. For the fiscal year ended February 28, 2014, net cash used in operating activities was $135,008.
Cash Flows from Financing Activities
We have financed our operations primarily from related party advances and proceeds from the sale of common stock. For the year ended February 28, 2016 cash provided by related party advances was $63,830 and $100,005 from the sale of common stock. For the year ended February 28, 2015 cash provided by related party advances was $30,710.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through related party advances in the near term as we prepare for future capital raise through an issuance of securities. We have no guarantees or firm commitments that the related party advances will continue in the near term. Our working capital requirements are expected to increase with the growth of our business.
Existing working capital, further advances, capital raises and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through related party advances and proceeds from the sale of our common stock.
Management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses; and (iii) marketing expenses. We intend to finance these expenses with issuances of securities.
Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
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Material Commitments
As of the date of this Current Report, we do not have any material commitments.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment during the next twelve months.
Off-Balance Sheet Arrangements
As of the date of this Current 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 auditors' report accompanying our February 28, 2016 and February 28, 2015 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
As reflected in the accompanying financial statements, the Company had an accumulated net loss of approximately $4,116,512 at February 28, 2016 and revenue of $54,388.
The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of equity securities and related party advances. In addition, the Company is in the development stage and has generated no revenues since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern.
The ability of the Company to continue operations is dependent on the success of Management's plans, which include the raising of capital through the issuance of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
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Joey New York, Inc.
Financial Statements
For the Years Ending February 29, 2016 and 2015
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Report of Independent Registered Public Accounting Firm
Joey New York, Inc.
Consolidated Balance Sheets
February 29, 2016 and February 28, 2015
Joey New York, Inc.
Consolidated Statements of Operations
For the years ended February 29, 2016 and February 28, 2015
Joey New York, Inc.
Consolidated Statements of Stockholders' Deficit
For the years ended February 29, 2016
Joey New York, Inc.
Consolidated Statements of Cash Flows
For the years ended February 29, 2016 and February 28, 2015
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
NOTE 1. NATURE OF BUSINESS
ORGANIZATION
Joey New York, Inc. ("the Company") was incorporated under the laws of the State of Nevada on December 22, 2011. Effective August 27, 2013, the Board of Directors approved a name change to Joey New York, Inc. On May 12, 2014, the Company merged with a Florida limited liability company, RAR Beauty, LLC, which distributes natural skin care and beauty products on the wholesale and retail levels and operates under the name of Joey New York and with Pronto Corp a registered company. The Company accounted for the acquisition as a reverse merger whereby, the operations of RAR Beauty, LLC is the continuing entity for financial reporting purposes and the former members of RAR Beauty, LLC owning approximately 75% of the Company. On May 12, 2014, RAR Beauty, LLC became a wholly owned subsidiary of the Company.
The Company through its wholly owned subsidiary, RAR Beauty, LLC doing business under the name Joey New York, distributes natural skin care and beauty products on wholesale and retail levels.
The Company's headquarters is based in Sunny Isles Beach, Florida. The Company seeks to increase market share and introduce its product line through multiple channel markets. The Company faces competition from nationally recognized firms that may have greater resources of personnel, capitalization, and reputation. The Company has therefore concentrated its efforts on product quality and performance.
Joey New York product lines include skin care treatments and beauty enhancements that are health conscious, effective and affordable. In keeping with our beauty mission, we have utilized the water from tender young green coconuts, blended with Indian ginseng extract, into our new fast-acting QUICK RESULTS skincare collection.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the year ended February 29, 2019 the Company has incurred a loss from operations of $323,242. The Company has a history of losses resulting in an accumulated deficit of $1,377,944. The Company has negative working capital, in the amount of $4,121,312, as of February 29, 2016. The Company intends to fund operations and continuing product development through debt and equity financing arrangements, which efforts may be insufficient to fund its capital expenditures, working capital and other cash requirements. The Company cannot be certain that it will be successful in its efforts to attain such capital or that the terms of capital will be at acceptable terms.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. general accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The Company's balance sheet includes certain financial instruments, primarily, cash, accounts receivable, inventory, accounts payable, and debt to related parties. The carrying amounts of current assets and current liabilities approximate their fair value due to the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3
Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of February 28, 2015. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
CASH FLOWS REPORTING
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method ("Indirect method") as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
CASH
For purposes of the statement of cash flows, cash equivalents include demand deposits, money market funds, and all highly liquid debt instructions with original maturities of three months or less.
ACCOUNTS RECEIVABLE
The company uses the reserve method of accounting for doubtful accounts. There were no bad debts as of February 29, 2016 and February 28, 2015. Based on prior experience no provision for doubtful accounts was deemed necessary.
CONCENTRATIONS AND CREDIT RISKS
The Company's financial instruments that are exposed to concentrations and credit risk primarily consist of its cash and accounts receivable.
Cash - The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Receivables - The Company issues credit to its customers, based on their credit worthiness. The Company does not have a long history with its customers, to base its credit history and therefore has credit risk. The Company has not incurred bad debts and therefore has not set a provision for doubtful accounts.
INVENTORY
Inventory is stated at the lower of cost or market, determined by the first-in, first-out method. Inventory consists solely of finished goods.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
PROPERTY AND EQUIPMENT AND LONG-LIVED ASSETS
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the assets, five years, utilizing the straight method. Maintenance and repairs are expensed as incurred. Expenditures which significantly increase value or extend useful asset lives are capitalized. When property or equipment is sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation period or the undepreciated balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of property and equipment existed at February 29, 2016.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
REVENUE RECOGNITION
The Company recognizes revenue when it is realized or realizable and estimable in accordance with ASC 605, "Revenue Recognition". The Company will recognize revenue only when all of the following criteria have been met:
i)
Persuasive evidence for an agreement exists;
ii)
Service has been provided;
iii)
The fee is fixed or determinable; and,
iv)
Collection is reasonably assured.
We recognize a sale when the product has been shipped at which time risk of loss has passed to the customer and the above criteria have been met.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs incurred for the period ending February 29, 2016 and February 28, 2015 were $60 and $4,458, respectively.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
SHARE-BASED EXPENSE
ASC 718, Compensation - Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized in the period of grant.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the years ending February 29, 2016 and February 28, 2015 were $0 and $67,027, respectively.
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs when incurred. Research and development costs include testing of product and outputs. We spent $0 and $20,000 in research and development costs for the years ending February 29, 2016 and February 28, 2014, respectively.
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets or liabilities were off-set by a 100% valuation allowance, therefore there has been no recognized benefit as of February 29, 2016.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with ASC 260, "Earnings Per Share." The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at February 29, 2016 and February 28, 2015. Due to net operating loss, there is no presentation of dilutive earnings per share, as it would be anti-dilutive. As of February 29, 2016, the Company had no dilutive potential common shares.
COMMITMENTS AND CONTINGENCIES
The Company follows ASC 450-20, "Loss Contingencies," to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of February 28, 2015.
RECENTLY ACCOUNTING PRONOUNCEMENTS
In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction-and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. Public entities are required to adopt the revenue recognition standard for reporting periods beginning after December 15, 2016, and interim and annual reporting periods thereafter. Early adoption is not permitted for public entities. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.
In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation. As a result, the target is not reflected in the estimation of the award's grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the consolidated financial statements.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity's liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity's liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity's liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.
Recent accounting pronouncements issued by the FASB (Accounting Standards Update, including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.
NOTE 3. INVENTORY
Inventory consists of finished goods. Inventory is carried at cost on a first-in-first-out basis (FIFO) and held at public warehouse, which performs shipping and distribution function. All products held in inventory are of our popular brands ordered and anticipated minimal order quantities are held in inventory necessary to operate without backlog or delays in order fulfillment. Products have not significantly changed from year to year and there is no concentration of suppliers.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
NOTE 4. PROPERTY AND EQUIPMENT
Property consists of equipment purchased for the production of revenues. As of February 29, 2016 and February 28, 2015:
Depreciation for the years ending February 29, 2016 and February 28, 2015 was $655 and $1,148, respectively.
NOTE 5. RELATED PARTY ADVANCES
The Company's management has advanced funds and has made payments on behalf of the Company for the purpose of meeting obligations. These accumulated advances have been formalized by demand notes payable and accrue interest at 2.6%. The Company is indebted to its two majority shareholders for an aggregate amount of $612,737 and $592,238, as of February 29, 2016 and February 28, 2015, respectively.
NOTE 6. LONG-TERM DEBT
On May 12, 2014, in accordance with the acquisition agreement, the Company issued promissory notes payable, amounting $3,000,000 to its two majority shareholders. The terms of the notes (2, each at $1,500,000) are at a stated interest rate of 5% and mature on May 12, 2016. The company recorded this as an equity transaction as the notes did not represent any prior or future compensation.
In accordance with the acquisition agreement, the previous majority shareholder of Pronto Corp. received a promissory note payable of $15,600 for costs incurred prior to the acquisition. The note has a stated interest rate of 5% and matures on July 12, 2014. Payments on note totaled $15,600, paid in full.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
NOTE 7. INCOME TAXES
Income taxes are provided based upon the liability method. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by accounting standards to allow recognition of such an asset.
At February 29, 2016 and February 28, 2015, the Company expected no net deferred tax assets to be recognized, resulting from net operating losses. Deferred tax assets were offset by a corresponding allowance of 100%.
For the tax year ended December 31, 2013, the predecessor entity to Joey New York, Inc. was a limited liability company, and as such, all tax benefits and obligations passed through the entity to its members. No provisions have been made prior to December 31, 2013, nor does management believe that any tax modifications would have a material effect on the financials.
Although Management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our tax provisions. Ultimately, the actual tax benefits to be realized will be based upon future taxable earnings levels, which are very difficult to predict.
The income tax provision consists of the following as of February 29, 2016 and February 28, 2015:
At February 29, 2016, the Company had a net operating loss ("NOL") carry forward in the amount of approximately $469,000, available to offset future taxable income through 2035. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
Deferred tax assets/liabilities were as follows:
The valuation allowance was increased by $110,000 during fiscal year ended February 29, 2016.
A reconciliation of the Company's effective tax rate as a percentage of income before taxes and federal statutory rate for the years ended February 29, 2016 and February 28, 2015 is summarized below.
No income tax expense has been realized as a result of operations and no income tax penalties and interest have been accrued related to uncertain tax positions.
NOTE 8. EQUITY
The Company is authorized to issue 1,500,000,000 shares of $0.001 par value common stock.
In January 2016, the Company received stock subscriptions for 250,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,000.
In June 2015, the Company received stock subscriptions for 250,025 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $50,005.
In July 2014, the Company issued 335,134 shares of common stock in satisfaction of legal and consultation services in the amount of $67,027. The shares were valued at $0.20 per share, the best effort share selling price of current equity raise and accepted by the service provider. The current trading market for our stock is thinly traded and believe that quotation price, at the time of the exchange, was not indicative of fair value, therefore believe that the value of the services are more measurable.
In July 2014, the Company received stock subscriptions for 550,000 restricted shares of common stock ($0.20 per share) in exchange for cash in the amount of $110,000.
There are no warrants or options outstanding.
Joey New York, Inc.
Notes to Consolidated Financial Statements
February 29, 2016 and February 28, 2015
NOTE 9. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.
Related Party
The controlling members have pledged support to fund continuing operations; however there is no written commitment to this effect. The Company is dependent upon the continued support of these parties in the immediate future, in order to meet its current obligations, until such time that revenues are generated to meet all current obligations or until such time that adequate capital is raised for its growth plans.
The Company has limited needs for office administration and does not own or lease property or lease office space. The office space used by the Company was arranged by the officers and directors of the Company to use at no charge.
The Company does not have employment contracts with its key employees, including the controlling shareholders who are officers of the Company.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
Legal and other matters
In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company's financial position or results of operations.
NOTE 10. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date of filing the consolidated financial statements with the Securities and Exchange Commission, the date the consolidated financial statements were available to be issued. Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the consolidated financial statements thereby requiring adjustment or disclosure.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
Joey New York, Inc. was incorporated under the laws of the State of Nevada on December 22, 2011. Our registration statement has been filed with the Securities and Exchange Commission on April 26, 2012 and was declared effective on August 27, 2012. The Company completed the acquisition of an entity, RAR Beauty, LLC on May 12, 2014 and currently operates as a distributor of natural skin care and beauty products on the wholesale and retail levels
Forward-Looking Statements
The following discussion should be read in conjunction with our consolidated financial statements, which are included elsewhere in this Form 10-K (the "Report"). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
For a description of such risks and uncertainties refer to our Registration Statement on Form S-1, on our Annual Report on Form 10-K and on our filings of Form 8-K with the Securities and Exchange Commission. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
RESULTS OF OPERATION
Years ending February 29, 2016 and February 28, 2015:
Revenues were $54,388 and $156,146 for the years ending February 29, 2016 and February 28, 2015, respectively. The decrease in sales was primarily due to our decreasing customer base and not necessarily due to economic factors. Our gross profit was $7,974 and $51,363 or 14.7% and 32.9% of revenue for the years ending February 29, 2016 and February 28, 2015. Fluctuations in our profit margins will be due to product mix and minor increases in our product costs.
During the year ended February 29, 2016, we incurred $164,732 in operating expenses compared to $388,569 for the year ended February 28, 2015. The change in the operating expenses was due to the operating company expenses associated with the merger during the year ended February 28, 2015. Significant expenses were professional fees which decreased from $238,034 to $21,152. Professional fees relate to the merger transaction and regulatory compliance. We acknowledge that our professional fees will continue due to the increased compliance and regulatory costs. Additionally, upon the raising of capital, we project additional costs of compensation and marketing.
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LIQUIDITY AND CAPITAL RESOURCES
As of February 29, 2016, our current assets were $8,035, of which $7,903 was in cash. We do not believe that we have sufficient cash to meet our current obligations for the near term and will require additional advances from our majority shareholders or through traditional financial institutions or capital through the sale of our common stock. As of February 29, 2016, our working capital deficit was $4,121,312.
Cash Flows
We have not generated positive cash flows from operating activities. For the year ended February 29, 2016, net cash flows used in operating activities was $116,772, which was financed by proceeds from shareholder advances, in the amount of $20,499 and sales of our common stock in the amount of $100,005.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual 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.
CRITICAL ACCOUNTING POLICIES
BASIS OF CONSOLIDATION, PRESENTATION AND USE OF ESTIMATES
The Company prepares its consolidated financial statements (the accounts of Joey New York and its wholly-owned subsidiary, RAR Beauty, LLC) in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Significant estimates include considerations for allowance for doubtful accounts, product obsolescence and depreciation lives and methods. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The Company's balance sheet includes certain financial instruments, primarily, cash, accounts receivable, inventory, accounts payable, and debt to related parties. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
GOING CONCERN
As reflected in the accompanying consolidated financial statements, the Company has incurred a net loss, net cash used in operations for the year ending February 29, 2016. Additionally, the Company has a history of net losses resulting in significant accumulated deficit and a working capital deficit, as of February 29, 2016.
The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been advances from related parties; there are no written or oral guarantees for the continuance of this funding practice. These factors raise substantial doubt about the Company's ability to continue as a going concern.
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Item 9.
Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure
On [date], the Company, through and with the approval of its Board of Directors, engaged Thayer O'Neal & Company, as its independent registered public accounting firm.
On [date], L.L. Bradford was dismissed as the Company's independent registered public.
Prior to engaging Thayer O'Neal, the Company did not consult with Thayer O'Neal regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Thayer O'Neal on the Company's financial statements, and Thayer O'Neal did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
The report of L.L. Bradford regarding the Company's financial statements for the fiscal year ended February 28, 2014 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended February 28, 2016 and during the period from February 28, 2016 to May 29, 2016, the date of dismissal, there were no disagreements with Thayer O'Neal on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Thayer O'Neal would have caused it to make reference to such disagreement in its reports.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, consisting of a sole officer and director at that time, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our sole officer and director at that time concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, or person/s performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management's Annual Report on Internal Control over Financial Reporting . Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of the Company's internal control over financial reporting as of February 28, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on this evaluation, our management, consisting of a sole officer and director at that time, concluded that, as of February 28, 2016, our internal control over financial reporting was effective.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management's report in this annual report.
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Changes in Internal Control over Financial Reporting . There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended February 28, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following persons are our executive officers and directors, and hold the offices set forth opposite their names.
Our Board of Directors consists of two members. We currently do not provide any cash remuneration for acting as a Director. A ll directors may, however be reimbursed their expenses, if any, for attendance at meetings of the Board of Directors.
The following is a brief account of the business experience during the past five years of each of our directors and executive officers:
Joey Chancis became our Chief Executive Officer, Director, and principal shareholder upon the closing of the acquisition of RAR Beauty, LLC on May 12, 2014. Mrs. Chancis founded the Joey New York Brand of products in 1993. She is the innovative driving force, as well as the inspiration of the company and is responsible for all aspects of the business including product development, creativity, design, marketing, promoting, production, sales and management. She is also the company's spokesperson. Joey travels worldwide participating in personal appearances, events, television shows and radio, as well as, store openings and trade shows. Mrs. Chancis gained exposure in the skin care and cosmetic industry while working for two major beauty companies where she experienced all sides of the business from R&D to sales and marketing.
Richard Roer became our President, Director, and principal shareholder upon the closing of the acquisition of RAR Beauty, LLC on May 12, 2014. Richard Roer joined Joey New York Brand in December 1997 to manage the launch of the retail distribution strategy. He has extensive domestic and international experience in the fashion industry working for Leslie Fay as well as owning a prestigious fashion company. Mr. Roer also specialized in licensing popular international brands such as Fila and Roberto Cavalli, and was the first importer to bring these prestigious companies to the U.S. He also served as President of a fashion company that sold licensed apparel under the following trademarks: Anne Klein, Bill Blass, Bob Mackie, and Oleg Cassini. Building on these successful experiences, Mr. Roer is involved in numerous facets of the business, including the sales, marketing, finance and administrative functions.
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Involvement in Certain Legal Proceedings
During the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:
●
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
●
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
●
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
●
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.
●
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
●
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Committees of the Board
Decisions of the Board of Directors are generally taken by written unanimous resolutions. The current Board comprises two members and is intending to hold regularly scheduled meetings. The entire board provides the functions of Audit, Compensation and Governance committees until such time as charters for these committees can be adopted and they can be populated by independent directors.
Code of Ethics
The Company has not yet adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Until recently we have had a sole officer and director conducting all operations. We have recently expanded operations, the Board of Directors and the executive team. We anticipate adopting a formal Code of Ethics soon.
Family Relationships
No family relationships exist between any of our present directors and officers, other than Richard Roer and Joey Chancis who are Father and Daughter.
Compliance with Section 16(A) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the "reporting persons") file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own during the fiscal year ended February 28, 2015, Forms required, if any, were filed with the SEC by such reporting persons.
Changes in Nominating Procedures
None
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Item 11.
Item 11. Executive Compensation
The following table sets forth information concerning the total compensation paid or accrued by us during the past two fiscal years ended February 28, 2016 to:
●
all individuals who served as our chief executive officer, chief financial officer or acted in a similar capacity for us at any time during the fiscal year ended February 28, 2014 and 2015 and
●
all individuals who served as executive officers of ours at any time during the fiscal year ended February 28, 2014 and 2015 and received annual compensation during the fiscal year ended February 28, 2014 and/or 2015 in excess of $100,000.
Summary Compensation Table
Employment Agreements and Benefits
We currently do not currently provide any employee benefit or retirement programs. Our officers' salaries are determined by the Board of Directors. Officers and employees may receive bonuses from time to time in the form of cash or equity at the sole discretion of the Board of Directors.
We currently do not currently have any compensation agreements in place with our officers or directors.
We may also pay bonuses to our named executive officers and other employees at the discretion of the board of directors.
Outstanding Equity Awards
We did not have any outstanding equity awards with any of our executive officers named in the Summary Compensation Table, effective February 28, 2016.
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Director Compensation
The following table sets forth compensation received by our directors in the fiscal year ended February 28, 2016.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
Compensation of Directors
We reimburse our directors for expenses incurred in connection with attending board meetings.
We did not pay director's fees or other cash compensation for services rendered as a director in the year ended February 28, 2016 or February 28, 2015.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of May 29, 2016, the beneficial ownership of Joey New York, Inc. common stock by each of our directors and named executive officers, each person known to us to beneficially own more than 5% of our common stock, and by the officers and directors of the Company as a group. Except as otherwise indicated, all shares are owned directly. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power (subject to applicable community property laws) and that person's address is c/o Joey New York, Inc., Trump Tower I, 16001 Collins Ave. #3202, Sunny Isles Beach, Fl 33160. Shares of Common Stock subject to options, warrants, or convertible notes currently exercisable or convertible or exercisable or convertible within 60 days after May 29, 2016 are deemed outstanding for computing the share ownership and percentage of the person holding such options, warrants, or convertible notes but are not deemed outstanding for computing the percentage of any other person.
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(1)
Joey Chancis is CEO and Director. Includes 7,000,000 shares held in the name of Richard Chancis, who is the spouse of Joey Chancis. Joey Chancis holds directly 22,500,000 shares held in her name. Does not include any shares owned by Richard Roer which is her father of which she disclaims beneficial ownership.
(2)
Richard Roer is President and Director. Does not include any shares owned by Joey Chancis which is his daughter of which he disclaims beneficial ownership.
(5)
Includes 22,500,000 shares held in the name of Joey Chancis, who is his spouse. Richard Chancis holds directly 7,000,000 shares held in his name. Does not include any shares owned by Richard Roer which is his father-in-law of which he disclaims beneficial ownership.
Note: Beneficial Ownership of Securities: Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, a beneficial owner of securities is a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within sixty days through means including the exercise of any option, warrant or conversion of a security.
Item 13.
Item 13. Certain Relationships and Related Transaction, and Director Independence
In addition to the cash and equity compensation arrangements of our directors and executive officers discussed above under "Director Compensation" and "Executive Compensation," the following is a description of transactions to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.
As of the date of this Annual Report, other than as disclosed below and in this Current report, none of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transactions, which has materially affected or will materially affect us.
On May 12, 2014, the Company completed an acquisition agreement with RAR Beauty, LLC, a Florida limited liability company ("RAR"). Pursuant to the Agreement the Company issued promissory notes totaling $3,000,000 due in twenty four months at 5% annual interest to the two members of RAR (Joey Chancis, our now CEO & Director and Richard Roer our now President & Director) in exchange for 100% of the membership interests of RAR.
During 2015, a director of the Company advanced $88,795. During 2016, the same director advanced an additional . The advances were non-interest bearing, unsecured and due on demand. As of February 28, 2016, the outstanding balance of related party advances is $656,063.
Director Independence
Our directors are not "independent," as defined by SEC rules adopted pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Although our stock is not listed for trading on the Nasdaq Stock Market at this time, we are required to determine the independence of our directors by reference to the rules of a national securities exchange or of a national securities association (such as the Nasdaq Stock Market). In accordance with these requirements, we have determined that Joey Chancis and Richard Roer are not "independent directors," as determined in accordance with Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market, Inc. The Board has recently been expanded to four members and has appointed new officers. The Board will re-evaluate the continued service of Svetlana Gofman and evaluate our new director Evgeny Smirnov to determine if they are to be considered independent directors going forward.
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Item 14.
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountants for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ending February 28, 2016 and 2015 were: $ and $ , respectively.
Audit-Related Fees
No aggregate fees were billed in either of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1) for the fiscal years ending February 28, 2016 and 2015.
Tax Fees
No aggregate fees were billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning for the fiscal years ending February 28, 2016 and 2015.
All Other Fees
Other fees billed for professional services provided by the principal accountant, other than the services reported above, for the fiscal years ending February 28, 2016 and 2015 were $0 and $ 0.
Audit Committee Pre-Approval Policies
Our Board of Directors performing as the Audit Committee by their Chair has approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending February 28, 2015. Audit-related fees, tax fees, and all other fees, if any, were approved by the Board of Directors.
Work Performed by Others
The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than 50 percent.
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Item 15.
Item 15. Exhibits, Financial Statement Schedules
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____________
*
Filed herewith
**
Furnished herewith
+
Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 1, 2016
/s/ Joey Chancis
Joey Chancis, Director
and Principal Executive Officer
Date: June 1, 2016
/s/ Richard Roer
Richard Roer, Director and Principal Financial Officer
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