Citius Pharmaceuticals - 10-Q quarterly report FY2014 Q2

Trail One, Inc. (“The Company”) was formed in the state of Nevada on September 9, 2010 to manufacture TOCNC Tags, which are personalized/customized license plates for customers who want one of a kind luxury car jewelry to uniquely define them and to offer a sense of identification privacy at public events such as car shows, photo shoots, auto clubs, and other public venues.  TOCNC Tags are cosmetic and do not take the place of proper state license plates as required to operate motor vehicles on public roads.

TOCNC tags will come with their own serial numbers (for insurance and authenticity purposes), secured in an airtight, crash resistant, pressure clamping case, and will be available with numerous options, including, but not limited to, a wide variety of inscribable names, with personalized designs in front, with numerous border designs and available in various thicknesses and shapes, and will be available in USDM (American); dimensions, and with various angle cuts, face designs, fonts, font sizes, images and just about any other customized design imaginable to suit the connoisseur and set the customer’s vehicle apart from everyone else’s vehicles.

On May 24, 2013 (the “Closing Date”), the Company’s largest shareholder Mr. Ralph Montrone entered into a Security Purchase Agreement (the “SPA”) with Mr. Mohammad Omar Rahman.  Pursuant to the SPA, Mr. Montrone sold his 10,000,000 issued and outstanding shares of common stock, representing approximately 55.6% of the issued and outstanding shares of the Company, to Mr. Rahman.  As of the Closing Date, Mr. Rahman was appointed the new CEO and elected by shareholders to serve as a Director of the Company.

The Company is currently considering expanding its business by acquiring the business or equity of another entity without the Company paying any material amount of cash consideration (a “Reverse Merger Transaction”).  Any Reverse Merger Transaction may be structured as an acquisition of assets or equity by the Company issuing stock, exchanging stock and other equity interests, merging with another entity or entities or entering into any transaction with similar effect.  In connection with any Reverse Merger Transaction, the Company will likely assume the obligations of the acquired business, which may include debt or other financing, and may incur other debt or other financing.  The amount of stock that the Company may issue in any Reverse Merger Transaction will likely result in a change in control of the Company.  The Company is currently negotiating, on a non-binding basis, the terms and conditions of a Reverse Merger Transaction with a business entity.  If the Reverse Merger Transaction is consummated, the Company would continue as a smaller reporting company.  No assurance may be given, however, that such negotiations will conclude with terms and conditions that would be acceptable to us or that any such Reverse Merger Transaction would be consummated. 

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. The Company follows the same accounting policies in the preparation of interim reports.

The Company has adopted a fiscal year end of September 30th.

The comparative financial statements herein include the fiscal year ended September 30, 2013, and the period from September 9, 2010 (inception) through March 31, 2014, and the unaudited three and six months ended March 31, 2014.

The accompanying balance sheet as of March 31, 2014, statement of operations for the three and six months ended March 31, 2014, statement of stockholders’ equity (deficit) for the six months ended March 31, 2014 and statements of cash flows for the six months ended March 31, 2014, are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of the Company’s management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of the Company’s statement of financial position at March 31, 2014, its results of operations for the three and six months ended March 31, 2014 and its cash flows for the six months ended March 31, 2014. The results for the three and six months ended March 31, 2014 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2014.

 

The Company is currently considered a development stage enterprise. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. An entity remains in the development stage until such time as, among other factors, revenues have been realized. To date, the development stage of the Company’s operations consists of developing the business model and marketing concepts.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

All costs associated with advertising and promoting products are expensed as incurred.

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

  

Under FASB ASC 280-10-50, the Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

 

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash and accrued interest reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis.

For revenue from product sales, the Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure.

The Company adopted FASB guidance on stock based compensation upon inception on September 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company did not issue any share-based payments for services or compensation to employees, or otherwise for the periods presented.

 

Effective upon inception at September 9, 2010, the Company adopted new standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

 

 

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

 

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company is in the development stage, has incurred continuous losses from operations, an accumulated deficit of $105,586 and $95,216 at March 31, 2014 and September 30, 2013, respectively, has no revenues, and working capital (deficit) of ($25,054) and ($14,694) at March 31, 2014 and September 30, 2013, respectively, and cash on hand of $0 as of March 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful, therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

From time to time the Company’s founder and former CEO, Ralph Montrone advanced loans to the Company for operations at an 8% interest rate, due on demand. The principal balances due were $0 and $0 at March 31, 2014 and September 30, 2013, respectively.

 

During the year ended September 30, 2013 Mr. Montrone paid BK Consulting $33,907 on behalf of the Company.  This amount consisted of $30,147 for the repayment of notes payable, $2,510 for accrued interest and $1,250 for accrued legal fees.  Mr. Montrone also paid certain payables in the amount of $400 on behalf of the Company.  On August 19, 2013, Ralph Montrone released the Company of notes payable in the amount of $21,693, accrued interest in the amount of $3,822, advances in the amount $2,700 and payments made on behalf of the Company in the amount of $34,307.  Amount forgiven was recorded as additional paid in capital.

From time to time the Company’s founder and former CEO, Ralph Montrone advanced loans to the Company for operations at an 8% interest rate, due on demand. The principal balances due were $0 and $0 at March 31, 2014 and September 30, 2013, respectively.

 

During the year ended September 30, 2013 Mr. Montrone paid BK Consulting $33,907 on behalf of the Company.  This amount consisted of $30,147 for the repayment of notes payable, $2,510 for accrued interest and $1,250 for accrued legal fees.  Mr. Montrone also paid certain payables in the amount of $400 on behalf of the Company.  On August 19, 2013, Ralph Montrone released the Company of notes payable in the amount of $21,693, accrued interest in the amount of $3,822, advances in the amount $2,700 and payments made on behalf of the Company in the amount of $34,307.  See note above.

The Company recorded interest expense in the amount of $0 and $428 and $0 and $865 related to these notes payable for the three and six months ended March 31, 2014 and 2013, respectively.

 

From time to time the Company has received loans from a third party for operations at an 8% interest rate, due on demand. During the six months ended March 31, 2014 and 2013, the Company received proceeds of $0 and $200 from BK Consulting, to fund operations. The principal balances due were $0 and $0 at March 31, 2014 and September 30, 2013, respectively. The Company recorded interest expense in the amount of $0 and $465 and $0 and $812 related to these notes payable for the three and six months ended March 31, 2014 and 2013, respectively.

 

 

During the year ended September 30, 2013 Mr. Montrone paid BK Consulting $33,907 on behalf of the Company.  This amount consisted of $30,147 for the repayment of notes payable, $2,510 for accrued interest and $1,250 for accrued legal fees.  Mr. Montrone forgave and released the Company from any further obligation related to these notes. The Amount forgiven was recorded as additional paid in capital.  See note above.

On October 25, 2012, the Company received an unsecured loan of $200, due on demand, bearing interest at 8%, from BK Consulting, to fund operations.

 

During the six months ended March 31, 2014 the Company received loans in the amount of $24,207 from Highline Research Advisors LLC, a third party, for operations at a 5% interest rate, due on demand. The principal balances due were $24,207 and $3,200 as of March 31, 2014 and September 30, 2013, respectively. In addition, accrued interest of $352 and $11 existed at March 31, 2014 and September 30, 2013, respectively.

 

The Company recorded interest expense in the amount of $274 and $0 and $341 and $0 related to these notes payable for the three and six months ended March 31, 2014 and 2012, respectively.

 

On September 9, 2010, the founder of the Company established 90,000,000 authorized shares of $0.001 par value common stock. Additionally, the Company founder established 10,000,000 authorized shares of $0.001 par value preferred stock.

 

On May 24, 2013 (the “Closing Date”), the Company’s largest shareholder Mr. Ralph Montrone entered into a Security Purchase Agreement (the “SPA”) with Mr. Mohammad Omar Rahman.  Pursuant to the SPA, Mr. Montrone sold his 10,000,000 issued and outstanding shares of common stock, representing approximately 55.6% of the issued and outstanding shares of the Company, to Mr. Rahman.  As of the Closing Date, Mr. Rahman was appointed the new CEO and elected by shareholders to serve as a Director of the Company.

On August 19, 2013, Ralph Montrone released the Company of notes payable and advances due to him in the amount of $62,522.  Amount forgiven was recorded as additional paid in capital.

On October 13, 2013, Ralph Montrone released the Company of advances due to him in the amount of $10.  Amount forgiven was recorded as additional paid in capital.

The Company is not aware of any subsequent events to disclose through the date of this filing.

 

Trail One was formed in the state of Nevada on September 9, 2010 to establish retail sales of automobile license plate tags to the general public.  The Company expects to generate its corporate revenue from the sale of its license plate tags.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. The Company follows the same accounting policies in the preparation of interim reports.

 

The Company has adopted a fiscal year end of September 30.

 

Trail One, Inc. is presently marketing an automobile license plate tag as an accessory. Trail One is a development stage company with a limited history of development stage operations.

 

The Company may market Trail One through a combination of direct sales, referrals and networking within the industry. To date the Company has not generated any sales.

 

Based on our current operating plan, we do not expect to generate revenue that is sufficient to cover our expenses for the next three months, and we will need to obtain additional financing to operate our business for the next three months. Our “burn rate” is approximately $3,335 per month. Most of our expenses are anticipated to be legal, accounting, transfer agent, and other costs associated with being a public company. Additional financing, whether through equity security sales, debt instruments, and private financing to fund operations, may not be available, or if available, may be on terms unacceptable to us. Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital.

 

The Company is currently considering expanding its business by acquiring the business or equity of another entity without the Company paying any material amount of cash consideration (a “Reverse Merger Transaction”).  Any Reverse Merger Transaction may be structured as an acquisition of assets or equity by the Company issuing stock, exchanging stock and other equity interests, merging with another entity or entities or entering into any transaction with similar effect.  In connection with any Reverse Merger Transaction, the Company will likely assume the obligations of the acquired business, which may include debt or other financing, and may incur other debt or other financing.  The amount of stock that the Company may issue in any Reverse Merger Transaction will likely result in a change in control of the Company.   The Company is currently negotiating, on a non-binding basis, the terms and conditions of a Reverse Merger Transaction with a business entity.  If the Reverse Merger Transaction is consummated, the Company would continue as a smaller reporting company.  No assurance may be given, however, that such negotiations will conclude with terms and conditions that would be acceptable to us or that any such Reverse Merger Transaction would be consummated. 

 

If we issue additional equity securities to raise funds, the ownership percentage of our existing security holder would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.

On May 24, 2013 (the “Closing Date”), the Company’s largest shareholder Mr. Ralph Montrone entered into a Security Purchase Agreement (the “SPA”) with Mr. Mohammad Omar Rahman.  Pursuant to the SPA, Mr. Montrone sold his 10,000,000 issued and outstanding shares of common stock, representing approximately 55.6% of the issued and outstanding shares of the Company, to Mr. Rahman.  As of the Closing Date, Mr. Rahman was appointed the new CEO and elected by shareholders to serve as a Director of the Company.

The Company is currently considering expanding its business by acquiring the business or equity of another entity without the Company paying any material amount of cash consideration (a “Reverse Merger Transaction”).  Any Reverse Merger Transaction may be structured as an acquisition of assets or equity by the Company issuing stock, exchanging stock and other equity interests, merging with another entity or entities or entering into any transaction with similar effect.  In connection with any Reverse Merger Transaction, the Company will likely assume the obligations of the acquired business, which may include debt or other financing, and may incur other debt or other financing.  The amount of stock that the Company may issue in any Reverse Merger Transaction will likely result in a change in control of the Company.   The Company is currently negotiating, on a non-binding basis, the terms and conditions of a Reverse Merger Transaction with a business entity.  If the Reverse Merger Transaction is consummated, the Company would continue as a smaller reporting company.  No assurance may be given, however, that such negotiations will conclude with terms and conditions that would be acceptable to us or that any such Reverse Merger Transaction would be consummated. 

The Company had no revenues during the three months ending March 31, 2014 and March 31, 2013

Total operating expenses were $9,731 for the three months ended March 31, 2014 compared to $9,336 for the three months ended March 31, 2013, an increase of $395.  The increase in operating expense for the three months ended March 31, 2014 compared to March 31, 2013 was due primarily to professional fee expenses.

Total interest expense was $274 for the three months ended March 31, 2014 compared to $893 for the three months ended March 31, 2013, a decrease of $619.

For the reasons above, our net loss for the three months ended March 31, 2014 was $10,005 compared to $10,229 for the three months ended March 31, 2013, a decrease of $224 or approximately 2%.  

The Company had no revenues during the six months ending March 31, 2014 and March 31, 2013

Total operating expenses were $10,029 for the six months ended March 31, 2014 compared to $9,972 for the six months ended March 31, 2013, an increase of $57.  The decrease in operating expense for the six months ended March 31, 2014 compared to March 31, 2013 was due primarily to a decrease of $689 in general and administrative cost and an increase of $746 in professional fees.

Total interest expense was $341 for the six months ended March 31, 2014 compared to $1,677 for the six months ended March 31, 2013, a decrease of $1,336.

For the reasons above, our net loss for the six months ended March 31, 2014 was $10,370 compared to $11,649 for the six months ended March 31, 2013, a decrease of $1,279 or approximately 12%.  

We believe that our existing sources of liquidity will not be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements for at least the next twelve months. In the event the Company is unable to achieve profitable operations in the near term, it may require additional equity and/or debt financing, or reduce expenses, including officer’s compensation, to reduce such losses. However, we cannot assure that such financing will be available to us on favorable terms, or at all. We will continue to monitor our expenditures and cash flow position. At some time in the future, however, we may need to obtain additional financing to complete our business plan. There is no assurance that we will be able to obtain such financing if needed and the failure to do so could negatively impact the viability of our Company to continue with this business and the business may fail.

 

The following table summarizes total assets, accumulated deficit, stockholder’s equity (deficit) and working capital at March 31, 2014:

Since our inception on September 9, 2010, we have incurred an accumulated deficit of $105,586. Our cash and cash equivalent balances were $0 at March 31, 2014. On March 31, 2014 we had negative working capital of $25,054 and total current liabilities were $25,054.

Net cash used in operating activities totaled $21,008 for the six months ended March 31, 2014 and $98,217 for the period from Inception (September 9, 2010) through March 31, 2014. Operating expenses were $10,029 for the six months ended March 31, 2014 and $98,902 for the period from Inception (September 9, 2010) through March 31, 2014, and primarily consisted of costs of incorporation, professional fees, and general and administrative expenses incurred as we formed our entity and prepared our filings for the Securities and Exchange Commission (“SEC”).

Net cash provided by financing activities totaled $21,008 for the six months ended March 31, 2014 and $98,217 for the period from Inception (September 9, 2010) through March 31, 2014.

 

Eighteen Million (18,000,000) common shares were issued with a value of $0.001.  Cash provided by financing activities relating to the issuance of shares of common stock during the period of September 9, 2010 (date of inception) to March 31, 2014 was $18,000 as a result of the sale of eighteen million (18,000,000) shares of common stock, issued to our founder and former CEO, Ralph Montrone on September 9, 2010.

Since inception we have received short term loans totaling $21,693 (net of repayments of $8,750) from Ralph Montrone, in exchange for an unsecured promissory notes carrying 8% interest, due on demand.

Since inception the Company has received short term loans totaling $30,147 from BK Consulting, in exchange for an unsecured promissory notes carrying 8% interest, due on demand.

During the year ended September 30, 2013, the Company received advances in the amount of $34,307 from Ralph Montrone. These advances were payments made by Mr. Montrone on behalf of the Company for the repayment of debt in the amount of $30,147, interest in the amount of $2,510 and accounts payable and accrued expenses in the amount of $1,650.

 

Since inception the Company has received short term loans totaling $24,207 from Highline Research Group, in exchange for unsecured promissory notes carrying 5% interest, due on demand.

Since inception, our capital needs have entirely been met by these sales of stock and short term debt financings.

 

Our plan for satisfying our cash requirements for the next twelve months is through generating revenue from TOCNC Tags, sale of shares of our common stock, third party financing, and/or traditional bank financing. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.

 

We will have additional capital requirements during the fiscal year ending September 30, 2014. We do not expect to be able to satisfy our cash requirements through our product sales, and therefore we will attempt to raise additional capital through the sale of our common stock and debt financing activities.

 

We cannot assure that we will have sufficient capital to finance our growth and business operations or that such capital will be available on terms that are favorable to us or at all.  We are currently incurring operating deficits that are expected to continue for the foreseeable future.

Based on our current operating plan, we do not expect to generate revenue that is sufficient to cover our expenses for at least the next twelve months. In addition, we do not have sufficient cash and cash equivalents to execute our operations for at least the next twelve months. We will need to obtain additional financing to conduct our day-to-day operations, and to fully execute our business plan. We will raise the capital necessary to fund our business through a subsequent offering of equity securities. Additional financing, whether through public or private equity or debt financing, arrangements with security holders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us.

 

Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing security holders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.

The rate of inflation has had little impact on the Company's results of operations and is not expected to have a significant impact on the continuing operations.

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 is material to investors.

 

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout management's Discussion and Analysis or Plan of Operation where such policies affect our reported and expected financial results. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

 

Sales are recorded when products are shipped to customers and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales for which payment has been received, but shipment to our customers has not occurred. The Company has not recorded revenues to date.

 

In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

 

 

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

 

This item is not applicable as we are currently considered a smaller reporting company.

 

 

Our Chief Executive Officer and Chief Financial Officer, Mohammad Omar Rahman, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based on the evaluation, Mr. Rahman concluded that our disclosure controls and procedures are not effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings and ensuring that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure, for the following reasons:

 

 

We plan to rectify these weaknesses by implementing an independent board of directors and hiring additional accounting personnel once we have additional resources to do so.

On May 24, 2013 (the “Closing Date”), Ralph Montrone (the “Selling Stockholder”), the owner of an aggregate of 10,000,000 shares of common stock of Trail One, Inc. (the “Registrant”), representing approximately 55.6% of the issued and outstanding shares of the common stock of the Registrant (the “Shares”), entered into and performed a Securities Purchase Agreement (the “SPA”), pursuant to which the Selling Stockholder sold all 10,000,000 Shares to Mohammad Omar Rahman. Pursuant to the SPA, the Selling Stockholder sold the Shares to Mr. Rahman for aggregate consideration of $340,000, or approximately $0.034 per share, less the amount of all liabilities of the Registrant as of the Closing Date.

As contemplated by the SPA and the transactions contemplated thereby, effective on the Closing Date, Mr. Rahman was appointed by the existing director to serve as the Registrant’s Chief Executive Officer and was elected by the shareholders of the Registrant to serve as a director. In addition, in accordance with the SPA and the transactions contemplated thereby, the Selling Stockholder has resigned as an officer and agreed to resign as the director of the Registrant effective upon compliance by the Registrant with any applicable information distribution requirements. Mr. Rahman does not presently have any agreement with the Registrant to receive any compensation for his service as the Registrant’s Chief Executive Officer and director.  Mr. Rahman will receive reimbursement of reasonable expenses incurred in his capacity as the Chief Executive Officer or director. Upon the resignation of the Selling Stockholder as an officer and director of the Registrant, Mr. Rahman shall be the sole officer and director of the Registrant. There are no related party transactions between the Registrant and Mr. Rahman that would require disclosure under Item 404(a) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended.

 

 

Mohammad Omar Rahman (age 31) was appointed to serve as the Registrant’s Chief Executive Officer and as the Registrant’s director as of the Closing Date. Mr. Rahman has several years of experience within the financial services and consulting industries. He has served in various roles and has developed a keen understanding of investment and client management. His responsibilities have included financial modeling, investment valuations, financial & tax reporting, cash flow forecasting, business process re-engineering, and strategic planning. Since April 2007, Mr. Rahman has been a member of the Carlyle Group and has helped manage operations of its Asia Buyout, Asia Growth, Europe Growth & Technologies, Infrastructure and Real Estate funds. Prior to joining Carlyle, Mr. Rahman was a management consultant with BearingPoint Inc. and he has also worked at Oliver Carr & Co. Mr. Rahman received his Masters of Accountancy from George Washington University’s School of Business and has a BSBA in Finance with a minor in Economics from University of Florida’s Warrington School of Business. He is currently an MBA candidate at Georgetown University’s McDonough School of Business and holds a CPA license in the state of Virginia.

 

We know of no material pending legal proceedings to which our company or subsidiary is a party or of which any of their property is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

We know of no material proceedings in which any director, officer or affiliate of our company, or any registered or beneficial stockholder of our company, or any associate of any such director, officer, affiliate, or stockholder is a party adverse to our company or subsidiary or has a material interest adverse to our company or subsidiary.

There has been no change in the Company’s risk factors since the Company’s Form S-1/A filed with the SEC on July 7, 2011.

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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.