UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2017
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number:
333-180954
Joey New York Inc.
(Exact name of small business issuer as specified in its charter)
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Nevada
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68-0682410
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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Trump Tower I, 16001 Collins Ave. #3202,
Sunny Isles Beach, FL 33160
(Address of principal executive offices)
(305) 948-9998
(Registrants telephone number, including area code)
_____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Yes
☐
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Yes
☐
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
☐
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Accelerated filer
☐
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Non-accelerated filer
☐
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Smaller reporting company
☒
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(Do not check if smaller reporting company)
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Emerging growth company
☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
☒
No
The number of shares outstanding of each of the issuer's classes of common equity as of May 31, 2017 was 28,370,352 shares of common stock.
NOTE THAT THIS FORM 10-Q IS INITIALLY BEING FILED WITHOUT REVIEW BY THE COMPANY'S INDEPENDENT REGISTERED ACCOUNTING FIRM
Contents
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Part 1
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FINANCIAL INFORMATION
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Item 1
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Consolidated Financial Statements (unaudited)
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Consolidated Balance Sheets at May 31, 2017 and February 29, 2017 (unaudited)
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4
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Consolidated Statements of Operations for the three month periods ending May 31, 2017 and 2016 (unaudited)
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5
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Consolidated Statements of Stockholders' Deficit for the period ended May 31, 2017 (unaudited)
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6
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Consolidated Statements of Cash Flows for the three month periods ending May 31, 2017 and 2016 (unaudited)
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7
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Notes to Consolidated Financial Statements (unaudited)
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8
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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16
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Item 4.
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Controls and Procedures
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17
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Part II.
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OTHER INFORMATION
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Item 1
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Legal Proceedings
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17
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Item 1A
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Risk Factors
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17
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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18
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Item 3
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Defaults Upon Senior Securities
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18
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Item 4
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Mine Safety Disclosures
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18
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Item 5
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Other Information
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18
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Item 6
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Exhibits
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19
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SIGNATURES
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20
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Joey New York, Inc.
Financial Statements
For the Three Months Ended May 31, 2017
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Page
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Financial Statements (Unaudited):
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Consolidated Balance Sheets
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4
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Consolidated Statements of Operations
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5
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Consolidated Statements of Stockholders' Deficit
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6
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Consolidated Statements of Cash Flows
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7
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Notes to Unaudited Consolidated Financial Statements
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8
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Joey New York, Inc.
Balance Sheet
At May 31, 2017 and February 28, 2017
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
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May 31,
2017
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February 28, 2017
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Assets
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Current assets
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Cash and cash equivalents
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$
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126,306
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$
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25
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Accounts receivable, net
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-
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275
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Inventory
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85,568
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143,826
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Total current assets
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211,874
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144,126
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Property and equipment, net
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25,014
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18,877
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Deposits
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3,000
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-
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Total assets
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$
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239,888
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$
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163,003
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Liabilities and stockholders' deficit
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Current liabilities
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Accounts payable
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$
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461,354
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$
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458,214
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Accrued liabilities
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638,109
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709,564
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Shareholder advances – related party
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663,042
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579,580
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Note payable
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150,000
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-
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Notes payable – related party
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3,000,000
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3,000,000
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Current portion of derivative liabilities
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1,009,238
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-
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Current maturities of convertible debt
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100,232
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-
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Total current liabilities
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6,021,975
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4,747,359
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Derivative liability
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181,799
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303,308
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Convertible note payable, net
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10,868
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18,955
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Total liabilities
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6,214,642
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5,069,621
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Commitments and Contingencies
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Stockholder's deficit
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Common stock, $0.001 par value; 500,000,000 shares
authorized; 28,270,352 and 28,045,352 shares issued and
outstanding
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28,270
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28,045
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Additional paid in capital
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(1,864,049
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)
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(2,266,265
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)
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Accumulated deficit
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(4,138,975
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)
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(2,668,398
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)
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Total stockholder's deficit
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(5,974,754
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)
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(4,906,618
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)
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Total liabilities and stockholder's equit
y
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$
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239,888
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$
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163,003
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The Accompanying Notes are an Integral Part of These Financial Statements
See Accountant's Report
Joey New York, Inc.
Consolidated Statements of Operations
For the periods ended May 31, 2017 and May 31, 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
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May 31,
2017
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May 31,
2016
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Revenues
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$
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142,409
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$
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143
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Cost of sales
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70,448
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43
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Gross margin
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71,961
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100
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Operating expenses
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564,111
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44,482
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Loss from operations
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(492,150
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(44,382
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)
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Other (expense)
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Interest expense
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(47,733
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)
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(44,114
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)
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Debt discount amortization
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(128,203
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)
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-
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Derivative interest expense
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(802,491
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)
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-
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Total other income expense
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(978,427
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)
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(44,114
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)
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Loss before income taxes
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(1,470,577
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)
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(88,496
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)
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Provision (benefit) for income taxes
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-
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-
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Net loss
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$
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(1,470,577
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)
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$
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(88,495
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)
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Basic and diluted loss per share
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$
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(0.05
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)
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$
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(247.89
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)
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Weighted average shares outstanding
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28,515,352
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357
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The Accompanying Notes are an Integral Part of These Financial Statements
See Accountant's Report
Joey New York, Inc.
Consolidated Statements of Stockholders' Deficit
For the period ended May 31, 2017
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
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Common
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Description
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Shares
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Amount
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Additional Paid-In Capital
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Accumulated Deficit
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Total Shareholders Deficit
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Balance February 28, 2017
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28,045,352
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$
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28,045
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$
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(2,266,265
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)
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$
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(2,668,398
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)
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$
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(4,906,618
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)
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Stock issued for services
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100,000
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100
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120,900
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-
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121,000
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Stock issuance associated with notes
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125,000
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125
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166,625
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-
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166,750
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Convertible notes issuance
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-
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-
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114,691
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-
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114,691
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Net loss
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-
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-
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-
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(1,470,577
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)
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(1,470,577
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)
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Balance May 31, 2017
|
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28,270,352
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$
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28,270
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$
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(1,864,049
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)
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$
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(4,138,975
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)
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$
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(5,974,754
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)
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The Accompanying Notes are an Integral Part of These Financial Statements
See Accountant's Report
Joey New York, Inc.
Consolidated Statements of Cash Flows
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
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Cash flows from operating activities
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May 31,
2017
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May 31,
2016
|
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Net loss attributable to shareholders of Joey New York
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$
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(1,470,577
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)
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$
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(88,495
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)
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Adjustments to reconcile net income to net cash provided
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by operating activities:
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Depreciation and amortization
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1,941
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|
462
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Amortization of debt discount
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128,203
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Changes in operating assets and liabilities:
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Share based compensation
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120,900
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Derivability liability
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887,729
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Convertible note payables
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(75,877
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)
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Accounts receivable
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275
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|
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(143
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)
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Inventory
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58,258
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|
|
|
43
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Accounts payable
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3,140
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(42,613
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)
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Accrued expenses
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12,007
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|
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|
77,451
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Net cash used in operating activities
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(334,001
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)
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(53,296
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)
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Cash flows from investing activities
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|
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Purchases of property and equipment
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(8,078
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)
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(2,475
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)
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Deposits
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(3,000
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)
|
|
|
-
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Net cash used in investing activities
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(11,078
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)
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|
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(2,475
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)
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Cash flows from financing activities
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|
|
|
|
|
|
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Proceeds from the sale of common stock
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216,725
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39,000
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Proceeds from note payables
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|
150,000
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|
|
|
11,250
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Proceeds from convertible note payables
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|
|
104,635
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|
|
|
-
|
|
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Net cash from financing activities
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|
471,360
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|
|
|
50,250
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Net change in cash and cash equivalents
|
|
|
126,281
|
|
|
|
(5,521
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)
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Cash and cash equivalents, beginning of period
|
|
|
25
|
|
|
|
7,903
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Cash and cash equivalents, end of period
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$
|
126,306
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|
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$
|
2,382
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|
|
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|
|
|
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Supplemental disclosure of cash flow information
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|
|
|
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Interest paid
|
|
$
|
-
|
|
|
$
|
2,631
|
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
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Supplemental disclosures of non-cash transitions:
|
|
|
|
|
|
|
|
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Stock subscription receivable
|
|
$
|
-
|
|
|
$
|
1,000
|
|
The Accompanying Notes are an Integral Part of These Financial Statements
See Accountant's Report
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
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 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") for interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ended May 31, 2017, are not necessarily indicative of the results that may be expected for the year ending February 28, 2018. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2017, as filed with the Securities and Exchange Commission ("SEC") on July 13, 2017.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates.
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION POLICY
These financial statements include the consolidated accounts of Joey New York and its wholly owned subsidiary. Intercompany accounts and transactions have been eliminated in consolidation.
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.
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.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at May 31, 2017 and 2016. Due to net operating loss, there is no presentation of dilutive earnings per share, as it would be anti-dilutive. As of August 31, 2017, the Company had dilutive potential common shares due to convertible notes.
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 May 31, 2017.
RECENTLY ACCOUNTING PRONOUNCEMENTS
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.
DEBT ISSUANCE COSTS
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 amends previous guidance to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted ASU No.2015-03 regarding the presentation of debt issuance cost from fiscal year 2016.
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
NOTE 4 - 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 three months ended May 31, 2017 the Company has incurred a loss from operations of $1,333,004. The Company has a history of losses resulting in an accumulated deficit of $
3,997,902
as of May 31, 2017. The Company has negative working capital, in the amount of $
4,700,631
, as of May 31, 2017. 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.
NOTE 5 - PROPERTY AND EQUIPMENT
Property consists of equipment purchased for the production of revenues. As of May 31, 2017, and February 28, 2017:
|
Description
|
|
May 31,
2017
|
|
|
February 28, 2017
|
|
|
Property and equipment
|
|
$
|
38,647
|
|
|
$
|
30,568
|
|
|
Less accumulated depreciation
|
|
|
13,633
|
|
|
|
11,692
|
|
|
Property and equipment, net
|
|
$
|
25,014
|
|
|
$
|
18,877
|
|
Depreciation for the three months ending May 31, 2017 and 2016 was $1,914 and $462, respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company's management has advanced funds and has made payments on behalf of the Company for 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 $628,379 and $628,379, as of May 31, 2017 and February 28, 2017, respectively.
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
NOTE 7 - RELATED PARTY NOTES PAYABLE
On May 12, 2014, in accordance with the acquisition agreement, the Company issued promissory notes payable for a total of $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 are due on demand
.
NOTE 8 – CONVERTIBLE DEBT
Convertible notes payable as of May 31, 2017 and February 28, 2017 consists of the following:
|
Description
|
|
5/31/2017
|
|
|
2/28/2017
|
|
|
Peak One Opportunity Fund matures January 11, 2020 bears interest at 0% coupon, default rate 18%, convertible at $1.35 prior 180 days and lesser of $1.35 or 65% of the second lowest closing price prior 20 Days trading days. The Company is in default of this agreement.
|
|
$
|
85,000
|
|
|
$
|
-
|
|
|
EMA Financial. LLC matures February 2, 2018 bears interest at 0% coupon rate, default rate 24%, convertible at the lower of closing price prior closing date and 65% of the average lowest two sales price during 20days prior closing date or the closing bid price whichever is lower. The Company is in default of this agreement.
|
|
|
90,000
|
|
|
|
-
|
|
|
Auctus Fund matures November 2, 2017 bears interest at 0% coupon rate, default rate 24%, convertible at the lesser of 65% multiple average of two lowest trading price prior the note issued date or variable conversion price 65% multiple the average two lowest trading price during 20 days prior to the conversion date. The Company is in default of this agreement.
|
|
|
90,000
|
|
|
|
-
|
|
|
JSJ matures on January 24, 2018 bears interest at 12% coupon rate, default rate 18%, convertible at 65% multiple average 2 lowest trading prices during previous 20 days prior conversion (after 180 days). The Company is in default of this agreement.
|
|
|
75,000
|
|
|
|
-
|
|
|
EMA Financial matures on May 3, 2018 bears interest at 0% coupon rate, default rate 24%, convertible at the lower of the current market price and 65% of Average of 2 lowest sales price for 20 days prior to conversion. The Company is in default of this agreement.
|
|
|
159,000
|
|
|
|
-
|
|
|
Tangiers Global matures on January 24, 2018 bears interest at 10% coupon rate, default rate 20%, convertible at $ 1 per share. The Company is in default of this agreement.
|
|
|
137,500
|
|
|
|
-
|
|
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
|
Description
|
|
5/31/2017
|
|
|
2/28/2017
|
|
|
Auctus Fund matures February 5, 2018 bears interest at 0% coupon rate, default rate 24%, convertible at the lesser of 65% multiple average of two lowest trading price prior the note issued date or variable conversion price 65% multiple the average two lowest trading price during 20 days prior to the conversion date. The Company is in default of this agreement.
|
|
|
151,600
|
|
|
|
-
|
|
|
Convertible note payable dated January 11, 2017 maturing January 11, 2020 bearing interest at -% with a default rate of 18%, convertible into common stock at $1.35 per share the first 180 days and at the lesser of $1.35 per share or 65% of the second lowest closing price for the prior 20 trading days
|
|
|
-
|
|
|
|
85,000
|
|
|
Convertible note payable dated February 1, 2017 February 11, 2018 bearing interest at -% with a default rate of 24%, convertible into common stock at $ the lower of closing price prior closing date and 65% of the average lowest two sales price during 20days prior closing date or the closing bid price whichever is lower
|
|
|
-
|
|
|
|
90,000
|
|
|
Convertible note payable dated January 11, 2017 maturing January 11, 2020 bearing interest at -% with a default rate of 24%, convertible at the lesser of 65% multiple average of two lowest trading price prior the note issued date or variable conversion price 65% multiple the average two lowest trading price during 20 days prior to the conversion date
|
|
|
-
|
|
|
|
90,000
|
|
|
Total
|
|
$
|
788,100
|
|
|
$
|
265,000
|
|
|
Less: debt discount
|
|
|
(777,750
|
)
|
|
|
(265,000
|
)
|
|
Less: debt issue cost
|
|
|
(37,900
|
)
|
|
|
-
|
|
|
Less: conversions
|
|
|
-
|
|
|
|
-
|
|
|
Add: amortization of debt discount
|
|
|
138,649
|
|
|
|
18,955
|
|
|
Balance of convertible debt, net
|
|
|
111,099
|
|
|
|
18,955
|
|
|
Less: current portion
|
|
|
100,232
|
|
|
|
15,229
|
|
|
Long-term convertible debt, net
|
|
$
|
10,868
|
|
|
$
|
3,726
|
|
NOTE 9 – DERIVATIVES LIABILITIES
The Company identified the conversion features embedded within its convertible debt as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value. The following schedule shows the change in fair value of the derivative liabilities for the three month period ended May 31, 2017:
|
Description
|
|
Amount
|
|
|
Derivative liabilities - February 28, 2017
|
|
$
|
303,308
|
|
|
Add fair value at the commitment date for convertible notes issued during the current quarter
|
|
|
410,343
|
|
|
Less derivatives due to conversion
|
|
|
-
|
|
|
Fair value mark to market adjustment for derivatives
|
|
|
477,386
|
|
|
Derivative liabilities - May 31, 2017
|
|
|
1,191,037
|
|
|
Less: current portion
|
|
|
1,009,238
|
|
|
Long-term derivative liabilities
|
|
$
|
181,799
|
|
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions during the current quarter:
|
Assumption
|
Commitment
|
Re-measurement
|
|
Date
|
Date
|
|
Expected dividends:
|
0%
|
0%
|
|
Expected volatility:
|
156%~208%
|
165%~203%
|
|
Expected term (years):
|
0.75~3 years
|
0.42~2.61 years
|
|
Risk free interest rate:
|
0.83%~1.47%
|
1.08%-1.44%
|
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
NOTE 10 – DEBT DISCOUNT, ORIGINAL ISSUE DISCOUNTSS AND DEBT ISSUANCE COSTS
During the quarter end May 31, 2017, the Company recorded debt discounts totaling $550,650. The debt discount amount consists of debt discount due to beneficial conversion features, warrants, original issue cost, and debt issue cost. The Company amortized $128,203 of debt discount in the three-month period ended May 31, 2017.
|
Description
|
|
Amount
|
|
|
Debt discount - February 28, 2017
|
|
|
246,045
|
|
|
Additional Debt discount
|
|
$
|
559,159
|
|
|
Accumulated amortization of debt discount
|
|
|
(128,203
|
)
|
|
Debt discount - net
|
|
|
677,001
|
|
|
Current Debt discount - net
|
|
|
602,868
|
|
|
Non-current debt discount - net
|
|
$
|
74,132
|
|
NOTE 11 - EQUITY
The Company is authorized to issue 500,000,000 shares of $0.001 par value common stock and 100,000,000 shares of preferred stock.
The Company completed a subsidiary merger which effectuated a reverse stock split at the ratio of 1 share for 200 shares effective on August 1, 2016, which was subsequently made effective on the Company's stock market by the Financial Industry Regulatory Authority ("FINRA"). All shares have been retroactively restated in these financial statements to account for this reverse split.
During the three months ended August 31, 2016, the company issued 25,500,000 shares of common stock, 25,000,000 of which were issued in order to acquire a 100% interest in the LABB, LLC.
In connection with the acquisition mentioned above, the Company also issued 42,000,000 warrants, each valued at $.009. These warrants were valued using a Black-Scholes model, with the following inputs:
|
Description
|
|
Input
|
|
|
Stock price
|
|
$
|
0.01
|
|
|
Exercise price
|
|
$
|
0.01
|
|
|
Term
|
|
10 years
|
|
|
Discount rate
|
|
|
2.28
|
%
|
|
Volatility
|
|
|
100
|
%
|
The stock price of $0.01 was used because with no active market for the Company's stock, the best evidence for its value on the grant date was the exercise price of the warrants.
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
In May 2017, the Company issued warrants associated with 3 notes: Tangiers Global, EMA Financial, LLC, and Actus Fund:
|
Description
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
(in Years)
|
|
|
Balance, Feb 28, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
201,342
|
|
|
|
1.27
|
|
|
|
5.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled/Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance, May 31, 2017
|
|
|
201,342
|
|
|
$
|
1.27
|
|
|
|
5.00
|
|
NOTE 12 – SEGMENT DISCLOSURES
Management evaluates operations in terms of three separate segments, sales of cosmetics, medical procedures and general corporate overhead. Medical procedures are further segmented by geographical location although for the three-month period ended May 31, 2017 there was only one significant location through which medical facilities were provided.
Prior to the acquisition of the LABB or August 11, 2016 there was only one operating segment.
Revenue, cost of revenue and general and administrative expenses for the three-month period ended May 31, 2017 are detailed as follows:
|
Description
|
|
LABB
|
|
|
RAR
|
|
|
Total
|
|
|
Revenue
|
|
$
|
142,684
|
|
|
$
|
(275
|
)
|
|
$
|
142,409
|
|
|
Cost of revenue
|
|
|
70,448
|
|
|
|
-
|
|
|
|
70,448
|
|
|
General and administrative expenses
|
|
|
261,116
|
|
|
|
165,421
|
|
|
|
426,537
|
|
|
Other expense
|
|
|
-
|
|
|
|
978,427
|
|
|
|
978,427
|
|
|
Net loss
|
|
$
|
(188,880
|
)
|
|
$
|
(1,144,124
|
)
|
|
$
|
(1,333,004
|
)
|
Assets, liabilities and equity accounts by segment as of May 31, 2017 are detailed as follows:
|
Description
|
|
LABB
|
|
|
RAR
|
|
|
Total
|
|
|
Asset
|
|
$
|
113,884
|
|
|
$
|
634,054
|
|
|
$
|
747,938
|
|
|
Liability
|
|
|
699,137
|
|
|
|
6,012,542
|
|
|
|
6,711,679
|
|
|
Equity
|
|
$
|
585,253
|
|
|
$
|
5,378,489
|
|
|
$
|
5,963,742
|
|
Joey New York, Inc.
Notes to Consolidated Financial Statements
For the Three Months ended May 31, 2017 and 2016
(Unaudited and Without Review by the Company's Independent Registered Accounting Firm)
NOTE 13 - 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 shareholders 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.
NOTE 14- 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 as Pronto Corp. on December 22, 2011. Our registration statement was filed with the Securities and Exchange Commission on April 26, 2012 and was declared effective on August 27, 2012. 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 own approximately 75% of the Company.
On August 11, 2016, the Company entered a purchase agreement for the acquisition of 100% of the common stock of Reflex Productions, Inc. (Reflex) Reflex provides clinical cosmetic procedures including Botox injections and other cosmetic procedures.
Forward-Looking Statements
The following discussion should be read in conjunction with our consolidated financial statements, which are included elsewhere in this Form 10-Q (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
Three months ending May 31, 2017 and May 31, 2016:
Revenues were $142,409 and $143 for the three-month periods ending May 31, 2017 and 2016, respectively. Our gross profit was $71,961 and $100 for the three months ended May 31, 2017 and 2016, respectively. Fluctuations in our profit margins will be due to product mix and minor increases in our product costs.
During the three-month periods ended May 31, 2017, we incurred $426,537 in operating expenses compared to $44,382 for the three-month period ended May 31, 2016. The increase primarily results from increased marketing expenses related to the opening of our new clinic.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2017, our current assets were $211,874, of which $126,306 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 or sale of other types of equity or debt. As of May 31, 2017, our working capital deficit was $4,700,631.
Cash Flows
We have not generated positive cash flows from operating activities. For the three months ended May 31, 2017, net cash flows used in operating activities was $334,001.
We also used cash for financing activities of $471,360 for the three-month period ended May 31, 2017 compared to $50,250 for the comparable period of the prior year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, the Company's Chief Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act reports is (1) recorded, processed, summarized and reported within the periods specified in the Commission's rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The ineffective control over financial reporting resulted from a general lack of resources directed to our accounting and financial reporting functions and a lack of internal proficiency on matters of financial reporting. We are addressing this issue by entering into a contract with a competent outside contractor to outsource all of these functions and dedicating a significant amount of resources to enter into that agreement.
Changes in Internal Control over Financial Reporting
We have not made a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended August 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
PART II – OTHER INFORMATION
Item 1 – 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 1A - Risk Factors
Not required for Smaller Reporting Companies.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
In May 2017, the Company issued warrants associated with three notes: Tangiers Global, EMA Financial, LLC, and Actus Fund:
|
Description
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
(in Years)
|
|
|
Balance, Feb 28, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
201,342
|
|
|
|
1.27
|
|
|
|
5.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled/Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance, May 31, 2017
|
|
|
201,342
|
|
|
$
|
1.27
|
|
|
|
5.00
|
|
Item 3 - Defaults Upon Senior Securities
No disclosure required.
Item 4 – Mine Safety Disclosure
No disclosure required.
Item 5 - Other Information
No disclosure required.
Item 6. EXHIBITS
Exhibits:
|
Number
|
Description
|
|
|
|
|
31.1
|
Certification of Principal Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant Section 302 of the Sarbanes Oxley Act of 2002
|
|
|
|
|
31.2
|
Certification of Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant Section 302 of the Sarbanes Oxley Act of 2002
|
|
|
|
|
32.1
|
Certification of Chief Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
32.2
|
Certification of Chief Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
101. DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
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.
|
|
Joey New York, Inc.
|
|
|
|
|
|
|
|
Date: August 3, 2017
|
By:
|
/s/ Joey Chancis
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Joey Chancis, CEO
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Principal Executive Officer
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Date: August 3, 2017
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By:
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/s/ Richard Roer
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Richard Roer, President
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Principal Financial Officer
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