UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2019

000-55513

Commission File Number

Apawthecary Pets USA.

(Exact name of registrant as specified in its charter)

Nevada

26-1679929

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

c/o Bradley Kersch 1223 Fletcher Way, Port Coquitlam, British Columbia		V3C6B5
(Address of principal executive offices)		(Zip Code)

(323) 634-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	¨	Non-accelerated filer	¨
Accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)		Emerging Growth	x

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. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court ¨Yes ¨ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 15, 2019 we had 24,827,264 shares of common stock outstanding.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3. Quantitative and Qualitative Disclosures About Market Risk

12

Item 4. Controls and Procedures

12

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

13

Item 1A. Risk Factors

13

Item 2. Unregistered Sales of Securities and Use of Proceeds

13

Item 3. Defaults Upon Senior Securities

13

Item 4. Mine Safety Disclosures

13

Item 5. Other Information

13

Item 6. Exhibits

14

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Apawthecary Pets USA
Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited)

	February 28,			August 31,
	2019			2018
Assets

Current assets
Cash and cash equivalents	$	29,945		$	42,594
Inventory		7,200			7,200
Total current assets		37,145			49,794

Total Assets	$	37,145		$	49,794

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable and accrued liabilities	$	11,408		$	5,069
Accounts payable due to related parties (Note 3)		551			551
Due to related parties (Note 3)		70,673			70,673
Total current liabilities		82,632			76,293

Total Liabilities		82,632			76,293

Stockholders' deficit
Capital stock (Note 4)
Authorized
75,000,000 of common shares, par value $0.001
Issued and outstanding
24,827,264 common shares issued and outstanding (August 31, 2018 - 24,827,264), par value $0.001		24,827			24,827
Additional paid in capital		349,223			349,223
Accumulated deficit		(419,537	)		(400,549	)

Total stockholders' deficit		(45,487	)		(26,499	)

Total Liabilities and Stockholders' Deficit	$	37,145		$	49,794

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Apawthecary Pets USA
Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)

	For the			For the			For the			For the
	three month			three month			six month			six month
	period ended			period ended			period ended			period ended
	February 28,			February 28,			February 28,			February 28,
	2019			2018			2019			2018

Operating Expenses
Professional fees	$	12,387		$	24,787		$	17,007		$	32,936
General and administrative		1,479			3,258			1,981			11,581

Total operating Expenses		13,866			28,045			18,988			44,517

Net loss	$	(13,866	)	$	(28,045	)	$	(18,988	)	$	(44,517	)

Basic and diluted net loss per common share - basic and diluted		(0.00	)		(0.00	)		(0.00	)		(0.00	)

Weighted average number of common shares - basic and diluted		24,827,264			24,827,264			24,827,264			24,803,783

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Apawthecary Pets USA
Statements of Changes in Equity
(Expressed in U.S. Dollars)
For the three month periods ended February 28, 2019 and 2018

	Common stock				Additional paid-in		Accumulated
	Shares		Amount		capital		Deficit			Total
Balance at November 30, 2018		24,827,264		24,827		349,223		(405,671	)		(31,621	)
Net loss		-		-		-		(13,866	)		(13,866	)
Balance at February 28, 2019		24,827,264		24,827		349,223		(419,537	)		(45,487	)

Balance at November 30, 2017		24,827,264		24,827		349,223		(368,747	)		5,303
Net loss		-		-		-		(28,045	)		(28,045	)
Balance at February 28, 2018		24,827,264		24,827		349,223		(396,792	)		(22,742	)

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Apawthecary Pets USA
Statements of Changes in Equity
(Expressed in U.S. Dollars)
For the six month periods ended February 28, 2019 and 2018

	Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at August 31, 2018		24,827,264		24,827		349,223		(400,549	)		(26,499	)
Net loss		-		-		-		(18,988	)		(18,988	)
Balance at February 28, 2019		24,827,264		24,827		349,223		(419,537	)		(45,487	)

Balance at August 31, 2017		23,977,264		23,977		265,073		(352,275	)		(63,225	)
Common shares sold for cash		850,000		850		84,150		-			85,000
Net loss		-		-		-		(44,517	)		(44,517	)
Balance at February 28, 2018		24,827,264		24,827		349,223		(396,792	)		(22,742	)

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Apawthecary Pets USA
Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)

	For the			For the
	six month			six month
	period ended			period ended
	February 28,			February 28,
	2019			2018

Cash flows from operating activities
Net loss	$	(18,988	)	$	(44,517	)
Changes in operating asssets and liabilities:
Increase (decrease) in inventory		-			(7,200	)
Increase (decrease) in accounts payable and accrued liabilities		6,339			7,706

Cash flows used in operating activities		(12,649	)		(44,011	)

Cash flows from financing activities
Proceeds from common shares sold for cash		-			85,000

Cash provided by financing activities		-			85,000

Net increase in cash		(12,649	)		40,989

Cash and cash equivalents, beginning of year		42,594			13,380

Cash and cash equivalents, end of year	$	29,945		$	54,369

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Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars)

For the three and six months periods ended February 28, 2019 and 2018

(Unaudited)

Nature and Continuance of Operations

Apawthecary Pets USA (the ”Company”) was incorporated under the laws of the States of Nevada on December 27, 2007. The Company intends to operate in the pet industry.

On July 20 2017, the Company changed its name from Bookedbyus Inc. to Apawthecary Pets USA.

In the opinion of the management, all normal recurring adjustments which are necessary for a fair presentation of financial statements of the results for the periods ended February 28, 2019 and 2018 have been included.

The Company’s financial statements as of February 28, 2019 and for the period then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company generated a net loss of $15,488 for the six month period ended February 28, 2019 and had a working capital deficit of $41,987 as of February 28, 2019. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ended August 31, 2019. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

As of February 28, 2019, the Company was not engaged in continued business, and had significant expenses from early stage activities. Although management is currently attempting to implement its business plan and is seeking additional sources of financing, there is no assurance the activity will be successful. Accordingly, the Company must rely on its president to perform essential functions without compensation until a business operation can be commenced. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Significant Accounting Policies

Basis of presentation

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the Company’s audited financial statement for the year ended August 31, 2018, as filed with the SEC on Form 10-K. In the opinion of management, all normal recurring adjustments which are necessary for a fair presentation of financial statements of the results for the interim period ended February 28, 2019, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period ended August 31, 2018, as reported in the From 10-K have been omitted.

Inventory

Inventories are stated at the lower of cost or net realizable value, using the first-in first-out method. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company regularly review inventory quantities on hand, future purchase commitments with supplies, and the estimated utility of inventory. If the review indicates a reduction in utility below carrying value, the Company reduces the inventory to a new cost basis through a charge to cost of goods sold.

Due to Related Parties and Related Party Transactions

The outstanding balance of management fees payable to a consultant, Brad Kersch, who was under contract until December 31, 2016 was $551 as of February 28, 2019 and August 31, 2018 respectively.

As of February 28, 2019, the Company utilized office space located at 619 S.Ridgley, Los Angeles CA at no cost. The office space is operated by a company with an officer in common.

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Apawthecary Pets USA

Notes to Financial Statements

(Expressed in U.S. Dollars)

For the three and six months periods ended February 28, 2019 and 2018

(Unaudited)

	As of February 28, 2019, related parties of the Company have provided a series of loans, totaling $70,673 (August 31, 2018 $70,673), for working capital purposes. These amounts are unsecured, interest free and are due on demand.

	Yuying Liang has contributed uncompensated financial accounting services to Apawthecary Pets USA.

	On August 24, 2017 Apawthecary Pets USA entered into a license agreement with Solace Management Group Inc. a British Columbia corporation. The material terms of such license agreement are:

	1.	Upon execution of the Agreement, the Apawthecary Pets USA shall provide a nonrefundable license fee in the amount of $100,000 (the “License Fee”) to be held in an escrow account pursuant and subject to the terms of an escrow agreement whereby the License Fee will remain in the escrow account until the earlier of a $3,000,000 raise by the Licensee or after the Setup Period.

	2.	Term of the License Agreement is 10 years with a 5 year renewal term.

	3.	The license is an exclusive, nontransferable, nonsub licensable license to manufacture, sell, represent, market, distribute and advertise the Licensed Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Management Group Inc.’s Licensed Products and Services, Marks, Manuals, brands, and the business format, formulations, methods, specifications, standards, and operating procedures.

	4.	Apawthecary Pets USA shall pay the Solace Management Group Inc. for all packaging and shipment expenses to the Licensee at the then current market rate plus 20%.

	5.	Royalties will commence to accrue when the Licensed Products are accepted by the Apawthecary Pets USA. Apawthecary Pets USA shall pay quarterly royalties in addition to the yearly royalty fee, 10% of sales based on the wholesale price of each item.

	Solace Management Group Inc. owns the brand and intellectual property rights to Apawthecary Pets. Apawthecary Pets Inc., a Canadian corporation licensed the brand and distribution rights for Apawthecary Pets for use in Canada from Solace Management Group Inc. Solace Management Group Inc. and Apawthecary Pets USA have an officer and director in common, Bradley Kersch. Apawthecary Pets USA has negotiated a licensing and distribution agreement with Solace Management Group Inc. The $100,000 License fee has not been paid as of February 28, 2019.

4.	Capital Stock

	The total authorized capital is 75,000,000 common shares with a par value of $0.001 per common share.

	Issued and outstanding The Company had 24,827,264 common shares issued and outstanding as at February 28, 2019 and August 31, 2018, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis

This section of the Form 10-Q includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Apawthecary Pets USA (formerly Bookedbyus Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on December 27, 2007. The Company intends to operate in the pet industry. We have commenced only limited operations, primarily focused on organizational matters in connection with this offering. The Company has not yet implemented its business model.

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

On August 24, 2017, Apawthecary Pets USA entered into a license agreement with Solace Management Group Inc. a British Columbia corporation. The material terms of such license agreement are:

1. Upon execution of the Agreement, the Apawthecary Pets USA shall provide a non-refundable license fee in the amount of $100,000 (the “License Fee”) to be held in an escrow account pursuant and subject to the terms of an escrow agreement whereby the License Fee will remain in the escrow account until the earlier of a $3,000,000 raise by the Licensee or after the Set-up Period.

2. Term of the License Agreement is 10 years with a 5 year renewal term.

3. The license is an exclusive, non-transferable, non-sub licensable license to manufacture, sell, represent, market, distribute and advertise the Licensed Products within the Territory on the terms and conditions set forth in the License Agreement and shall include access to, and use of, the Solace Management Group Inc.’s Licensed Products and Services, Marks, Manuals, brands, and the business format, formulations, methods, specifications, standards, and operating procedures.

4. Apawthecary Pets USA shall pay the Solace Management Group Inc. for all packaging and shipment expenses to the Licensee at the then current market rate plus 20%.

5. Royalties will commence to accrue when the Licensed Products are accepted by the Apawthecary Pets USA. Apawthecary Pets USA shall pay quarterly royalties in addition to the yearly royalty fee, 10% of sales based on the wholesale price of each item.

Solace Management Group Inc. owns the brand and intellectual property rights to Apawthecary Pets.

Apawthecary Pets Inc., a Canadian corporation licensed the brand and distribution rights for Apawthecary Pets for use in Canada from Solace Management Group Inc.

Solace Management Group Inc. and Apawthecary Pets USA have an officer and director in common, Bradley Kersch. Apawthecary Pets USA has negotiated a licensing and distribution agreement with Solace Management Group Inc. The $100,000 License fee has not been paid as of February 28, 2019.

Capital Resources and Liquidity

Our auditors have issued a “going concern” opinion, meaning that there is substantial doubt if we can continue as an on-going business unless we obtain additional capital. No substantial revenues from our planned business model are anticipated until we have raised sufficient monies to implement our business model.

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The Company will need to seek capital from other resources such as private placements or in the Company’s sales of registered securities, or debt financing, which may not even be available to the Company. However, if such financing were available, because we are a development stage company with no or limited operations to date, it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the company cannot raise additional proceeds via such financing, it would be required to cease business operations.

As of February 28, 2019, we had $29,945 in cash and $7,200 in inventory as compared to $49,794 in cash and $7,200 in inventory as at August 31, 2018. As of the date of this Form 10-Q, the current funds available to the Company will not be sufficient to fund the expenses related to the implementation of our business and continue maintaining a reporting status. The Company’s sole officer and director, Mr. Kersch has indicated that he may be willing to provide a maximum of $20,000, required to maintain the reporting status, in the form of a non-secured loan for the next twelve months as the expenses are incurred if no other proceeds are obtained by the Company. However, there is no contract or written agreement in place.

We do not anticipate researching any further products nor the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees.

Results of Operations

We had $nil in revenue for the three month period ended February 28, 2019 as compared to revenue for three month period ended February 29, 2018 of $nil.

Total operating expenses for the three month period ended February 28, 2019 were $10,366 as compared to total operating expenses for the three month period ended February 28 2018 of $28,045 resulting in a net loss for the three month period ended February 28, 2019 of $10,366 as compared to a net loss of $28,045 for three month period ended February 28, 2018. The net loss for the three month period ended February 28, 2019 is a result of professional fees of $8,887, and general and administrative expense of $1,479, as compared to the net loss for the three month period ended February 28, 2018 of $28,045 which was a result of professional fees of $24,787 comprised of legal and accounting fees and general and administrative expense of $3,258.

Total operating expenses for the six month period ended February 28, 2019 were $15,488 as compared to total operating expenses for the six month period ended February 28, 2018 of $44,517 resulting in a net loss for the six month period ended February 28, 2019 of $15,488 as compared to a net loss of $44,517 for six month period ended February 28, 2018. The net loss for the six month period ended February 28, 2019 is a result of professional fees of $13,507, and general and administrative expense of $1,981, as compared to the net loss for the six month period ended February 28, 2018 of $44,517 which was a result of professional fees of $32,936 comprised of legal and accounting fees and general and administrative expense of $11,581.

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Off-balance sheet arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's principal executive officer and principal financial officer. Based upon that evaluation, our company's principal executive officer and principal financial officer concluded that as of February 28, 2019 our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended February 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Currently we are not involved in any pending litigation or legal proceeding.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosure.

None

Item 5. Other Information.

(a) None

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Item 6. Exhibits.

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

Exhibit No.		Description

3.1		Certificate of Amendment as previously filed with the SEC on Form S-1 on September 15, 2017
3.2		By-Laws Inc. as previously filed with the SEC on Form S-1 on September 7, 2011
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934*
32.1		Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

_____________

* Included in Exhibit 31.1

** Included in Exhibit 32.1

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SIGNATURES*

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Apawthecary Pets USA.

Date: April 15, 2019	By:	/s/ Bradley Kersch
		Bradley Kersch
		President, Chief Executive Officer (Principal Executive Officer) and Director

	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	13

Item 1A.	Risk Factors	13

Item 2.	Unregistered Sales of Securities and Use of Proceeds	13

Item 3.	Defaults Upon Senior Securities	13

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits	14

Apawthecary Pets USA 10-Q