{"url_path":"/sec/cik-0001566243/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-10","source_url":"https://www.sec.gov/Archives/edgar/data/1566243/0001753926-26-000995-index.html","accession_number":"0001753926-26-000995","cik":"0001566243","ticker":null,"issuer_name":"Arax Holdings Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/1566243/0001753926-26-000995-index.html","primary_entity_key":"0001566243","primary_entity_name":"Arax Holdings Corp"},"word_count":2516,"has_tables":true,"body_markdown":"**ITEM\n7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n** **\n\n**Overview**\n\n** **\n\nArax\nHoldings Corp. (the “Company”, “we”, “our”, or “us”) was incorporated under the\nlaws of the State of Nevada on February 23, 2012. Our financial statements accompanying this Report have been prepared assuming\nthat we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal\ncourse of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.\nWe have a limited operating history and have generated modest revenues to date, primarily from our software and logistics services\nand emerging blockchain-based offerings.\n\n \n\n**Business\nOperations and Strategic Developments**\n\n** **\n\nThe\nCompany has established operations providing software and logistics services to a client in South Africa, generating consistent\nrevenue streams. We are actively working to strengthen this relationship while pursuing expansion opportunities in other global\nmarkets. Our strategic focus has shifted toward leveraging blockchain technology to deliver innovative financial and technological\nsolutions, as evidenced by our recent acquisitions and platform developments.\n\n \n\nOn\nDecember 30, 2022, the Company completed the acquisition of Core Business Holdings through a share swap agreement. The transaction\nwas between entities under common control and, therefore, was accounted for under ASC 805-50 using carryover basis. The net assets\nacquired had a carrying amount of zero in the transferor’s records. Accordingly, no new basis of accounting was established,\nand no impairment expense or gain was recognized in the income statement. The equity issued was recorded at the carrying amount\nof the net assets transferred (zero), with the difference recorded directly in additional paid-in capital.\n\n \n\nOn\nMay 3, 2023, we acquired 100% of Cilandro SA, a Swiss entity holding financial licenses, for $268,000, accounted for as an asset\nacquisition. This acquisition enhances our ability to offer Central Business Digital Currencies (CBDCs) and other blockchain-based\nfinancial solutions globally, positioning us to meet growing demand for digital financial infrastructure.\n\n \n\nIn\n2025, we achieved a major milestone with the successful development of our BaaP Ecosystem—a Core Blockchain-based enterprise\nplatform designed for seamless interoperability between our in-house technologies and third-party platforms through multiple connectors.\nLater that year, we launched the first solution platforms within the ecosystem: the Commodity Trade and Trade Finance platforms.\nThese releases marked a significant step forward in advancing our blockchain strategy. These platforms facilitate secure and transparent\ncommodity trade transactions and trade finance solutions, leveraging blockchain’s immutability and efficiency. We are currently\nonboarding a commodities test Use Case to validate the platform’s functionality, with initial results indicating strong\npotential for scalability and client adoption.\n\n \n\nAdditionally,\nwe are advancing our age verification services, which utilize blockchain technology to provide secure and privacy-compliant identity\nverification solutions, targeting industries requiring robust compliance frameworks, such as finance and e-commerce.\n\n \n\n4 \n\n \n\nOur\nrevenue model is centered on subscription fees and transaction fees derived from our BaaP solutions, including software subscriptions,\nconsulting, and integration services. We are also exploring co-investment opportunities with government and enterprise partners\nto share initial infrastructure costs, which we believe will accelerate market penetration and reduce capital requirements.\n\n** **\n\n**Plan\nof Operation**\n\n** **\n\nOur\nplan of operation focuses on expanding our blockchain-based offerings while continuing to grow our existing software and logistics\nservices. Key initiatives include:\n\n \n\n**Scaling\nBlockchain Solutions:**We are prioritizing the commercialization of our Trade Finance platform and age verification services,\nwith ongoing efforts to onboard additional Use Cases and clients globally. The Core Blockchain, released in May 2022, serves as\nthe backbone for these solutions, and we are developing additional software modules to enhance functionality and revenue potential.\n\n** **\n\n**Global\nExpansion:**Building on our South African operations, we are targeting new markets in Europe, Asia, and North America, leveraging\nCilandro’s financial licenses to offer stablecoins, stable tokens and CBDC and other digital financial solutions. Strategic\npartnerships and co-investment models will be critical to this expansion.\n\n \n\n**Strategic\nAcquisitions:**We continue to evaluate opportunities to acquire complementary software technologies or businesses to bolster\nour BaaP portfolio. Our management is exploring potential business combinations, including reverse mergers or asset purchases,\nparticularly in the U.S., to access capital markets and enhance shareholder value. Given our limited capital resources, we anticipate\nfocusing on a single, high-impact acquisition, which may involve entities in early-stage development or facing financial challenges.\n\n** **\n\n**Operational\nEfficiency:**We aim to optimize our cost structure by streamlining operations and leveraging our existing assets. This includes\ncontinued investment in software development under ASC 350-40 (internal-use software), where qualifying application-development-stage\ncosts are capitalized while preliminary project and post-implementation costs are expensed as incurred. In fiscal 2024, $1,372,620\nof software development expenditures were evaluated, resulting in the expensing of non-qualifying pre-feasibility costs and capitalization/amortization\nof qualifying costs (see Note 6).\n\n \n\nOur\nChief Executive Officer’s experience in business consulting guides our strategic direction, but we acknowledge the challenges\nin identifying and implementing a viable business strategy. Risks such as economic downturns, technological disruptions, and competitive\npressures, including those exacerbated by the lingering effects of the coronavirus pandemic, may hinder our ability to execute\nour plan. We face competition from venture capital firms, blank check companies, and other entities seeking similar acquisition\nopportunities, many of which have greater financial resources.\n\n \n\n**Financial\nCondition and Results of Operations**\n\n** **\n\n**Year\nEnded October 31, 2024 Compared to Year Ended October 31, 2023**\n\n** **\n\n**Restatement\nof Prior Period Financial Statements**\n\n \n\n**As\ndiscussed in Note 2**, the Company restated its October 31, 2023, financial statements to correct the accounting for the common-control\nasset acquisition of Core Business Holdings under ASC 805-50 and to reclassify certain software development costs from ASC 985-20\n(external-use) to ASC 350-40 (internal-use). The acquisition was originally recorded with an impairment loss; it has now been\nrecharacterized as a direct equity adjustment with no income-statement impact. In addition, adjusting journal entries were recorded\nto reclassify previously expensed software development costs, resulting in changes to general and administrative expenses, research\nand development expenses, and amortization expense for the year. The non-cash restatement reduced 2023 assets by $4,982,519 and\nstockholders’ equity by $5,082,519 (recharacterization to equity), impacting year-over-year comparability of asset balances\nbut not 2024 operations, liquidity, or cash flows. Management enhanced internal controls over common-control acquisitions and\nsoftware capitalization accounting to prevent recurrence.\n\n5 \n\n \n\nARAX HOLDINGS CORP. \n   \n   \n  \n\nBALANCE SHEETS \n   \n   \n  \n\n  \nOctober 31, 2023  \nAdjustments  \n\n**October 31, 2023**\n\n**(As Restated)**\n \n\nASSETS: \n    \n    \n   \n\nCurrent Assets: \n    \n    \n   \n\nCash \n$1,448,769  \n$—  \n$1,448,769 \n\nAccounts Receivable \n 226,951  \n (226,951) \n — \n\nTotal current assets \n 1,675,720  \n (226,951) \n 1,448,769 \n\n  \n    \n    \n   \n\nProperty, plant and equipment, net \n 1,510  \n —  \n 1,510 \n\nSoftware development \n 5,033,332  \n (4,755,569) \n 277,763 \n\nLong-term investments \n 437,372  \n (437,372) \n — \n\nIntangible assets, net \n —  \n 268,000  \n 268,000 \n\nOther assets \n —  \n 169,373  \n 169,373 \n\nTOTAL ASSETS \n$7,147,934  \n$(4,982,519) \n$2,165,415 \n\n  \n    \n    \n   \n\nLIABILITIES AND STOCKHOLDERS’ DEFICIT \n    \n    \n   \n\nCurrent Liabilities: \n    \n    \n   \n\nAccounts payable \n$—  \n$100,000  \n$100,000 \n\nAccrued expenses \n 100,378  \n —  \n 100,378 \n\nDue to related party \n 57,756  \n 100,000  \n 157,756 \n\nOther current liabilities \n 100,000  \n (100,000) \n — \n\nNotes payable \n —  \n —  \n — \n\nTotal current liabilities \n 258,134  \n 100,000  \n 358,134 \n\n  \n    \n    \n   \n\nTOTAL LIABILITIES \n 258,134  \n 100,000  \n 358,134 \n\n  \n    \n    \n   \n\nSTOCKHOLDERS’ DEFICIT: \n    \n    \n   \n\nPreferred Stock Series A, par value $0.001, 10,000,000 shares authorized, 10,000,000 shares issued and outstanding as of October 31, 2023. \n 10,000  \n —  \n 10,000 \n\nCommon stock, par value $0.001, 950,000,000 shares authorized, 126,160,534 issued and outstanding as of October 31, 2023. \n 126,160  \n (113,544) \n 12,616 \n\nCommon stock to be issued \n —  \n 33,142  \n 33,142 \n\nAdditional paid-in-capital \n 26,176,224  \n (16,959,205) \n 9,217,019 \n\nAccumulated deficit \n (19,422,584) \n 11,957,088  \n (7,465,496)\n\nTOTAL STOCKHOLDERS’ DEFICIT \n 6,889,800  \n (5,082,519) \n 1,807,281 \n\n  \n    \n    \n   \n\nTOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT \n$7,147,934  \n$(4,982,519) \n$2,165,415 \n\n \n\n6 \n\n \n\nARAX HOLDINGS CORP. \n   \n   \n  \n\nSTATEMENT OF OPERATIONS \n   \n   \n  \n\n  \n   \n   \nOctober 31, 2023 \n\n  \nOctober 31, 2023  \nAdjustments  \n(As Restated) \n\nRevenues \n   \n   \n  \n\nRevenues \n$909,176  \n$—  \n$909,176 \n\nCost of sales \n —  \n —  \n — \n\nGross Profit (Loss) \n 909,176  \n —  \n 909,176 \n\n  \n    \n    \n   \n\nOperating expenses: \n    \n    \n   \n\nAdministrative expenses \n 811,639  \n (811,639) \n — \n\nAdministrative expenses -officers \n 90,000  \n (90,000) \n — \n\nGeneral and administrative expenses \n —  \n 7,445,821  \n 7,445,821 \n\nDepreciation and amortization expense \n —  \n 49,097  \n 49,097 \n\nTotal operating expenses \n 901,639  \n 6,593,279  \n 7,494,917 \n\n  \n    \n    \n   \n\nLoss from operations \n 7,537  \n (6,593,278) \n (6,585,741)\n\n  \n    \n    \n   \n\nOther income (expense): \n    \n    \n   \n\nImpairment of assets \n (18,550,285) \n 18,550,285  \n — \n\nOID (expense) \n (830) \n 80  \n (750)\n\nTotal other income (expense) \n (18,551,115) \n (80) \n (67,779,270)\n\n  \n    \n    \n   \n\nNet loss before taxes \n (18,543,578) \n (11,957,088) \n (6,586,491)\n\nIncome tax provision (benefit) \n —  \n —  \n — \n\nNet loss \n$(18,543,578) \n$11,957,088  \n$(6,586,491)\n\n  \n    \n    \n   \n\nNet loss per share, basic and diluted \n$(0.22) \n    \n$(0.10)\n\nWeighted average shares outstanding, basic and diluted \n 82,811,424  \n    \n 67,779,270 \n\n** **\n\n**Revenue**\n\n** **\n\nFor\nthe year ended October 31, 2024, we generated revenue of $613,636, of which $301,750 was from Gut Moravia, a related party, compared\nto $909,176 in 2023. The decline was primarily due to timing of project completions in software and logistics services. We expect\nrevenue growth to resume as we onboard new Use Cases for our Trade Finance platform and expand age-verification services.\n\n \n\n**Operating\nExpenses**\n\n \n\nWe\nhad total operating expenses of $3,905,200 and $7,494,917 for the years ended October 31, 2024 and 2023, respectively, a decrease\nof $3,589,717 or 47.9%. This decrease is primarily due to a $2,368,146 reduction in general and administrative expenses and a\n$1,238,434 reduction in stock-based compensation expense. The changes in consulting and development services and accounting services\nreflect the timing of certain projects performed in the prior year. Depreciation and amortization of $65,960 is presented as a\nseparate line below stock-based compensation.\n\n \n\n**Other\nExpense**\n\n** **\n\nOther\nexpenses increase from $750 in 2023 to $272,773 in 2024, primarily due to the $169,373 impairment expense to capitalized software,\nand a $103,400 loss on short-term borrowing settlement, and minor other items.\n\n \n\n**Net\nLoss**\n\n** **\n\nOur\nnet loss for 2024 was $3,564,336, a substantial improvement from $6,586,491 in 2023, primarily due to reduced software development\nexpenses. The 2024 net loss reflects ongoing operating expenses, limited revenue growth, and stock-based compensation, underscoring\nthe need for additional capital to support our growth initiatives.\n\n \n\n**Liquidity\nand Capital Resources**\n\n** **\n\nNet\ncash used in operating activities was $2,351,356 in fiscal 2024, primarily reflecting operating losses adjusted for non-cash items\nincluding software amortization of $65,356 and software impairment of $169,373 (see Note 6). Net cash used in investing activities\nwas $0 in fiscal 2024. Net cash provided by financing activities was $983,430. Management continues to monitor liquidity closely\ngiven ongoing development efforts and limited cash resources.\n\n \n\n7 \n\n \n\n**ARAX HOLDINGS CORP.**\n\n****\n\n**SUMMARY TABLE**\n\n** **\n\n  \n    \n **October 31,\n2023**  \n  \n\nDescription \n **31-Oct-2024**  \n **(As Restated)**  \n**Variance** \n\nTotal operating expenses \n$3,905,200  \n$7,494,917  \nDecrease $3,589,717 (47.90%) \n\nNet cash used in operating activities \n (2,351,356) \n (4,449,501) \nImprovement $2,098,145 \n\nNet cash used in investing activities \n —  \n (497,742) \nImprovement $497,742 \n\nNet cash provided by financing activities \n 983,430  \n 6,355,010  \nDecrease $5,371,580 \n\nCash and cash equivalents, end of year \n 119,157  \n 1,448,769  \nDecrease $1,329,612 \n\nTotal assets \n 902,220  \n 2,165,414  \nDecrease $1,263,194 \n\nTotal Stockholders’ equity (deficit) \n (521,414) \n 1,807,280  \nDecrease $2,328,693 \n\n \n\nOur\ncurrent working capital is insufficient to sustain operations over the next 12 months, necessitating additional financing through\ndebt or equity issuances. We are dependent on convertible debt financing and advances from an entity controlled by our Chairman,\nwhich amounted to $157,756 as of October 31, 2024. Future issuances of equity or convertible debt may result in significant dilution\nto existing shareholders and could involve securities with preferential rights. If adequate funds are not available on acceptable\nterms, our ability to pursue new business opportunities or acquisitions will be restricted, potentially materially impacting our\noperations.\n\n \n\n**Off\nBalance Sheet Arrangements**\n\n \n\nAs\nof the date of this Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current\nor future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,\ncapital expenditures or capital resources that are material to investors.\n\n \n\n**Going\nConcern**\n\n** **\n\nThe\nindependent registered public accounting firm’s report accompanying our October 31, 2024, consolidated financial statements\nincludes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. This uncertainty\narises from our limited operating history, ongoing losses, and dependence on external financing. To address this, we are actively\npursuing revenue growth through our blockchain platforms, seeking strategic acquisitions, and exploring financing options to bolster\nour capital position.\n\n \n\n**Risks\nand Challenges**\n\n** **\n\nOur\nprospects must be considered in light of the risks inherent in our early-stage development, including:\n\n \n\n**Evolving\nBusiness Model:**Our shift toward blockchain-based solutions, including Trade Finance and age verification services, requires\nsignificant investment and market acceptance, with no assurance of profitability.\n\n \n\n**Competitive\nLandscape:**We face competition from well-funded firms seeking similar acquisition opportunities, which could limit our access\nto viable targets.\n\n** **\n\n**Regulatory\nCompliance**: Increasing state-level privacy regulations and SEC reporting obligations may require substantial resources, potentially\nstraining our limited capital.\n\n \n\n8 \n\n \n\n**Technological\nRisks:**Rapid advancements in blockchain and financial technology could render our platforms obsolete if we fail to innovate.\n\n** **\n\n**Capital\nConstraints:**Our limited resources may restrict our ability to diversify, increasing the risk of losses from a single venture\nor market.\n\n \n\nTo\nmitigate these risks, we are focusing on developing a robust marketing strategy, enhancing our technological capabilities, and\nattracting qualified personnel to execute our business plan. However, there can be no assurance that we will successfully address\nthese challenges, and failure to do so could materially adversely affect our business prospects, financial condition, and results\nof operations.\n\n \n\n**Critical\nAccounting Policies and Estimates**\n\n \n\nThe\npreparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect\nthe reported amounts of assets, liabilities, revenues, and expenses. The most significant estimates and assumptions relate to\nrevenue recognition (ASC 606), capitalization and amortization of internal-use software costs (ASC 350-40), impairment of long-lived\nassets (ASC 360-10), fair value of equity instruments issued, and the allowance for credit losses (ASC 326). Actual results could\ndiffer from these estimates.\n\n \n\nRevenue\nis recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration\nthe Company expects to be entitled to in exchange for those goods or services. Internal-use software development costs are capitalized\nunder ASC 350-40 once technological feasibility has been established and the software is placed in service, and are amortized\nover the estimated useful life of the related asset.\n\n \n\nCritical\nAccounting Estimates\n\n \n\nSignificant\nestimates include the recoverability of capitalized software development costs and the fair value of common stock issued for non-cash\nconsideration. The Company evaluates capitalized software for impairment whenever events or changes in circumstances indicate\nthat the carrying amount may not be recoverable. \n\n \n\n**Forward-Looking\nStatements**\n\n** **\n\nThis\ndiscussion contains forward-looking statements regarding our ability to expand our blockchain platforms, onboard new Use Cases,\npursue acquisitions, and secure financing. These statements are subject to risks and uncertainties, including those described\nin Item 1A – Risk Factors (not required for smaller reporting companies but relevant for context). We undertake no obligation\nto update these statements unless required by law.\n\n \n\n **Related\nParty Transaction**\n\nThe\nCompany had the following material related-party transactions (see Notes 4, 5, 8, 11, and 12):• Revenue from Gut Moravia\n(related party): $301,750 (2024) / $0 (2023).\n\n \n\n•Advances\nfrom entity controlled by Chairman: $157,756 outstanding (2024 and 2023).\n\n \n\n•\nCore Business Holdings acquisition (common-control transfer): In December 2022, the Company acquired Core Business Holdings through\na share-swap agreement. Because this was a transfer between entities under common control, the transaction was recorded at the\ntransferor’s historical carrying amount of zero in accordance with ASC 805-50. No new basis of accounting was established,\nno impairment expense was recognized, and the difference between the equity issued and the carrying amount of the net assets transferred\nwas recorded directly in additional paid-in capital.\n\n \n\nAll\ntransactions were on terms consistent with arm’s-length dealings.\n\n9"}