10-Q: Legend Spices Transitions to Shell Company Amid Losses

Legend Spices, Inc. has transitioned into a shell company after discontinuing its Armenian operations, reporting significant net losses and a going concern warning.

Summary

• Legend Spices, Inc. filed a Form 10-Q for the quarterly period ended September 30, 2025.
• The company has discontinued its primary operations in Armenia following a change of ownership on March 29, 2025, where Mr. Mkrtchyan sold his shares.
• It is currently operating as a shell company with no new business determined yet.
• A net comprehensive loss of $(15,037) was reported for the nine months ended September 30, 2025, an improvement from $(25,649) for the same period in 2024.
• The company has an accumulated deficit of $123,862 since inception.
• Working capital deficit improved to $(13,367) as of September 30, 2025, from $(68,047) as of December 31, 2024.
• Total assets as of September 30, 2025, were $3,938, and total liabilities were $13,367.
• Cash at the end of the period was $219 as of September 30, 2025.
• A loss on impairment of inventory of $572 and a bad debt expense of $2,727 were recognized due to discontinued operations and uncollectible receivables.
• Management identified a material weakness in internal control over financial reporting due to inadequate staffing and supervision in bookkeeping and accounting.
• The company intends to raise capital through an offering to address its going concern issues.

Sentiment

Score: 1

Explanation: The company has ceased all primary operations, is a shell company, has significant financial deficits, a going concern warning, and ineffective internal controls. Its future is highly uncertain and dependent on a successful capital raise and new business strategy.

Positives

• Net comprehensive loss decreased to $(15,037) for the nine months ended September 30, 2025, from $(25,649) in the prior year, indicating a reduced rate of loss.
• Working capital deficit improved significantly to $(13,367) as of September 30, 2025, from $(68,047) as of December 31, 2024.
• Related party debt of $69,717 was forgiven by former largest shareholder Khachatur Mkrtchyan, recorded as an increase in Additional Paid-In Capital.
• Net cash used by operating activities significantly reduced to $(389) for the nine months ended September 30, 2025, from $(23,289) in the prior year.

Negatives

• All primary business operations in Armenia have been discontinued.
• The company is currently operating as a shell company with no new business determined.
• Reported a net comprehensive loss of $(15,037) for the nine months ended September 30, 2025.
• An accumulated deficit of $123,862 has been incurred since inception.
• A working capital deficit of $13,367 persists as of September 30, 2025.
• Cash on hand was only $219 as of September 30, 2025.
• A loss on impairment of inventory of $572 and a bad debt expense of $2,727 were recognized.
• Management concluded that internal control over financial reporting was not effective due to a material weakness (inadequate staffing and supervision).
• Substantial doubt exists about the company's ability to continue as a going concern.
• Minimal revenues of $644 were generated for the nine-month period ended September 30, 2025, representing only 14% of the previous year's amount.
• There is no current commitment from officers, directors, or other financiers to supplement operations or provide future financing.

Risks

• Substantial doubt exists about the ability to continue as a going concern due to an accumulated deficit of $123,862 and a working capital deficit of $13,367.
• Inability to raise capital through an offering may force the company to curtail or cease operations.
• Failure to obtain financing could have a substantial adverse effect on business and financial results.
• The sale of additional equity or debt securities, if accomplished, may result in dilution to existing shareholders.
• Exposure to credit risk from accounts receivable, despite management's belief in dealing with financially sound counterparties (a bad debt expense was still recognized).
• Exposure to interest rate risk from a bank demand loan bearing interest at 6.0%.
• Exposure to market risk from investments in publicly traded securities.
• Exposure to currency risk due to transactions and assets/liabilities denominated in foreign currencies (Armenian dram).
• Liquidity risk arising primarily from the bank demand loan and dependence on funds from operating subsidiaries (now discontinued) and other related sources.
• Net operating loss carry forwards of approximately $123,862 are subject to annual limitations and may be limited in use in future years if a change in ownership occurs.
• Internal control over financial reporting was not effective due to inadequate staffing and supervision, constituting a material weakness.

Future Outlook

The company has discontinued its operations in Armenia and is in the process of realigning its business focus without any new business determined yet, currently operating as a shell company. Management cannot offer assurance of continued revenue generation and does not believe past performance is indicative of future performance. The company intends to raise capital through an offering to address its going concern issues.

Management Comments

• "We have discontinued our operations in Armenia and are in the process of realigning our business focus without any new business determined yet. The Company can currently be understood as a shell company for the time being."
• "Management does not believe past performance is indicative of future performance."
• "Management cannot offer any assurance that we will continue to generate revenues as our revenues are affected by factors such as the success of our marketing efforts, the size of our customer base, consumers preferences and general economic conditions."
• "We have no current commitment from our Officer and Director or any other financier to supplement our operations or provide us with financing in the future."
• "If we are unable to raise capital from an offering, we may be forced to curtail or cease our operations."
• "The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders."
• "We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all."
• "Management concluded that as of September 30, 2025, our company's internal control over financial reporting was not effective based on present company activity."
• "This material weakness consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company."

Industry Context

Legend Spices' transition to a shell company status, discontinuing its spice and seasoning operations in Armenia, marks a complete departure from its previous industry. This move places it in a unique position, detached from the competitive landscape of the food and beverage or specialty ingredients sector. Its future industry context will depend entirely on the new business focus it eventually determines, if any.

Comparison to Industry Standards

• The company's current status as a shell company with no active business operations and minimal assets makes direct comparison to industry standards for operating companies irrelevant.
• Its financial metrics, such as significant accumulated deficit and working capital deficit, are not comparable to healthy operating businesses in the spice or food industry.
• The identified material weakness in internal controls is a significant governance issue, contrasting sharply with best practices for publicly traded companies, regardless of size.

Management Changes

Corporate Governance

Legal Proceedings

• No pending legal proceedings or litigation mentioned, and no governmental authority is contemplating any proceeding likely to have a material adverse effect.

Related Party Transactions

• Khachatur Mkrtchyan, the former single largest shareholder, waived the company's debt of $69,717 as of March 31, 2025, which was recorded as an increase in Additional Paid-In Capital.
• As of September 30, 2025, $9,676 USD is owed to Qihui Wang for amounts she paid on behalf of the company.

Stakeholder Impact

• Shareholders face significant risk of dilution from future capital raises, uncertainty regarding the company's future business, and potential for complete loss of investment if the company ceases operations.
• There are no current employees, as the only employee resigned and operations were discontinued.
• Former customers of the spice business are no longer served due to discontinued operations.
• Existing creditors face risk due to the company's going concern issues and limited assets, though some related party debt was forgiven.

Next Steps

• Realign business focus and determine a new business activity.
• Raise capital through an offering.
• Address the material weakness in internal control over financial reporting.

Key Dates

Recommendation

The company has ceased all primary business operations, is now a shell company with no determined future business, and faces substantial doubt about its ability to continue as a going concern. It has significant accumulated deficits, minimal cash, and ineffective internal controls. While a related party debt was forgiven, the overall financial health is extremely poor, and future capital raises are uncertain and would likely result in significant shareholder dilution. There is a high risk of the company failing to find a new business or secure sufficient financing, leading to a potential complete loss for investors.

Keywords

shell company, discontinued operations, going concern, financial loss, capital raise, SEC filing, 10-Q, corporate governance, internal controls, Qihui Wang, Khachatur Mkrtchyan, Armenia