UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended December 31, 2024

Commission File No.333-252535

(949) 289-6789

(Registrant’s telephone number, including area code)

N/A

(Former name former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐     No ☒

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 shorter period that the registrant as 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 every Interactive Data File required to be submitted 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 such files). ☒  Yes   ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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.

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 Act). ☐  Yes ☒  No

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐  Yes    ☐  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

ARCULUS SYSTEM CO., LTD.

INDEX TO FINANCIAL STATEMENTS

The accompanying notes are an integral part of these unaudited financial statements.

The accompanying notes are an integral part of these financial statements.

ARCULUS SYSTEM CO., LTD.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

THREE MONTHS ENDED DECEMBER 31, 2024 AND DECEMBER 31, 2023

(UNAUDITED)

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these unaudited financial statements.

ARCULUS SYSTEM CO., LTD.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2024

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

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this Quarterly Report. Our unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

As used in this quarterly report, the terms “we,” “us,” “our,” or “the Company,” mean Arculus System Co., Ltd., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Overview

Arculus System Co., Ltd. (the “Company,” “we,” “our,” or “us”) is a development-stage company incorporated on October 4, 2019, in the State of Nevada under the name Azzurro Solutions Corp. and established a fiscal year end of September. On February 20, 2025, we changed our name to arculus system, and, on March 5, 2025, we amended and restated our articles of incorporation and changed our name to Arculus System Co., Ltd. and authorized 75,000,000 preferred shares. Subsequent to the change of control, our new management and majority shareholders have changed our business to deliver a robust suite of Electronic Design Automation (EDA) tools and integrated circuit (IC) design services.

We now specialize in the development of high-performance chip design front-end development software tools and solutions. As a developer in the EDA field, we are dedicated to pioneering breakthroughs aimed at assisting IC chip design enterprises in addressing the formidable challenges and critical issues encountered during innovation and development processes, and intend to become a trusted key partner in the industry.

Our flagship EDA tool is the Architecture Compiler, which represents our most advanced technology. This powerful solution simplifies SoC architecture design by optimizing software and hardware co-design, seamlessly integrating components, and enhancing overall performance. With the Architecture Compiler, we enable customers to build efficient and robust IC designs, laying a solid foundation for success.

We have developed iPROfiler, an advanced SoC performance analysis tool driven by artificial intelligence and designed for SoC. iPROfiler plays a crucial role in facilitating collaboration and comprehensive analysis among SoC design teams, software teams, and hardware teams. By leveraging its capabilities, customers can unleash the full potential of their SoC designs, achieving exceptional performance and functionality. It also serves as an important sign-off tool, ensuring smooth coordination between front-end and back-end design teams.

Customers are at the core of everything we do, and we strive to build strong partnerships by deeply understanding their goals and challenges. With our extensive experience and the powerful capabilities of our EDA tools, we prepared to tackle the most demanding and intricate problems brought about by IC design.

Our products will include high-quality system-on-chip (SoC) design capabilities such as intellectual property (IP) design, optimization, integration, and verification, enabling customers to accelerate development cycles and achieve efficient commercial outcomes.

As of the date of this filing, we have not commenced principal revenue-generating operations and have generated limited revenues since inception. Our operations have been limited to organizational activities, administrative functions, and preparation for future service offerings.

As of December 31, 2024, we had an accumulated deficit of $211,031. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Results of Operation

For the three months ended December 31, 2024 compared to the three months ended December 31, 2023

Revenue

We did not incur any revenues for the three months ended December 31, 2024 or December 31, 2023.

Cost of Goods Sold

We did not incur any cost of goods sold for the three months ended December 31, 2024 or December 31, 2023.

Operating Expenses and Net Loss

Operating expenses increased $21,641, or 246.60%, to $30,417 for the three months ended December 31, 2024 compared to $8,776 for the three months ended December 31, 2023. The increase is due to general and administrative expenses and professional fees incurred related to corporate overhead, and financial and administrative contracted services, such as legal and accounting. Our net loss consisted solely of our operating expenses.

Liquidity and Capital Resources

As of December 31, 2024, we had current assets of $18,197 and a working capital deficit of $121,677, consisting primarily of accounts payable, accrued payroll and payroll taxes and related party advances. We have relied primarily on short-term, non-interest-bearing, related party advances to fund our operations.

Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Our total assets were $18,197 for the quarter ended December 31, 2024, compared to $3,145 for the quarter ended December 31, 2023.

Our current and total liabilities were $139,874 for the quarter ended December 31, 2024, compared to $94,405 for the quarter ended December 31, 2023.

Our stockholders’ deficit was $211,031 for the quarter ended December 31, 2024, compared to $180,614 for the quarter ended December 31, 2023.

Cash Flows from Operating Activities

Net cash used in operating activities increased $26,272, or 302.81%, to $34,948 for the quarter ended December 31, 2024, compared to $8,676 for the quarter ended December 31, 2023. The increase in cash used was primarily due to an increase in net loss of $21,641, offset by $100 in depreciation and amortization expense, and $4,531 in accounts payable and accrued liabilities.

Cash Flows from Investing Activities

There were no cash flows used in investing activities for the quarter ended December 31, 2024 or December 31, 2023.

Cash Flows from Financing Activities

Cash flows provided by financing activities increased $37,650, or 304.86%, to $50,000 for the quarter ended December 31, 2024, compared to $12,350 for the quarter ended December 31, 2023, which consisted of related party advances.

Going Concern

Our financial statements have been prepared assuming we will continue as a going concern. As disclosed in Note 2 to our financial statements, we had an accumulated deficit of $211,031 as of December 31, 2024, and limited operations, which raise substantial doubt about our ability to continue as a going concern. Our continued existence is dependent upon our ability to obtain additional funding and implement a business plan that generates sustainable revenues.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses, and related disclosures. The Company’s significant accounting policies are described in Note 3 to the financial statements. Management considers the following policies to be critical because they involve significant judgments and assumptions, and because different assumptions could materially affect the Company’s financial condition or results of operations.

Going Concern

The Company assesses its ability to continue as a going concern in accordance with ASC 205-40. In assessing going concern, management evaluates conditions and events that raise substantial doubt about the Company’s ability to meet its obligations as they become due within one year after the date that the financial statements are issued. As of December 31, 2024, the Company had not yet established an ongoing source of revenue and had incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of these conditions and plans to mitigate them involve significant judgment. Management believes that without at least $500,000 in additional capital, we will not be able to implement our business plan or achieve commercial viability in the next 12 months.

Use of Estimates

The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. These estimates also affect the reported amounts of expenses during the reporting period. Significant areas requiring the use of management estimates and judgments include, but are not limited to, assessing the recoverability of assets, evaluating the need for impairment, and estimating income tax valuation allowances. Actual results could differ materially from those estimates.

Fair Value of Financial Instruments

The Company measures certain financial instruments at fair value in accordance with ASC 820, “Fair Value Measurement.” The carrying value of cash and related party advances approximates fair value due to their short-term nature. Management’s determination of fair value includes assumptions based on market data and may require judgment in the absence of observable inputs.

Income Taxes and Deferred Tax Assets

The Company accounts for income taxes using the liability method under ASC 740. Deferred tax assets are recognized for temporary differences between financial statement and tax bases of assets and liabilities. A valuation allowance is established when it is more likely than not that all or part of a deferred tax asset will not be realized. Determining the amount of valuation allowance requires significant judgment in estimating future taxable income, applicable tax strategies, and the expected timing of reversals of temporary differences.

Material Commitments

None.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment during the next twelve months.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company and not required to provide this information.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO), is responsible for establishing and maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO, to allow timely decisions regarding required disclosure.

As of the end of the fiscal quarter ended December 31, 2024, management conducted an evaluation, under the supervision and with the participation of our CEO, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our CEO concluded that our disclosure controls and procedures were not effective as of December 31, 2024, due to a material weakness in our internal control over financial reporting, as described below.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in compliance with policies or procedures.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of that date, due to the following material weakness:

Remediation Plan

We are committed to improving our internal control environment. To remediate the identified material weakness, we plan to evaluate and enhance our internal control procedures and, as resources permit, hire additional qualified personnel or engage external consultants with relevant expertise in financial reporting and SEC compliance. We intend to enhance our internal control procedures in Q3 of 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not subject to any legal proceedings and are unaware of any pending against us.

Item 1A. Risk Factors.

We are a smaller reporting company and not required to provide this information.

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

We did not issue any equity securities for the quarter ended December 31, 2024.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following documents are filed as part of this report:

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.

ATTACHMENTS / EXHIBITS

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