UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2016
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number333-197756
BEMAX INC.
(Exact name of registrant as specified in its charter)
Nevada | 46-554081 | |
(IRS Employer Identification Number) |
Dallas, GA 30
Tel: (770) 401-1809
(Address and telephone number of principal executive office)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reportshas submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be filed by Section 13 or 15(d) /of the Exchange Actsubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the pastpreceding 12 months (or for such shorter period that the registrant was requirerequired to filesubmit and post such reports), and (2) has been subject to such filing requirements for the past 90 days.files). Yes [X]☒ No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of "accelerated“large accelerated filer,” “accelerated filer,” “smaller reporting company” and large accelerated filer"“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [ X ]
State the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)number of shares outstanding of each of the Securities Exchange Actissuer’s classes of 1934 subsequentcommon equity, as of the latest practicable date: As of April 21, 2017, the issuer had 301,640,836 shares of its common stock issued and outstanding.
Explanatory Note: The May 31, 2016 financial statements were restated to record inventory for purchases previously recorded on a cash basis, eliminate accounts receivable, accounts payable and deferred revenue recorded due to errors; and to account for the embedded conversion feature related to convertible loans.
As a result of the errors related to inventory and recording prior sales and cost of goods sold, the financial statements for the nine months ended February 29, 2016 were restated to reflect these changes.
The statement of operations and cash flows for the nine months ended February 28, 2017 were restated to correct errors made when preparing the financial statement. There were no changes to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No
PART I | ||
Item 1. | Condensed Financial Statements (unaudited) | 1 |
Item 2. | Management’s Discussion and Analysis of Financial | 11 |
Item 3. | Quantitative and Qualitative | 12 |
Item 4. | Controls and Procedures | 12 |
PART II | ||
Item 1. | Legal | |
Item 1A. | Risk Factors | 13 |
Item 2. | Unregistered Sales | |
Item 3. | ||
Item 4. | Mining Safety | |
Item 5. | Other | |
Item 6. | 13 | |
�� | ||
Signatures | 14 |
3
ITEM 1. FINANCIAL STATEMENTS
BEMAX INC.
Financial Statements
Condensed Balance Sheets as of February 28, 2017 (unaudited) and May 31, 2016 | 2 |
Condensed Statements of Operations for the Three and Nine Months ended February 28, 2017 and 2016 (unaudited) | 3 |
Condensed Statements of Cash Flows for the Nine Months ended February 28, 2017 and 2016 (unaudited) | 4 |
Notes to the Condensed Financial Statements (unaudited) | 5 |
1 |
BEMAX INC
Condensed Balance Sheets
(Unaudited)
February 28, 2017 | May 31, 2016 | |||||||
(Unaudited / Restated) | (Restated) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 606 | $ | 115,738 | ||||
Prepaid expenses | 56,250 | - | ||||||
Inventory | 177,551 | 189,823 | ||||||
Total current assets | 234,407 | 305,561 | ||||||
Furniture and equipment | 500 | 500 | ||||||
Total Assets | $ | 234,907 | $ | 306,061 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Accrued interest on convertible loans | 634 | 1,845 | ||||||
Derivative liability | - | 351,041 | ||||||
Convertible loans, net of discount of $3,748 and $134,148, respectively | 42,252 | 73,602 | ||||||
Loan from shareholder and related party | 51,736 | 38,236 | ||||||
Total current liabilities | 94,622 | 464,724 | ||||||
Total Liabilities | 94,622 | 464,724 | ||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
Preferred stock series B, $0.0001 par value, 50,000,000 shares authorized; 50,000,000 and 0 shares issued and outstanding, respectively | 5,000 | - | ||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized; 301,640,836 and 258,792,500 shares issued and outstanding, respectively | 30,164 | 25,879 | ||||||
Additional paid-in capital | 1,533,092 | 36,876 | ||||||
Accumulated deficit | (1,427,971 | ) | (221,418 | ) | ||||
Total Stockholders’ Equity (Deficit) | 140,285 | (158,663 | ) | |||||
Total Liabilities and Stockholders’ Equity | $ | 234,907 | $ | 306,061 |
The accompanying notes are an integral part of these unaudited condensed financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations.
2 |
BEMAX INC.
Condensed Statements of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in theOperations
(Unaudited)
For the Three Months Ended February 28, 2017 | For the Three Months Ended February 29, 2016 | For the Nine Months Ended February 28, 2017 | For the Nine Months Ended February 29, 2016 | |||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||
Revenues | $ | 24,960 | $ | 246,119 | $ | 140,113 | $ | 346,338 | ||||||||
Cost of goods sold | 163,020 | 187,361 | 279,197 | 266,864 | ||||||||||||
Gross margin | (138,060 | ) | 58,758 | (139,084 | ) | 79,474 | ||||||||||
Operating Expenses: | ||||||||||||||||
Professional fees | 9,200 | 3,704 | 18,600 | 8,404 | ||||||||||||
Management fees | 1,500 | 1,500 | 4,500 | 4,500 | ||||||||||||
General and administrative | 68,858 | 8,654 | 79,442 | 14,078 | ||||||||||||
Total Operating Expenses | 79,558 | 13,858 | 102,542 | 26,982 | ||||||||||||
Income (loss) from operations | (217,618 | ) | 44,900 | (241,626 | ) | (52,492 | ) | |||||||||
Other Income (Expense): | ||||||||||||||||
Interest expense and loan fees | (3,712 | ) | (1,714 | ) | (53,001 | ) | (1,714 | ) | ||||||||
Interest expense discount | (134,032 | ) | - | (296,400 | ) | - | ||||||||||
Change in fair value of derivative liability | (715,358 | ) | - | (331,436 | ) | - | ||||||||||
Loss of issuance on convertible debt | - | - | (284,091 | ) | - | |||||||||||
Total other expense | (853,102 | ) | (1,714 | ) | (964,928 | ) | (1,714 | ) | ||||||||
Net income (loss) | $ | (1,070,720 | ) | $ | 43,186 | $ | (1,206,554 | ) | $ | 50,778 | ||||||
Basic and diluted income (loss) per share | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | |||||||||
Weighted average number of shares outstanding – basic and diluted | 347,475,778 | 258,792,500 | 288,045,808 | 258,792,500 |
The accompanying notes are an integral part of these unaudited condensed financial statements prepared in accordance with generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the period presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in our financial statements filed therewith the U.S. Securities and Exchange Commission (SEC) on September 28, 2016 and can be found on the SEC website at www.sec.gov.
3 |
BEMAX INC.
Condensed Statements
Three Months Ended | Year Ended | |||||||
August 31, 2016 | May 31, 2016 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 115,730 | $ | 115,738 | ||||
Accounts receivable | 372,622 | 372,622 | ||||||
Total current assets | 488,353 | 488,360 | ||||||
Fixed Assets | ||||||||
Furniture and Equipment | 500 | 500 | ||||||
Total fixed assets | 500 | 500 | ||||||
TOTAL ASSETS | $ | 488,853 | $ | 488,860 | ||||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Deferred revenue | 507,722 | 507,722 | ||||||
Convertible Loans | 302,750 | 207,750 | ||||||
Accrued interest on convertible loans | 6,784 | 1,845 | ||||||
Loan from shareholder and related party | 42,736 | 38,236 | ||||||
Accounts payable | 312,995 | 319,795 | ||||||
Total current liabilities | 1,172,987 | 1,075,348 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, ($0.0001 par value, 500,000,000 shares | ||||||||
authorized; 258,792,500 shares issued and outstanding at | ||||||||
August 31, 2016 and May 31, 2016 respectively | 25,879 | 25,879 | ||||||
Additional paid-in capital | 36,876 | 36,876 | ||||||
Deficit accumulated during development stage | (746,889 | ) | (649,241 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY | (684,134 | ) | (586,487 | ) | ||||
TOTAL LIABILITITES AND STOCKHOLDERS' EQUITY | $ | 488,853 | $ | 488,861 |
Three Months Ended | Three Months Ended | |||||||
August 31, 2016 | August 31, 2015 | |||||||
REVENUES | ||||||||
Revenues | 92,122 | - | ||||||
TOTAL REVENUES | $ | 92,122 | $ | - | ||||
Cost of good sold | ||||||||
Purchases-resale items | 126,000 | - | ||||||
TOTAL COGS | $ | 126,000 | $ | - | ||||
Gross profit | (33,878 | ) | - | |||||
Operating costs | 12,556 | - | ||||||
General and administrative expenses | 51,214 | 10,113 | ||||||
TOTAL OPERATING COSTS | $ | 63,769 | $ | 10,113 | ||||
NET ORDINARY INCOME (LOSS) | $ | (97,647 | ) | $ | (10,113 | ) | ||
BASIC AND DILUTED EARNINGS (LOSS) | ||||||||
PER SHARE | $ | (0.00 | ) | $ | (0.00 | ) | ||
WEIGHTED AVERAGE NUMBER OF | ||||||||
COMMON SHARES OUTSTANDING | 258,792,500 | 258,750 |
(Unaudited)
For the Nine Months Ended February 28, 2017 | For the Nine Months Ended February 29, 2016 | |||||||
(Restated) | (Restated) | |||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,206,554 | ) | $ | 50,778 | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of derivative | 331,436 | - | ||||||
Loss on issuance of convertible debt | 284,091 | - | ||||||
Amortization of debt discount | 296,400 | - | ||||||
Impairment expense | 157,279 | - | ||||||
Stock issued for services | 75,000 | - | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Prepaids | (56,250 | ) | - | |||||
Inventory | (145,007 | ) | (79,999 | ) | ||||
Accounts payable | - | - | ||||||
Accrued interest on convertible loans | (6,027 | ) | - | |||||
Net Cash Used in Operating Activities | (269,632 | ) | (29,221 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible loans | 181,000 | 40,000 | ||||||
Repayment of convertible loan | (40,000 | ) | - | |||||
Loan from shareholder and related party | 13,500 | 16,400 | ||||||
Net Cash Provided by Financing Activities | 154,500 | 56,400 | ||||||
NET INCREASE (DECREASE) IN CASH | (115,132 | ) | 27,179 | |||||
CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
CASH AT END OF PERIOD | $ | 606 | $ | 85,316 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during period for: | ||||||||
Interest | $ | 22,272 | $ | - | ||||
Income Taxes | $ | - | $ | - | ||||
Non-cash transactions: | ||||||||
Conversion of principal and interest to common shares | $ | 302,750 | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4 |
7
Deficit | ||||||||||||||||||||
Common | Accumulated | |||||||||||||||||||
Common | Stock | Additional | During | |||||||||||||||||
Stock | Amount | Paid-in Capital | Development Stage | Total | ||||||||||||||||
Stock issued for cash at May 31, 2013 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Net loss May 31, 2013 | (502 | ) | (502 | ) | ||||||||||||||||
Balance May 31, 2013 | - | - | - | (502 | ) | (502 | ) | |||||||||||||
Common stock issued for cash on May | ||||||||||||||||||||
16, 2014.4,000,000 shares at a par | ||||||||||||||||||||
value of $0.0001 per share | 200,000,000 | 20,000 | 62,232 | - | 82,232 | |||||||||||||||
Net loss May 31, 2014 | (2,000 | ) | (2,000 | ) | ||||||||||||||||
Balance May 31, 2014 | 200,000,000 | $ | 20,000 | $ | 62,233 | $ | (2,502 | ) | $ | 79,730 | ||||||||||
Common stock issued for cash between | ||||||||||||||||||||
between October 14 and 24, 2014 at | ||||||||||||||||||||
$0.05 per share | 58,750,000 | 5,875 | (25,357 | ) | (19,482 | ) | ||||||||||||||
Net loss May 31, 2015 | (483,568 | ) | (483,568 | ) | ||||||||||||||||
Balance May 31, 2015 | 258,750,000 | $ | 25,875 | $ | 36,876 | $ | (486,070 | ) | $ | (423,320 | ) | |||||||||
On February 24, 2016, Common stock | ||||||||||||||||||||
was issued for services rendered at | ||||||||||||||||||||
par value of $0.0001 per share | 42,500 | 4 | - | - | 4.00 | |||||||||||||||
Net loss May 31, 2016 | (163,171 | ) | (163,171 | ) | ||||||||||||||||
Balance May 31, 2016 | 258,792,500 | 25,879 | 36,876 | (649,241 | ) | (586,487 | ) |
8Notes to the Financial Statements
February 28, 2017
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
BEMAX INC. ("INC. (“The Company"Company”) was incorporated in the State of Nevada on November 28, 2012 to engage in the business of exporting disposable baby diapers manufactured in the United States and then distributing them throughout Europe and South Africa. The Company is in the development stage with nolimited revenues and very limited operating history.
NOTE 2 - GOING CONCERN
These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business one year from May 31, 2016.February 28, 2017. The Company has incurred a loss since inception resulting in an accumulated deficit of $97,647$1,427,971 as of August 31, 2016 andFebruary 28, 2017and further losses are anticipated in the development of its business raising substantial doubt about the Company'sCompany’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or the existing cash on hand, loans from directors and/or private placement of common stock, obtainingstock. Obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted accounting principles in the United States of America (GAAP)(“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are presented in US dollars. The Company's Year End is May 31.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally 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 financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimate.
9
The Company'sCompany’s financial instruments consisted of cash, accounts payable, related party advances and convertible notes. Unless otherwise noted, it is management'smanagement’s opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Because of the short maturity of such assets and liabilities the fair value of these financial instruments approximate their carrying values, unless otherwise noted.
5 |
Derivative Financial Instruments
Derivative liabilities are recognized in the salebalance sheets at fair value based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-15– Derivatives and Hedging – Embedded Derivatives(“ASC 815-15”). Pursuant to ASC Topic 815-15 an evaluation of the embedded conversion feature of convertible debt or equity instruments,is evaluated to determine if the bifurcated debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may beconversion feature is required to be bifurcated from the associated host instrument and accounted for separatelyclassified as a derivative instrument liability.
Fair value of similar publicly-traded companies.
10
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are recognized foreither directly or indirectly observable as of the estimated tax consequences attributable to differences betweenreporting date.
Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.
The following table classifies the financial statement carrying valuesCompany’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of February 28, 2017 and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At May 31, 2016,2016:
Description | Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | ||||||||||||
Derivative | - | - | - | (331,436 | ) | |||||||||||
Total | $ | - | $ | - | $ | - | $ | (331,436 | ) |
May 31, 2016:
Description | Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | ||||||||||||
Derivative | - | - | 351,041 | 128,331 | ||||||||||||
Total | $ | - | $ | - | $ | 351,041 | $ | 128,331 |
Revenue Recognition
The Company’s revenue recognition policy is on a full deferred tax asset valuation allowancesales-basis method. The Company recognizes and records revenue at the time of sale once payment has been providedreceived and nodisposable baby diapers are delivered to the buyer.
Pre-payment Policy: All sales to our customers will be solely on a pre-payment basis. Once the order is completed and payment is received, we will place an order with the North American supplier of disposable baby diapers and arrange shipping directly to our customers. The process is expected to take three weeks to complete. The pre-payment will be recorded as deferred tax asset has been recorded.revenue until the delivery is executed.
6 |
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have any significant impact on the Company'sCompany’s results of operations, financial position or cash flow.
NOTE 4 - RELATED PARTY TRANSACTIONS
The President of the Company provides management fees and office premises to the Company for a fee of $1,500 per month, the right to which the President has agreed to assign to the Company until such a time as the Company closes on an Equity or Debt financing of not less than $750,000. The assigned rights are valued at $1,000 per month for rent and $500 for executive compensation. A total of $4,500$13,500 for donated management fees was charged to Shareholder Loan for the periodnine months ended August 31, 2016.
As of May 31, 2016,February 28, 2017, there are loans from the majority shareholder and related party totalling $38,236.These$51,736.These loans were made in order to assist in meeting general and administrative expenses. These advances are unsecured, due on demand and carry no interest or collateral.
NOTE 5 - STOCKHOLDER’S EQUITY
On June 5, 2015, the Company decided to increase the authorized amount of common shares that can be issued from 70,000,000 to 500,000,000 with the same par value of $0.0001 per share. The Company also declared a Fifty (50) to One (1) forward stock split effective immediately.
During fiscal year 2016, the Company issued 42,500 Common Shares at $0.0001 par value to an attorney for legal services rendered.
On December 5, 2016, the Financial Statements
On January 24, 2017, The Company revenue recognition policy is on a sales-basis method. The Company recognizes and records revenue at the timeallowed Taiwo Aimasiko, its CEO to retire 150,000,000 shares of sales once payment has been received and disposable baby diapers are delivered to the buyer.
NOTE 76 - CONVERTIBLE LOANS
On February 16, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principleprincipal amount of the loan iswas $40,000 (forty thousand dollars) with an original issue discount of $4,000 (four thousand dollars) and carries an interest rate of 8% per annum. It becomesbecame due and payable with accrued interest on February 16, 2017. Crown Bridge Partners LLC. have the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate will be at a discount of 48% of the lowest average price for ten days prior to the actual date of conversion. The Company hashad the right to prepay any part of the loan plus accrued interest up to 90 days from the issue date, subject to a cash payment of the principal plus 130% interest and 91 days through 180 for a cash payment of the principal plus 150% interest. On July 14, 2016, the Company repaid the $40,000 of principal, $1,307 of accrued interest and a $20,965 early payment penalty. As a result of repayment of the note the Company recognized the remaining debt discount of $2,833. The Company cannot prepay any amount outstanding after 180 days.
On April 19, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principleprincipal amount of the loan iswas $30,000 (forty(thirty thousand dollars) with an original issue discount of $3,500 (three thousand five hundred dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on April 19, 2017. Crown Bridge Partners, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate is at a discount of 48% applied to the lowest price for ten days prior to the actual date of conversion. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $124,890 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note. As of August 31, 2016, the Company fair valued the derivative at $39,161 resulting in a gain on the change in the fair value for the three months of $85,729. In addition, $11,014 of the debt discount has been amortized to interest expense.
7 |
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Adar Bays, LLC. The principal amount of the loan was $30,000 (thirty thousand dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017. Adar Bays, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest price for fifteen days prior to the actual date of conversion. The Company recorded the derivative liability at its fair value of $108,800 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note. On November 28, 2016, $3,000 of principal was converted into 229,850 shares of common stock. Due to the conversion within the terms of the agreement, no gain or loss was recognized. At the time of conversion, the Company valued the derivative at $40,273 resulting in a gain on the change in the fair value of $8,331. During the third quarter the remaining principal and accrued interest of $27,000 and $1,453, respectively, were fully converted into 22,030,353 shares of common stock resulting in the immediate amortization of the remaining debt discount of $13,159, a $32,001 loss on the change in fair value of the derivative and a $105,878 credit to additional paid in capital.
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Eagle Equities, LLC. The principal amount of the loan was $30,000 (thirty thousand dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017. Eagle Equities, LLC. had the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate is at a discount of 48% of the lowest trading price for fifteen days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The Company recorded the derivative liability at its fair value of $108,800 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note.. During the third quarter principal and accrued interest of $30,000 and $1,459, respectively, were fully converted into 16,845,031 shares of common stock resulting in the immediate amortization of the remaining debt discount of $13,151, a $71,501 loss on the change in fair value of the derivative and a $143,634 credit to additional paid in capital.
On May 10, 2016, the Company issued a Convertible Promissory Note in favor of Auctus Fund, LLC. The principal amount of the loan was $77,750 (seventy-seven thousand, seven hundred and fifty dollars) with an original issue discount of $6,750 (six thousand, seven hundred and fifty dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 10, 2017. Auctus Fund, LLC. had the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% of the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $261,774 based on the Black Scholes Merton pricing model and a corresponding debt discount of $77,750 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $77,750 and $605, respectively, were fully converted into 43,741,990 shares of common stock resulting in the immediate amortization of the remaining debt discount of $20,282, a $295,729 loss on the change in fair value of the derivative and a $467,591 credit to additional paid in capital.
On June 2, 2016, the Company issued a Convertible Promissory Note in favor of JSJ Investments Inc. The principal amount of the loan was $55,000 (fifty-five thousand dollars), with an original issue discount of $3,000 three thousand dollars), a payment of $2,000 (two thousand dollars) in loan fees and it carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on June 2, 2017. JSJ Investments, Inc. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $167,895 based on the Black Scholes Merton pricing model and a corresponding debt discount of $55,000 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $55,000 and $2,395, respectively, were fully converted into 32,463,378 shares of common stock resulting in the immediate amortization of the remaining debt discount of $34,554, a $65,510 loss on the change in fair value of the derivative and a $190,914 credit to additional paid in capital.
On June 14, 2016, the Company issued a Convertible Promissory Note in favor of Black Forest Capital LLC. The principal amount of the loan was $80,000 (eighty thousand dollars), with an original issue discount of $8,000 (eight thousand dollars), a payment of $2,000 (two thousand dollars) for loan fees and it carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on June 14, 2017. Black Forest Capital, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $228,110 based on the Black Scholes Merton pricing model and a corresponding debt discount of $80,000 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $80,000 and $3,254, respectively, were fully converted into 55,208,045 shares of common stock resulting in the immediate amortization of the remaining debt discount of $42,959, a $203,588 loss on the change in fair value of the derivative and a $396,470 credit to additional paid in capital.
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On December 28, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principal amount of the loan is $46,000 (forty-six thousand dollars) with an original issue discount of $4,500 (four thousand five hundred dollars) and carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on April 19,December 28, 2017. Crown Bridge Partners, LLC., has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate will be at a discount of 48% of45% applied to the lowest average price for ten days prior to the actual date of conversion. The Company has the right to prepay any part of the loan plus accrued interest up to 90 days from the issue date, subject to a cash payment of the principal plus 130% interest and 91 days through 180 for a cash payment of the principal plus 150% interest. The Company cannot prepay any amount outstanding after 180 days.
A summary of outstanding convertible notes as of February 28, 2017, is $30,000 (forty thousand dollars) and carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017.Eagle Equities LLC. has the optionas follows:
Note Holder | Issue Date | Maturity Date | Stated Interest Rate | Amount of Note | Repayments / Conversions | Principal Balance 2/28/2017 | ||||||||||||||
Crown Bridge Partners, LLC (1) | 2/16/2016 | 2/16/2017 | 8 | % | $ | 40,000 | $ | (40,000 | ) | $ | - | |||||||||
Crown Bridge Partners, LLC | 4/19/2016 | 4/19/2017 | 8 | % | 30,000 | (30,000 | ) | - | ||||||||||||
Adar Bays, LLC | 5/9/2016 | 5/9/2017 | 8 | % | 30,000 | (30,000 | ) | - | ||||||||||||
Eagle Equities, LLC | 5/9/2016 | 5/9/2017 | 8 | % | 30,000 | (30,000 | ) | - | ||||||||||||
Auctus Fund, LLC | 5/10/2016 | 2/10/2017 | 8 | % | 77,750 | (77,750 | ) | - | ||||||||||||
JSJ Investments Inc. | 6/2/2016 | 2/26/2017 | 8 | % | 55,000 | (55,000 | ) | - | ||||||||||||
Black Forest Capital LLC | 6/14/2016 | 6/14/2017 | 8 | % | 80,000 | (80,000 | ) | - | ||||||||||||
Crown Bridge Partners, LLC | 12/28/2016 | 12/28/2017 | 8 | % | 46,000 | - | 46,000 | |||||||||||||
Total | $ | 388,750 | $ | (342,750 | ) | $ | 46,000 |
(1) | This Note was repaid in full with cash on July 14, 2016. |
All other reductions were conversions to convert the Note plus accrued interest into common shares
A summary of the Company, at anytime. The conversion rate will be at a discount of 52%activity of the lowest average pricederivative liability for fifteen days priorthe notes above is as follows:
Balance at May 31, 2015 | $ | - | ||
Increase to derivative due to new issuances | 479,374 | |||
Derivative (gain) due to mark to market adjustment | (128,333 | ) | ||
Balance at May 31, 2016 | 351,041 | |||
Increase to derivative due to new issuances | 434,591 | |||
Decrease due to debt settlement | (1,117,070 | ) | ||
Derivative loss due to mark to market adjustment | 331,438 | |||
Balance at February 28, 2017 | $ | - |
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended February 28, 2017 is as follows:
Inputs | February 28, 2017 | Initial Valuation | ||||||
Stock price | $ | .0047 - .0325 | $ | .52 – .74 | ||||
Conversion price | $ | .002 | $ | .14 – .27 | ||||
Volatility (annual) | 249% - 395% | 324% - 335% | ||||||
Risk-free rate | .51% - .90% | .51% - .52% | ||||||
Years to maturity | .08 - 1 | .76 - 1 |
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management
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NOTE 7 – RESTATEMENT
The May 31, 2016 financial statements were restated to record inventory for purchases previously recorded on a cash basis, eliminate accounts receivable, accounts payable and deferred revenue recorded due to accounting errors; and to account for the embedded conversion feature related to convertible loans.
The following table summarizes changes made to the actual date of conversion. The Company has the right to prepay any partMay 31, 2016 balance sheet.
May 31, 2016 | ||||||||||||
Balance Sheet: | As Reported | Adjustment | As Restated | |||||||||
Accounts receivable | $ | 372,622 | $ | (372,622 | ) | $ | - | |||||
Inventory | $ | - | $ | 189,823 | $ | 189,823 | ||||||
Total Current Assets | $ | 488,360 | $ | (182,799 | ) | $ | 305,561 | |||||
Total Assets | $ | 488,860 | $ | (182,799 | ) | $ | 306,061 | |||||
Accounts payable | $ | 319,795 | $ | (319,795 | ) | $ | - | |||||
Derivative liability | $ | - | $ | 351,041 | $ | 351,041 | ||||||
Debt discount | $ | - | $ | (134,148 | ) | $ | (134,148 | ) | ||||
Deferred revenue | $ | 507,722 | $ | (507,722 | ) | $ | - | |||||
Total current liabilities | $ | 1,075,348 | $ | (610,624 | ) | $ | 464,724 | |||||
Total liabilities | $ | 1,075,348 | $ | (610,624 | ) | $ | 464,724 | |||||
Accumulated deficit | $ | (649,241 | ) | $ | 427,823 | $ | (221,418 | ) |
As a result of the loan plus accrued interest uperrors related to 90 days frominventory and recording prior sales and cost of goods sold, the issue date, subjectfinancial statements for the nine months ended February 29, 2016 were restated to areflect these changes.
The statement of operations and cash payment offlows for the principal plus 130% interest and 91 days through 180 for a cash payment ofnine months ended February 28, 2017 were restated to correct errors made when preparing the principal plus 150% interest. The Company cannot prepay any amount outstanding after 180 days.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated all events and transactions that occurred after August 31, 2016February 28, 2017 up through the date these financial statements were available for issuance. It has been determined that there is nothing furtherthe following events need to report.be reported.
On March 20, 2017, the Company authorized and issued a Convertible Promissory Note in favor of Crown Bridge Partners for $114,000.
On March 27, 2017, the Company authorized and issued a Convertible Promissory Note in favor of JSJ Investments, Inc. for $125,000.
On April 4, 2017, the Company authorized and issued a Convertible Promissory Note in favor of Auctus Fund, LLC for $145,000.
Refer to the filing for the year ended May 31, 2017 for additional subsequent activity.
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ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements"“forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
Business Overview
Bemax Inc. is newa Nevada –based company focusing on the distribution of disposable baby diapers made in North America and Asia by quality producers to wholesalers and retailers in Europe and the emerging markets. We are a development stage corporation and have generated or realized minimal revenues from our business operations.
Liquidity and Capital Resources
Cash Flows
Three Months | Three Months | |||||||
Ended | Ended | |||||||
August 31, 2016 | August 31, 2015 | |||||||
$ | $ | |||||||
Net Cash Provided By (Used In) Operating Activities | (8.00 | ) | 93,476 | |||||
Net Cash Used by Investing Activities | - | (500 | ) | |||||
Net Cash Provided By (Used In) Financing Activities | (8.00 | ) | 58,750 | |||||
CASH AT BEGINNING OF PERIOD | 58,137 | 4,000 | ||||||
CASH AT END OF PERIOD | 115,730 | 155,726 |
Nine Months Ended February 28, 2017 | Nine Months Ended February 29, 2016 | |||||||
Net Cash Used in Operating Activities | $ | (269,632 | ) | $ | (29,221 | ) | ||
Net Cash Used by Investing Activities | $ | - | $ | - | ||||
Net Cash Provided by Financing Activities | $ | 154,500 | $ | 56,400 |
We currently have minimal cash reserves. To date, the Company has covered operating deficits primarily through loans from the sole director and third partythird-party convertible note of $302,750.notes. Accordingly, our ability to pursue our plan of operations is contingent on our being able to obtain funding for the development, marketing and commercialization of our products and services. However, as a result of its lack of operating success, the Company may not be able to raise additional funding to cover operating deficits.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has accumulated deficit of $97,647$1,427,971 since inception (November 28, 2012) to the period ended August 31, 2016February 28, 2017 and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. However, these conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern.
Results of Operations
Revenue
The Company had $24,960 in sales for the three months ended February 28, 2017 compared to $246,119 for period ended February 29, 2016. This reduction is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
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Sales for the Period Ended August 31, 2016
Operating Expense
The total operating expense for the three months ended February 28, 2017 is $79,558 compared to $13,859 for the three months ended February 29, 2016 and August 31, 2015 were $92,122 and $0 respectively.
The amounts presented in the financial statements do not providetotal costs of goods for the effectnine-month period ended February 28, 2017 is $279,197 compared to $266,864 for the same nine-month period ending February 29, 2016. The reason for the decrease is due to reduction in sales and write done of inflationinventory.
Interest Expenses
Total interest expense and loan fees for the nine months ended February 28, 2017 is $53,001 compared to $1,714 interest on our operations or financial position. The net operating losses shown would be greater than reported ifloan during the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Off-Balance Sheet Arrangements
As of August 31, 2016,February 28, 2017, we had no off balanceoff-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
The Company is working toward the introduction of new products including Diapers with wet indicators, wipes and newer version of pull –ups. The company will introduce better pricing including reduced shipping cost to accommodate larger segment of online customers.
The Company continue working on several business development projects to increase sales and generate revenues, including introducing the Company’s private label brands to other broad online market platforms such as Shopify and Amazon prime. The Company will continue to expand both manufacturing and distribution network with quality manufacturers and established distributors to enhance regional and global expansion strategy.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as(as defined in RuleRules 13a-15(e) promulgated underand 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), that are designed to ensurebe effective in providing reasonable assurance that information required to be disclosed by us in theour reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission's rules and formsCommission (the “SEC”), and that such information is accumulated and communicated to our sole officer, as appropriatemanagement to allow timely decisions regarding required disclosure. We carried out an evaluation, underOur Chief Executive Officer and Chief Financial Officer evaluated the supervision
● | timely and accurate reconciliation of accounts |
● | lack of segregation of duties |
● | complex accounting transaction expertise |
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.
Changes in Internal Controls
Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as ofno change occurred in the end of the periods covered by this report, we have identified the following material weakness of ourCompany’s internal controls: Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
N/A.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits:
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
BEMAX INC. | ||
Dated: November 2, 2017 | By: | /s/ Taiwo Aimasiko |
Taiwo Aimasiko, President and | ||
Chief Executive Officer | ||
Dated: November 2, 2017 | By: | /s/ Taiwo Aimasiko |
Taiwo Aimasiko, | ||
Chief Financial Officer |
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