UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 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
333-197756
(Exact name of registrant as specified in its charter)
| Nevada | 46-554081 |
| (State or other jurisdiction of Organization) | (IRS Employer Identification Number) |
625 Silver Oak Drive
Dallas, GA 30132
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)
| 1 |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) /of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated“accelerated filer and large accelerated filer"filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting 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 ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
301,640,836 common shares issued and outstanding as of January 11,April 21, 2017.
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TABLE OF CONTENTS |
| PART I – FINANCIAL INFORMATION | 4 | |
| Item 1. | Financial Statements | |
| Balance Sheets (audited) | 5 | |
| Statements of Operations (unaudited) | 6 | |
| Statements of Cash Flows (unaudited) | 7 | |
| Notes to the Financial Statements | 8 | |
| Item 2. Management's Discussion and Analysis of Financial condition and Resultos of Operations | ||
| Item 3. Quantitative and Qualitative Disclosure about Market Risk | ||
| Item 4. Controls and Procedures | ||
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings: | |
Item 2. | Unregistered Sales Of Equity Securities | |
| Item 3. | Default Upon Senior Securities | |
| Item 4. | Mining Safety Procedures | |
| Item 5. | Other Information: | |
| Item 6. | Signature | |
| 3 |
3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the 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 annual financial statements and notes thereto included in our annual Report on Form 10-K filed therewith the U.S. Securities and Exchange Commission (SEC) on July 6, 2016 and amended on July 14, 2016, and can be found on the SEC website at www.sec.gov
www.sec.gov
Financial Statements
(Expressed in US dollars)
(Unaudited)
| 4 |
4
Balance Sheets (Stated in U.S. Dollars)
February 28, 2017 and May 31, 2016
| Current Assets | February 28, 2017 $ | May 31, 2016 $ | ||||||
| Cash and cash equivalents | 606 | 115,738 | ||||||
| Pre-paid expenses | 56,250 | — | ||||||
| Inventory | 177,551 | 16,827 | ||||||
| Total current assets | 234,407 | 132,565 | ||||||
| Other assets | ||||||||
| Equipment | 500 | 500 | ||||||
| Total other assets | 500 | 500 | ||||||
| TOTAL ASSETS | 234,907 | 133,065 | ||||||
| Commitments & Contingencies | — | — | ||||||
| LIABILITIES & STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Derivative liability | — | 351,041 | ||||||
| Convertible loans | 46,000 | 207,750 | ||||||
| Debt discount | (3,748 | ) | (134,148 | ) | ||||
| Accrued interest on convertible loans | 634 | 1,845 | ||||||
| Loan from shareholder and related party | 51,736 | 38,236 | ||||||
| Total current liabilities | 94,622 | 464,724 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock series B, ($0.0001) par value, 50,000,000 shares authorized and issued as of February 28, 2017. | 5,000 | — | ||||||
| Common stock, ($0.0001 par value, 500,000,000 shares authorized; 301,640,836 shares issued and outstanding at February 28, 2017 and 258,792,500, at May 31, 2016, respectively | 30,164 | 25,879 | ||||||
| Additional paid-in capital | 1,533,092 | 36,876 | ||||||
| Accumulated deficit | (1,427,971 | ) | (394,414 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | 140,285 | (331,659 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 234,907 | 133,065 | ||||||
See Notes to Financial Statements
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| November 30, 2016 | May 31, 2016 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 14,454 | $ | 115,738 | ||||
| Total current assets | 14,454 | 115,738 | ||||||
| Fixed Assets | ||||||||
| Furniture and Equipment | 500 | 500 | ||||||
| Total fixed assets | 500 | 500 | ||||||
| TOTAL ASSETS | $ | 14,954 | $ | 116,238 | ||||
| LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Convertible Loans | $ | 298,746 | $ | 207,750 | ||||
| Accrued interest on convertible loans | 9,599 | 1,843 | ||||||
| Loan from shareholder and related party | 47,236 | 38,237 | ||||||
| Accounts payable | 725 | 725 | ||||||
| Total current liabilities | 356,306 | 248,555 | ||||||
| Commitments and Contingencies | - | - | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Common stock, ($0.0001 par value, 500,000,000 shares | ||||||||
| authorized; 259,196,500 shares issued and outstanding at | ||||||||
| November 30, 2016 and 258,792,500 as of May 31, 2016 | 25,919 | 25,879 | ||||||
| Additional paid-in capital | 44,102 | 36,876 | ||||||
| Accumulated deficit | (411,373 | ) | (195,071 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | (341,352 | ) | 132,317 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 14,954 | $ | 116,238 | ||||
| See Notes to Financial Statements | ||||||||
5
Statements of Operations
(Stated in U.S. Dollars) Unaudited
| Three Months Ended February 28, 2017 | Three Months Ended February 29, 2016 | Nine Months Ended February 28, 2017 | Nine Months Ended February 29, 2016 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| Sales | 24,960 | 246,119 | 140,113 | 346,338 | ||||||||||||
| TOTAL REVENUES | 24,960 | 239,119 | 140,113 | 346,338 | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Purchases-resale items | 20,067 | 187,361 | 106,200 | 266,864 | ||||||||||||
| TOTAL COGS | 20,067 | 187,361 | 106,200 | 266,864 | ||||||||||||
| Gross profit | 4,893 | 58,758 | 33,913 | 79,474 | ||||||||||||
| Operating costs | ||||||||||||||||
| General and administrative expenses | 68,858 | 8,655 | 79,442 | 14,078 | ||||||||||||
| Professional fees | 9,200 | 3,704 | 18,600 | 8,404 | ||||||||||||
| Management fees | 1,500 | 1,500 | 4,500 | 4,500 | ||||||||||||
| TOTAL OPERATING COSTS | 79,558 | 10,859 | 102,542 | 26,982 | ||||||||||||
Non-Operating Income (loss) Change in FV | (715,318 | ) | — | (331,436 | ) | — | ||||||||||
| Loss of issuance of convertible debt | — | — | (284,091 | ) | — | |||||||||||
| Interest expense and loan fees | (3,712 | ) | (1,714 | ) | (53,001 | ) | (1,714 | ) | ||||||||
| Interest expense discount | (134,032 | ) | — | (296,400 | ) | — | ||||||||||
| TOTAL NON-OPERATING INCOME(LOSS) | (853,062 | ) | (1,714 | ) | (964,928 | ) | (1,714 | ) | ||||||||
| NET ORDINARY INCOME(LOSS) | (927,727 | ) | 46,185 | (1,033,557 | ) | 50,778 | ||||||||||
| BASIC AND DILUTED EARNINGS (LOSS) PER SHARE | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 347,475,778 | 258,792,500 | 288,045,808 | 258,792,500 | ||||||||||||
See Notes to Financial Statements
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| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
| November 30, 2016 | November 30, 2015 | November 30, 2016 | November 30, 2015 | |||||||||||||
| REVENUES | ||||||||||||||||
| Revenues | 23,031 | 100,319 | 115,153 | 100,319 | ||||||||||||
| TOTAL REVENUES | $ | 23,031 | $ | 100,319 | $ | 115,153 | $ | 100,319 | ||||||||
| Cost of goods sold | ||||||||||||||||
| Purchases-resale items | 122,182 | - | 248,182 | - | ||||||||||||
| TOTAL COGS | $ | 122,182 | $ | - | $ | 248,182 | $ | - | ||||||||
| Gross profit | (99,151 | ) | 100,319 | (133,029 | ) | 100,319 | ||||||||||
| Operating costs | ||||||||||||||||
| General and administrative expenses | 4,025 | 3,510 | 10,583 | 8,423 | ||||||||||||
| Professional fees | 1,100 | 4,000 | 9,400 | 7,700 | ||||||||||||
| Management fees | 1,500 | 1,500 | 3,000 | 3000 | ||||||||||||
| TOTAL OPERATING COSTS | $ | 6,625 | $ | 9,010 | $ | 22,983 | $ | 19,123 | ||||||||
| Interest expense and loan fees | (6,079 | ) | - | (60,290 | ) | - | ||||||||||
| NET INCOME (LOSS) | $ | (111,855 | ) | $ | 91,309 | $ | (216,302 | ) | $ | 81,196 | ||||||
| BASIC AND DILUTED EARNINGS (LOSS) | ||||||||||||||||
| PER SHARE | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| WEIGHTED AVERAGE NUMBER OF | ||||||||||||||||
| COMMON SHARES OUTSTANDING | 258,843,687 | 258,750,000 | 258,817,954 | 258,750,000 | ||||||||||||
| See Notes to Financial Statements | ||||||||||||||||
6
Statements of Cash Flows
(Stated in U.S. Dollars)
For the Six Months Ended November 30,February 28, 2017 and February 29, 2016 and November 30, 2015
(Unaudited)
| Six Months Ended | Six Months Ended | |||||||
| November 30, 2016 | November 30, 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (216,302 | ) | $ | 81,196 | |||
| Changes in operating assets and liabilities: | ||||||||
| Adjustments to reconcile net loss to net cash | ||||||||
| provided by (used in) operating activities: | ||||||||
| Loan from shareholder and related party | 9,000 | 11,900 | ||||||
| Accounts payable | - | (105,560 | ) | |||||
| Accrued interest on convertible loans | 11,018 | - | ||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (196,284 | ) | (12,464 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from convertible notes payable | 135,000 | - | ||||||
| Payment on convertible notes payable | (40,000 | ) | - | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 95,000 | - | ||||||
| NET INCREASE (DECREASE) IN CASH | (101,284 | ) | (12,464 | ) | ||||
| CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
| 14,454 | ||||||||
| CASH AT END OF PERIOD | $ | 14,454 | $ | 45,673 | ||||
| 14,454 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during year for : | ||||||||
| Interest | $ | 12,325 | $ | - | ||||
| Income Taxes | $ | - | $ | - | ||||
| Non-cash transactions | ||||||||
| Common shares issued to pay principal and accrued interest on converted notes | 7,266 | $ | - | |||||
| See Notes to Financial Statements | ||||||||
| Nine Months Ended February 28, 2017 | Nine Months Ended February 29, 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (1,033,557 | ) | $ | 50,778 | |||
| Changes in operating assets and liabilities: | ||||||||
| Adjustments to reconcile net loss to net cash | ||||||||
| provided by (used in) operating activities: | ||||||||
| Loss on derivative | 331,436 | — | ||||||
| Stock issued for services | 75,000 | — | ||||||
| Amortization of convertible debt discount | 296,400 | — | ||||||
| Loss on issuance of notes | 284,091 | — | ||||||
| Changes in operating assets and liabilities: | — | |||||||
| Pre-paid expenses | (56,250 | ) | ||||||
| Inventory | (160,724 | ) | (79,999 | ) | ||||
| Loan from shareholder and related party | 13,500 | 16,400 | ||||||
| Debt discount | 6,028 | — | ||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (256,132 | ) | (12,821 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceed from convertible notes | 181,000 | 40,000 | ||||||
| Payments on convertible notes | (40,000 | ) | — | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 141,000 | 40,000 | ||||||
| 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 year for : | ||||||||
| Interest | $ | 1,307 | $ | — | ||||
Income Taxes Disclosure of non-cash activities: Conversion of principal and interest to common shares | $ | 1,435,318 | $ | — | ||||
7
| 7 |
BEMAX INC. Notes to the Financial Statements February 28, 2017 (Unaudited) |
1. NATURE OF OPERATIONS
BEMAX 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 limited revenues and very limited operating history.
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 for the foreseeable future. The Company anticipates future losses 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 to obtain 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 with existing cash on hand, loans from directors and/or issuance of common shares.
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. The Company has incurred a loss since inception resulting in an accumulated deficit of $411,373$1,427,971 as of November 30, 2016February 28, 2017 and 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. 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 with personal cash, outside loans, or equity issuances.
There is no guarantee that the Company will be able to raise any capital through any type of offering.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and are presented in US dollars. The Company'sCompany’s Year End is May 31.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.
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 estimates.
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BEMAX INC. Notes to the Financial Statements February 28, 2017 (Unaudited) |
8
The Company'sCompany follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments consistedand paragraph 820-10-35-37 of cash, accounts payable, related party advances and convertible notes. Unless otherwise noted, it is management's opinion the Company is not exposedFASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to significant interest, currency or credit risks arising from thesemeasure the fair value of its financial instruments. BecauseParagraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
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 either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of such assets and liabilitiesthose instruments. The Company’s notes payable approximates the fair value of thesesuch instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial instruments approximate their carrying values, unless otherwise noted.arrangements at February 28, 2017.
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of:
February 28, 2017:
| 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 | |||||||||
| Total | $ | - | $ | - | $ | 351,041 | $ | 128,331 | ||||
| 9 |
Income Taxes
The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values 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 November 30, 2016,February 28, 2017, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
Basic and Diluted Net (Loss) per Share
The Company computes net (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The Company has losses for the sixnine months ended November 30, 2016;February 28, 2017; therefore basic EPS equals diluted EPS.
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.
As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
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 $9,000$13,500 for donated management fees was charged to Shareholder Loan for the sixnine months ended November 30, 2016.
As of November 30, 2016,February 28, 2017, there are loans from the majority shareholder and related party totalling $47,236.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.
| 10 |
5. STOCKHOLDER'SSTOCKHOLDER’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.
At November 30, 2016,February 28, 2017, there are 500,000,000450,000,000 shares of common stock at a par value of $0.0001 and 50,000,000 preferred shares at $0.0001 per share authorizedauthorized. There are 301,640,836 common and 259,196,50050,000,000 preferred shares issued and outstanding.
The 50-1 stock split has been shown retroactively.
On December 5, 2016, the Company entered into an initial one year consulting agreement with Adebayo Ladipo. He has been compensated by receiving 7,500,000 shares of common stock valued at $75,000 based on the market price of the common stock on this date. This was valued at $0.01 per share. At no time is he considered an employee of the Company. He is an Independent Contractor and able to pursue other interests.
On January 24, 2017, The Company allowed Taiwo Aimasiko, its CEO to retire 150,000,000 shares of common stock in exchange for 50,000,000 Series B preferred shares.
6. REVENUE RECOGNITION
The Company'sCompany’s revenue recognition policy is on a sales-basis method. The Company recognizes and records revenue once payment has been received and disposable 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 revenue until the delivery is executed.
7. CONVERTIBLE LOANS
On February 16, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principal 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. 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% 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 repaid the note prior to when the convertible feature was effective; therefore there are no derivatives related to the embedded conversion feature.
| 11 |
cannot5. STOCKHOLDER’S EQUITY prepay any
On June 5, 2015, the Company decided to increase the authorized amount outstanding after 180 days. This Noteof 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.
At February 28, 2017, there are 450,000,000 shares of common stock at a par value of $0.0001 and 50,000,000 preferred shares at $0.0001 per share authorized. There are 301,640,836 common and 50,000,000 preferred shares issued and outstanding.
The 50-1 stock split has been paid.
On April 19,December 5, 2016, the Company entered into an initial one year consulting agreement with Adebayo Ladipo. He has been compensated by receiving 7,500,000 shares of common stock valued at $75,000 based on the market price of the common stock on this date. This was valued at $0.01 per share. At no time is he considered an employee of the Company. He is an Independent Contractor and able to pursue other interests.
On January 24, 2017, The Company allowed Taiwo Aimasiko, its CEO to retire 150,000,000 shares of common stock in exchange for 50,000,000 Series B preferred shares.
6. REVENUE RECOGNITION
The Company’s revenue recognition policy is on a sales-basis method. The Company recognizes and records revenue once payment has been received and disposable 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 revenue until the delivery is executed.
7. CONVERTIBLE LOANS
On February 16, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principal amount of the loan is $30,000 (thirtywas $40,000 (forty thousand dollars) with an original issue discount of $3,500 (three$4,000 (four thousand five hundred dollars) and carries an interest rate of 8% per annum. It becomesbecame due and payable with accrued interest on April 19,February 16, 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% 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 repaid the note prior to when the convertible feature was effective; therefore there are no derivatives related to the embedded conversion feature.
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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.
On May 9,June 2, 2016, the Company issued a Convertible RedeemablePromissory Note in favor of Adar Bays,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 $30,000 (thirty$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 May 9, 2017.Adar Bays,December 28, 2017. Crown Bridge Partners, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at anytime.after 180 days. The conversion rate will be at a discount of 52% of45% applied to the lowest average price for fifteen 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
A summary of outstanding convertible notes as of February 28, 2017, is $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 carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 10, 2017.Auctus Fund, 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 ten days prior to the actual datenotes 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 | (128,331) | |
| Balance at May 31, 2016 | 351,040 | |
| 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 | 331,436 | |
| Balance at February 28, 2017 | $ | - |
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A summary of conversion. 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
8. CORRECTION OF ERRORS
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 135% interestdiscovered that there were errors in prior periods regarding revenue, expense and 91 days through 120derivative recognition for a cash payment of the principal plus 140% interest. From 121 through 150 days, prepaying the principle plus accrued interest plus 145% interest and day 151 through 180 days plus interest of 150%.The Company cannot prepay any amount outstanding after 180 days.
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Accounts Receivable | $ | 372,622 | $ | (372,622 | ) | $ | - | |||||
| Accounts Payable | $ | 319,795 | $ | (319,070 | ) | $ | 725 | |||||
| Deferred Revenue | $ | 507,722 | $ | (507,722 | ) | $ | - | |||||
| Accumulated Deficit | $ | (649,241 | ) | $ | 454,170 | $ | (195,071 | ) |
9. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions that occurred after November 30, 2016February 28, 2017 up through the date these financial statements were available for issuance. It has been determined that the following events are material:
On December 5, 2016,March 20, 2017, the Company entered into an initial one year consulting agreement with Adebayo Ladipo. He has been compensated by receiving 7,500,000 sharesauthorized and issued a Convertible Promissory Note in favor of common stock at a par value of $0.0001 per share. At no time is he considered an employee of the Company. He is an Independent Contractor and able to pursue other interests.
On March 27, 2017, the six loans outstanding including accrued interest, have all been converted to common shares. There are currently no loans outstanding. The total numberCompany authorized and issued a Convertible Promissory Note in favor of sharesJSJ Investments, Inc. for $125,000.
On April 4, 2017, the Company authorized and issued regarding these conversions totals 184,748,966.a Convertible Promissory Note in favor of Auctus Fund, LLC for $145,000.
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ITEM 2. MANAGEMENT'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" 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 a 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.
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Cash Flows
Six Months Ended November 30, 2016 $ | Six Months Ended November 30, 2015 $ | |||||||
| Net Cash Provided By (Used In) Operating Activities | (196,284 | ) | (12,464 | ) | ||||
| Net Cash Used by Investing Activities | - | - | ||||||
| Net Cash Provided By (Used In) Financing Activities | 95,000 | - | ||||||
| CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
| CASH AT END OF PERIOD | 14,454 | 45,673 |
| Nine Months | Nine Months | |||||||
| Ended | Ended | |||||||
| February 28, 2017 | February 29, 2016 | |||||||
| $ | $ | |||||||
| Net Cash Provided By (Used In) Operating Activities | (256,132) | (12,821 | ) | |||||
| Net Cash Used by Investing Activities | — | — | ||||||
| Net Cash Provided By (Used In) Financing Activities | 141,000 | 40,000 | ||||||
| CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
| CASH AT END OF PERIOD | 606 | 85,316 | ||||||
We currently have minimal cash reserves. To date, the Company has covered operating deficits primarily through loans from the sole director and third party convertible 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 financial statements have been prepared assuming that the Company will continue as a going concern. The Company has accumulated deficit of $411,373$1,427,971 since inception (November 28, 2012) to the period ended November 30, 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's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Management's Fiscal Quarter Report on Internal Control over Financial Reporting.
Our management 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. Management has determined that internal control are not effective.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Results of Operations
Sales
The Company had $23,031$24,960 in revenuesales for the three months ended November 30, 2016February 28, 2017 compared to $65,219$246,119 for period ended November 30, 2015.February 29, 2016. This reduction is due to inability to secure viable and less dilutive financing to effectively finance purchase orders.
Sales for the sixnine months ended November 30, 2016February 28, 2017 is $115,153$140,113 compared to $65,219$306,419 for the sixnine months ended November 30, 2015.February 29, 2016. The reduction is due to less purchase order received from the Company’s distributors during this period.
Operating Expense
The total operating expense for the three months ended February 28, 2017 is $79,558 compared to $10,859 for the three months ended February 29, 2016 and $102,542 compared to the nine months ended February 28, 2017. The increase is due to increase purchase orders.
The total costs of goods for the three months ended November 30, 2016 is $122,182 compared to $0 for the three months ended November 30, 2015. The increase is due to increase in number of purchase orders.
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Interest Expenses
Total interest expense and loan fees for the sixnine months ended November 30, 2016February 28, 2017 is $60,290 due$53,001 compared to financing obtained$1,714 interest on loan during the period. No notes payable occurred during the six monthsnine month period ended November 30, 2015.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if 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 November 30, 2016,February 29, 2017, we had no off-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:including introducing the Company'sCompany’s private label brands to new segment ofother broad online customers throughmarket platforms such as Shopify and Amazon introduce better pricingprime. The Company will continue to existingexpand both manufacturing and prospective distributors to obtain larger purchase orders, introduce the Company's brands to traditional U.S. retail outlets. In addition, the Company is working to sign exclusive distribution agreementnetwork with largerquality 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
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our sole officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our sole officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2016.February 28, 2017.
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Based on the evaluation of these disclosure controls and procedures, our Chief Executive and Chief Financial Officer concluded that as of the end of the periods covered by this report, we have identified the following material weakness of our internal controls: Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
There were no changes in our internal control or in other factors during the last fiscal quarter covered by this report that have materially affected, or are likely to materially affect the Company's internal control over financial reporting.
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:
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d- 14(b) and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
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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: April 21, 2017 | By: /s/Taiwo Aimasiko |
| Taiwo Aimasiko, President and | |
| Chief Executive Officer | |
| Dated: April 21, 2017 | By: /s/Taiwo Aimasiko |
| Taiwo Aimasiko, Chief Financial Officer |
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