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 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)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) /ofof the Exchange Act during the past 12 months (or for such shorter period that the registrant was requirerequired 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ 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 subsequent tocommon equity, as of the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No
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 six months ended November 30, 2015 were restated to reflect these changes.
The balance sheets as of November 30, 2016 and statements of operations and cash flows for the six months then ended were restated as well.
TABLE OF CONTENTS
PART I | ||
Item 1. | Condensed Financial Statements (unaudited) | 1 |
Item 2. | ||
Item 3. | ||
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. | ||
Signatures | 14 |
3
ITEM 1. FINANCIAL STATEMENTS
BEMAX INC.
Financial Statements
Condensed Balance Sheets as of November 30, 2016 (unaudited) and May 31, 2016 | 2 |
Condensed Statements of Operations for the Three and Six Months ended November 30, 2016 and 2015 (unaudited) | 3 |
Condensed Statements of Cash Flows for the Six Months ended November 30, 2016 and 2015 (unaudited) | 4 |
Notes to the Condensed Financial Statements (unaudited) | 5 |
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BEMAX INC
Condensed Balance Sheets
(Unaudited)
November 30, 2016 | May 31, 2016 | |||||||
ASSETS | (Unaudited / Restated) | (Restated) | ||||||
Current Assets: | ||||||||
Cash | $ | 14,454 | $ | 115,738 | ||||
Inventory | 321,828 | 189,823 | ||||||
Total current assets | 336,282 | 305,561 | ||||||
Furniture and equipment | 500 | 500 | ||||||
Total Assets | $ | 336,782 | $ | 306,061 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Accrued interest on convertible loans | 12,863 | 1,845 | ||||||
Derivative liability | 401,710 | 351,041 | ||||||
Convertible loans, net of discount of $133,280 and $134,148, respectively | 162,466 | 73,602 | ||||||
Loan from shareholder and related party | 47,236 | 38,236 | ||||||
Total current liabilities | 624,275 | 464,724 | ||||||
Total Liabilities | 624,275 | 464,724 | ||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized; 259,196,500 and 258,792,500 shares issued and outstanding, respectively | 25,920 | 25,879 | ||||||
Additional paid-in capital | 43,838 | 36,876 | ||||||
Accumulated deficit | (357,251 | ) | (221,418 | ) | ||||
Total Stockholders’ (Deficit) | (287,493 | ) | (158,663 | ) | ||||
Total Liabilities and Stockholders’ Equity | $ | 336,782 | $ | 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 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.
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BEMAX INC.
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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 |
(Unaudited)
For the Three Months Ended November 30, | For the Six Months Ended November 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||
Revenues | $ | 23,031 | $ | 100,319 | $ | 115,153 | $ | 100,319 | ||||||||
Cost of goods sold | 5,297 | 88,513 | 116,177 | 88,513 | ||||||||||||
Gross margin | 17,734 | 11,806 | (1,024 | ) | 11,806 | |||||||||||
Operating Expenses: | ||||||||||||||||
Professional fees | 1,100 | 1,000 | 9,400 | 4,700 | ||||||||||||
Management fees | 1,500 | 1,500 | 3,000 | 3000 | ||||||||||||
General and administrative | 4,025 | 3,510 | 10,584 | 8,423 | ||||||||||||
Total Operating Expenses | 6,625 | 6,010 | 22,984 | 16,123 | ||||||||||||
Income (loss) from operations | 11,109 | 5,796 | (24,008 | ) | (4,317 | ) | ||||||||||
Other Income (Expense): | ||||||||||||||||
Interest expense and loan fees | (6,079 | ) | - | (49,289 | ) | - | ||||||||||
Interest expense discount | (82,115 | ) | - | (162,368 | ) | - | ||||||||||
Change in fair value of derivative liability | 47,145 | - | 383,922 | - | ||||||||||||
Loss of issuance on convertible debt | (12,086 | ) | - | (284,091 | ) | - | ||||||||||
Total other expense | (53,135 | ) | - | (111,826 | ) | - | ||||||||||
Net income (loss) | $ | (42,026 | ) | $ | 5,796 | $ | (135,834 | ) | $ | (4,317 | ) | |||||
Basic and diluted income (loss) per share | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | |||||||||
Weighted average number of shares outstanding – basic and diluted | 258,843,687 | 258,750,000 | 258,817,954 | 258,750,000 |
The accompanying notes are an integral part of these unaudited condensed 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
Condensed Statements of Cash Flows
(Unaudited)
For the Six Months Ended November 30, | ||||||||
2016 | 2015 | |||||||
(Restated) | (Restated) | |||||||
CASH FLOW FROM OPERATING ACTIVITES: | ||||||||
Net loss | $ | (135,834 | ) | $ | (4,317 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of derivative | (383,922 | ) | - | |||||
Loss on issuance of convertible debt | 284,091 | - | ||||||
Amortization of debt discount | 162,368 | - | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Inventory | (132,005 | ) | (17,697 | ) | ||||
Accounts payable | - | (2,350 | ) | |||||
Accrued interest on convertible loans | 18 | - | ||||||
Net Cash Used in Operating Activities | (205,284 | ) | (24,364 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible loans | 135,000 | - | ||||||
Repayment of convertible loan | (40,000 | ) | - | |||||
Loan from shareholder and related party | 9,000 | 11,900 | ||||||
Net Cash Provided by Financing Activities | 104,000 | 11,900 | ||||||
NET DECREASE IN CASH | (101,284 | ) | (12,464 | ) | ||||
CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
CASH AT END OF PERIOD | $ | 14,454 | $ | 45,673 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during period for: | ||||||||
Interest | $ | 22,272 | $ | - | ||||
Income Taxes | $ | - | $ | - | ||||
Non-cash transactions: | ||||||||
Common shares issued to pay principal on convertible notes | $ | 7,004 | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4 |
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 |
7
Notes to the Financial Statements
November 30, 2016
(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 limited 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. The Company has incurred a loss since inception resulting in an accumulated deficit of $411,373$357,251 as of November 30, 2016 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.
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 estimates.
8
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.
Income TaxesDerivative Financial Instruments
Derivative liabilities are recognized in the balance 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 is evaluated to determine if the bifurcated debt conversion feature is required to be classified as a derivative liability. Since the terms of the embedded conversion features of the Company’s convertible debt provides for the estimated tax consequences attributable to differences betweenissuance of shares of common stock at 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, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
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Fair value of financial instruments
The Company follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10-50-10,Financial Instruments—Overall—Disclosure, for disclosures about fair value of our financial instruments and ASC 820-10-35-37,Fair Value Measurement—Overall—Subsequent Measure—Fair Value Hierarchy, to measure the fair value of our financial instruments. ASC 820-10-35-37 establishes a framework for measuring fair value GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10-35-37 establishes a fair value hierarchy that 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 ASC 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.
Revenue Recognition
The Company’s revenue recognition policy is on a sales-basis method. The Company recognizes and records revenue at the time of sale 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.
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 $9,000 for donated management fees was charged to Shareholder Loan for the six months ended November 30, 2016.
As of November 30, 2016, there are loans from the majority shareholder and related party totalling $47,236.These$47,236. 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.
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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.
At November 30, 2016, there are 500,000,000 shares of common stock at a par value of $0.0001 per share authorized and 259,196,500 issued and outstanding.
NOTE 6 - 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 $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 becomes 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 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. This Note has been paid.
On April 19, 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 thousand dollars) with an original issue discount of $3,500 (three thousand five hundred dollars) and carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on April 19, 2017. Crown Bridge Partners LLC.L.L.C. 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 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.
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Adar Bays, LLC. The principal amount of the loan is $30,000 (thirty thousand dollars) and carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017.Adar2017. Adar Bays, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at anytime.any time. The conversion rate will be at a discount of 52% of 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
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Eagle Equities, LLC. The principal amount of the loan is $30,000 (thirty 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 L.L.C. 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 52% of the lowest 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 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. 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. As of November 30, 2016, the Company fair valued the derivative at $42,358 resulting in a gain on the change in the fair value for the six months of $66,442. In addition, $16,849 of the debt discount has been amortized to interest expense.
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On May 10, 2016, the Company issued a Convertible Promissory Note in favor of Auctus Fund, LLC.L.L.C. The principal amount of the loan is $77,750 (seventy seven(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.Auctus2017. Auctus Fund LLC.L.L.C. has the option to convert the Note plus accrued interest into common shares of the Company, at anytime.any time. The conversion rate will be at a discount of 52% of 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 135% interest and 91 days through 120 for a cash payment of the principal plus 140% interest. FromDays 121 through 150, days, prepayingpre-paying the principleprincipal plus accrued interest plus 145% interest and day 151 through 180 days plus interest of 150%.The. 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. As of November 30, 2016, the Company fair valued the derivative at $99,176 resulting in a gain on the change in the fair value for the six months of $162,598. In addition, $57,468 of the debt discount has been amortized to interest expense.
On June 2, 2016, the Company issued a Convertible Promissory Note in favor of JSJ Investments Inc. The principal amount of the loan is $55,000 (fifty five(fifty-five thousand dollars) with an original issue discount of $3,000 three(three thousand dollars) a payment of $2,000 (two thousand dollars)for the Note itself and it carries 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 anytime.any time. The conversion rate will be at a discount of 52% of 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 135% interest and 91 days through 120 for a cash payment of the principal plus 140% interest. FromDay 121 through 150 days, prepayingpre-paying the principleprincipal plus accrued interest plus 145% interest and day 151 through 180 days plus interest of 150%.The. The Company cannot prepay any amount outstanding after 180 days.
On June 14, 2016, the Company issued a Convertible Promissory Note in favor of Black Forest Capital LLC. The principal amount of the loan is $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 the Note itself and it carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on June 14, 2017. Black Forest Capital, LLC.L.L.C. has the option to convert the Note plus accrued interest into common shares of the Company, at anytime.any time. The conversion rate will be at a discount of 52% of 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 135% interest and 91 days through 120 for a cash payment of the principal plus 140% interest. FromDay 121 through 150 days, prepayingpre-paying the principleprincipal plus accrued interest plus 145% interest and day 151 through 180 days plus interest of 150%.The. The Company cannot prepay any amount outstanding after 180 days.
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A summary of February 16, 2016. Including the principal, the Company paid a totaloutstanding convertible notes as of $62,271.23.
Note Holder | Issue Date | Maturity Date | Stated Interest Rate | Amount of Note | Repayments / Conversions | Principal Balance 11/30/2016 | ||||||||||||||
Crown Bridge Partners, LLC (1) | 2/16/2016 | 2/16/2017 | 8 | % | $ | 40,000 | $ | (40,000 | ) | $ | - | |||||||||
Crown Bridge Partners, LLC (2) | 4/19/2016 | 4/19/2017 | 8 | % | 30,000 | (4,004 | ) | 25,996 | ||||||||||||
Adar Bays, LLC (2) | 5/9/2016 | 5/9/2017 | 8 | % | 30,000 | (3,000 | ) | 27,000 | ||||||||||||
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 | |||||||||||||
Total | $ | 342,750 | $ | (47,004 | ) | $ | 295,746 |
(1) | This Note was repaid in full with cash on July 14, 2016. |
(2) | Reductions are conversions to stock. |
A summary of outstanding convertible notes as of November 30, 2016, is as follows:
Note Holder | Issue Date | Maturity Date | Stated Interest Rate | Amount of Note | Debt Discount | Net Principal Balance 11/30/2016 | ||||||||||||||
Crown Bridge Partners, LLC | 4/19/2016 | 4/19/2017 | 8 | % | $ | 25,946 | $ | (12,125 | ) | $ | 13,821 | |||||||||
Adar Bays, LLC | 5/9/2016 | 5/9/2017 | 8 | % | 27,000 | (10,159 | ) | 16,841 | ||||||||||||
Eagle Equities, LLC | 5/9/2016 | 5/9/2017 | 8 | % | 30,000 | (13,151 | ) | 16,849 | ||||||||||||
Auctus Fund, LLC | 5/10/2016 | 2/10/2017 | 8 | % | 77,750 | (20,282 | ) | 57,468 | ||||||||||||
JSJ Investments Inc. | 6/2/2016 | 2/26/2017 | 8 | % | 55,000 | (34,554 | ) | 20,446 | ||||||||||||
Black Forest Capital LLC | 6/14/2016 | 6/14/2017 | 8 | % | 80,000 | (42,959 | ) | 37,041 | ||||||||||||
Total | $ | 295,696 | $ | (133,230 | ) | $ | 162,466 |
(1) | This Note was repaid in full on July 14, 2016. |
A summary of the activity of the derivative liability for the notes above is as follows:
Balance at May 31, 2016 | $ | 351,041 | ||
Increase to derivative due to new issuances | 396,005 | |||
Change due to debt settlement | 32,623 | |||
Derivative loss due to mark to market adjustment | (377,959 | ) | ||
Balance at November 30, 2016 | $ | 401,710 |
On November 1, 2016, Crown Bridge Partners, LLC.LLC converted $4,004 of the principal loan into 154,000 shares of common stock at $0.026 per share. The balance of the loan at November 30, 2016 is $25,996.
On November 22, 2016, Auctus Fund, LLC.Adar Bays LLC converted $3,265.50$3,000 of the accrued unpaid interestprincipal into 250,000 shares of common stock at $0.01305 per share. The balance of the loan at November 30, 2016 is $77,750$27,000.
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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 accrued interest is $77.34.
The following table summarizes changes made to the May 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 errors related to inventory and recording prior sales and cost of goods sold, the financial statements for the six months ended November 30, 2015 were restated to reflect these changes.
The balance sheets as of November 30, 2016 the outstanding balanceand statements of Convertible Loans is $295,746.
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 | ) |
November 30, 2016 | ||||||||||||
Balance Sheet: | As Reported | Adjustment | As Restated | |||||||||
Inventory | $ | - | $ | 321,828 | $ | 321,828 | ||||||
Derivative liability | $ | - | $ | 401,710 | $ | 401,710 | ||||||
Debt discount | $ | - | $ | (133,280 | ) | $ | (133,280 | ) | ||||
Convertible loans | $ | 298,746 | $ | (3,000 | ) | $ | 295,746 | |||||
Accrued interest | $ | 9,599 | $ | 3,264 | $ | 12,863 | ||||||
Common stock | $ | 25,919 | $ | 1 | $ | 25,920 | ||||||
Additional paid in capital | $ | 44,102 | $ | (264 | ) | $ | 43,838 | |||||
Accumulated deficit | $ | (411,373 | ) | $ | 54,122 | $ | (357,251 | ) | ||||
Statement of Operations: | ||||||||||||
Cost of goods sold | $ | 122,182 | $ | (6,005 | ) | $ | 116,177 | |||||
Non-operating expenses | $ | (60,290 | ) | $ | (51,536 | ) | $ | (111,826 | ) | |||
Net loss | $ | (216,302 | ) | $ | 80,468 | $ | (135,834 | ) |
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated all events and transactions that occurred after November 30, 2016 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, 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 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.
As of January 11, 2017, the six loans outstanding including accrued interest have all been converted to common shares. There are currently no loans outstanding. The total number of shares issued regarding these conversions totals 184,748,966.
As of January 11, 2017, there are 500,000,000 shares authorized. 451,640,836 have been issued and are outstanding and 43,646,325 have been reserved for a new loan that is currently being negotiated. Available shares for future issue totals 4,712,839.
Refer to amended filings for the quarters and year end subsequent to May 31, 2016 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-Q10-Q/A 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 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.
Liquidity and Capital Resources
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 |
Six Months Ended November 30, 2016 | Six Months Ended November 30, 2015 | |||||||
Net Cash Used in Operating Activities | $ | (205,284 | ) | $ | (24,364 | ) | ||
Net Cash Used by Investing Activities | $ | - | $ | - | ||||
Net Cash Provided by Financing Activities | $ | 104,000 | $ | 11,900 |
Through November 30, 2016, the Company's operations has increasedCompany generated $23,031 in revenue compared to $100,319 of same period of last year with $115,153 in revenues.
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$357,251 since inception (November 28, 2012) to the period ended November 30, 2016 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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For the three months ended November 30, 2016 ("2016") as compared to the three months ended November 30, 2015 ("2015"):
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Revenue
The Company had $23,031 in revenue for the three months ended November 30, 2016 compared to $65,219$100,319 for period ended November 30, 2015. This reduction is due to the inability to secure viable and less dilutive financing to finance purchase orders.
Costs of Goods Sold
The total costs of goods for the three months ended November 30, 2016 is $122,182$5,297 compared to $0$88,513 for the three months ended November 30, 2015. The increasedecrease is due to increasereduction in number of purchase orders.
The total costs of goods for the six month period ended November 30, 2016 is $248,182$116,177 compared to $0$88,513 for the same six month period ending November 30, 2015. The reason for the increase is due to increase number of purchase orders.
Interest Expenses
Total interest expense and loan fees for the sixthree months ended November 30, 2016 is $60,290$6,079 due to financing obtained during the period. No notes payable occurred during the six months ended November 30, 2015.
Off-Balance Sheet Arrangements
As of November 30, 2016, 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 on several business development projects to increase sales and generate revenues, including: introducing the Company'sCompany’s private label brands to new segment of online customers through Amazon, introduce better pricing to existing and prospective distributors to obtain larger purchase orders, introduce the Company'sCompany’s brands to traditional U.S. retail outlets. In addition, the Company is working to sign exclusive distribution agreement with larger 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 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.
● | 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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