UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q/A
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2017
or
[ ]
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number333-197756
BEMAX INC.
(Exact name of registrant as specified in its charter)
Nevada | 46-554081 | |
(State or other jurisdiction of Organization) | (IRS Employer Identification Number) |
625 Silver Oak
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 reportshas submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be filed by Section 13 or 15(d) /of the Exchange Actsubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the pastpreceding 12 months (or for such shorter period that the registrant was requirerequired to filesubmit and post such reports), and (2) has been subject to such filing requirements for the past 90 days.files). Yes ☒ 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 “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 ☐
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whetherState 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
301,640,836 common shares issued and outstanding aslatest practicable date: As of April 21, 2017.
2017, the issuer had 301,640,836 shares of its common stock issued and outstanding.
Explanatory Note: The May 31, 2016 financial statements were restated to record inventory for purchases previously recorded on a cash basis, eliminate accounts receivable, accounts payable and deferred revenue recorded due to errors; and to account for the embedded conversion feature related to convertible loans.
As a result of the errors related to inventory and recording prior sales and cost of goods sold, the financial statements for the nine months ended February 29, 2016 were restated to reflect these changes.
The statement of operations and cash flows for the nine months ended February 28, 2017 were restated to correct errors made when preparing the financial statement. There were no changes to the balance sheet as of February 28, 2017.
PART I | ||
Item 1. | Condensed Financial Statements (unaudited) | 1 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
Item 4. | Controls and Procedures | 12 |
PART II | ||
Item 1. | Legal Proceedings | 13 |
Item 1A. | Risk Factors | 13 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
Item 3. | Defaults Upon Senior Securities | 13 |
Item 4. | Mining Safety Disclosures | 13 |
Item 5. | Other Information | 13 |
Item 6. | Exhibits | 13 |
�� | ||
Signatures | 14 |
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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
BEMAX INC.
Financial Statements
Condensed Balance Sheets as of February 28, 2017 (unaudited) and May 31, 2016 | 2 |
Condensed Statements of Operations for the Three and Nine Months ended February 28, 2017 and 2016 (unaudited) | 3 |
Condensed Statements of Cash Flows for the Nine Months ended February 28, 2017 and 2016 (unaudited) | 4 |
Notes to the Condensed Financial Statements (unaudited) | 5 |
1 |
(Expressed in US dollars)BEMAX INC
Condensed Balance Sheets
(Unaudited)
February 28, 2017 | May 31, 2016 | |||||||
(Unaudited / Restated) | (Restated) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 606 | $ | 115,738 | ||||
Prepaid expenses | 56,250 | - | ||||||
Inventory | 177,551 | 189,823 | ||||||
Total current assets | 234,407 | 305,561 | ||||||
Furniture and equipment | 500 | 500 | ||||||
Total Assets | $ | 234,907 | $ | 306,061 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Accrued interest on convertible loans | 634 | 1,845 | ||||||
Derivative liability | - | 351,041 | ||||||
Convertible loans, net of discount of $3,748 and $134,148, respectively | 42,252 | 73,602 | ||||||
Loan from shareholder and related party | 51,736 | 38,236 | ||||||
Total current liabilities | 94,622 | 464,724 | ||||||
Total Liabilities | 94,622 | 464,724 | ||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
Preferred stock series B, $0.0001 par value, 50,000,000 shares authorized; 50,000,000 and 0 shares issued and outstanding, respectively | 5,000 | - | ||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized; 301,640,836 and 258,792,500 shares issued and outstanding, respectively | 30,164 | 25,879 | ||||||
Additional paid-in capital | 1,533,092 | 36,876 | ||||||
Accumulated deficit | (1,427,971 | ) | (221,418 | ) | ||||
Total Stockholders’ Equity (Deficit) | 140,285 | (158,663 | ) | |||||
Total Liabilities and Stockholders’ Equity | $ | 234,907 | $ | 306,061 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2 |
BEMAX INC.
Condensed Statements of Operations
(Unaudited)
For the Three Months Ended February 28, 2017 | For the Three Months Ended February 29, 2016 | For the Nine Months Ended February 28, 2017 | For the Nine Months Ended February 29, 2016 | |||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||
Revenues | $ | 24,960 | $ | 246,119 | $ | 140,113 | $ | 346,338 | ||||||||
Cost of goods sold | 163,020 | 187,361 | 279,197 | 266,864 | ||||||||||||
Gross margin | (138,060 | ) | 58,758 | (139,084 | ) | 79,474 | ||||||||||
Operating Expenses: | ||||||||||||||||
Professional fees | 9,200 | 3,704 | 18,600 | 8,404 | ||||||||||||
Management fees | 1,500 | 1,500 | 4,500 | 4,500 | ||||||||||||
General and administrative | 68,858 | 8,654 | 79,442 | 14,078 | ||||||||||||
Total Operating Expenses | 79,558 | 13,858 | 102,542 | 26,982 | ||||||||||||
Income (loss) from operations | (217,618 | ) | 44,900 | (241,626 | ) | (52,492 | ) | |||||||||
Other Income (Expense): | ||||||||||||||||
Interest expense and loan fees | (3,712 | ) | (1,714 | ) | (53,001 | ) | (1,714 | ) | ||||||||
Interest expense discount | (134,032 | ) | - | (296,400 | ) | - | ||||||||||
Change in fair value of derivative liability | (715,358 | ) | - | (331,436 | ) | - | ||||||||||
Loss of issuance on convertible debt | - | - | (284,091 | ) | - | |||||||||||
Total other expense | (853,102 | ) | (1,714 | ) | (964,928 | ) | (1,714 | ) | ||||||||
Net income (loss) | $ | (1,070,720 | ) | $ | 43,186 | $ | (1,206,554 | ) | $ | 50,778 | ||||||
Basic and diluted income (loss) per share | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | |||||||||
Weighted average number of shares outstanding – basic and diluted | 347,475,778 | 258,792,500 | 288,045,808 | 258,792,500 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3 |
BEMAX INC.
Condensed Statements of Cash Flows
(Unaudited)
For the Nine Months Ended February 28, 2017 | For the Nine Months Ended February 29, 2016 | |||||||
(Restated) | (Restated) | |||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,206,554 | ) | $ | 50,778 | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of derivative | 331,436 | - | ||||||
Loss on issuance of convertible debt | 284,091 | - | ||||||
Amortization of debt discount | 296,400 | - | ||||||
Impairment expense | 157,279 | - | ||||||
Stock issued for services | 75,000 | - | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Prepaids | (56,250 | ) | - | |||||
Inventory | (145,007 | ) | (79,999 | ) | ||||
Accounts payable | - | - | ||||||
Accrued interest on convertible loans | (6,027 | ) | - | |||||
Net Cash Used in Operating Activities | (269,632 | ) | (29,221 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible loans | 181,000 | 40,000 | ||||||
Repayment of convertible loan | (40,000 | ) | - | |||||
Loan from shareholder and related party | 13,500 | 16,400 | ||||||
Net Cash Provided by Financing Activities | 154,500 | 56,400 | ||||||
NET INCREASE (DECREASE) IN CASH | (115,132 | ) | 27,179 | |||||
CASH AT BEGINNING OF PERIOD | 115,738 | 58,137 | ||||||
CASH AT END OF PERIOD | $ | 606 | $ | 85,316 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during period for: | ||||||||
Interest | $ | 22,272 | $ | - | ||||
Income Taxes | $ | - | $ | - | ||||
Non-cash transactions: | ||||||||
Conversion of principal and interest to common shares | $ | 302,750 | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4 |
BEMAX INC.
Balance Sheets (Stated in U.S. Dollars)Notes to the Financial Statements
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 |
(Unaudited)
See Notes to Financial Statements
BEMAX INC.
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
BEMAX INC.
Statements of Cash Flows
(Stated in U.S. Dollars)
For the Six Months Ended February 28, 2017 and February 29, 2016
(Unaudited)
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 | $ | — |
See Notes to Financial Statement
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1.NOTE 1 - NATURE OF OPERATIONS
BEMAX INC.INC. (“The 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’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.NOTE 2 - GOING CONCERN
These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business one year from May 31, 2016.February 28, 2017. The Company has incurred a loss since inception resulting in an accumulated deficit of $1,427,971 as of February 28, 2017 and2017and further losses are anticipated in the development of its business raising substantial doubt about the Company’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.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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturitynot necessarily indicative of three months or lessthe results to be cash equivalents.expected for the full year ending May 31, 2017. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K/A for the year ended May 31, 2016.
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.
Fair Value of Financial Instrument
The Company’s financial instruments consisted of cash, accounts payable, related party advances and convertible notes. Unless otherwise noted, it is management’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.
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Fair Value ofDerivative 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 issuance of shares of common stock at the election of the holders and the number of shares is subject to adjustment for a decline in the price of the Company’s common stock, the Company determined that the embedded conversion option met the criteria of a derivative liability. The estimated fair value of the embedded conversion feature of debt classified as derivative liabilities are determined using the Black-Scholes option pricing model. The model utilizes Level 3 unobservable inputs to calculate the fair value of the derivative liabilities at each reporting period. The Company determined that using an alternative valuation model such as a Binomial-Lattice model would result in minimal differences. The fair value of the embedded conversion feature of debt classified as derivative liabilities are adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded as other income or expense in the statement of operations. As of February 28, 2017, the embedded conversion feature of $0 of convertible notes payable was classified as a derivative liability. Each reporting period the embedded conversion feature is re-valued and adjusted through the caption “change in fair value of derivative liabilities” on the statements of operations.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASBFinancial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10-50-10,Financial Instruments—Overall—Disclosure, for disclosures about fair value of itsour financial instruments and paragraphASC 820-10-35-37, of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”)Fair Value Measurement—Overall—Subsequent Measure—Fair Value Hierarchy, to measure the fair value of itsour financial instruments. ParagraphASC 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),GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ParagraphASC 820-10-35-37 establishes a fair value hierarchy whichthat 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 ParagraphASC 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 those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial 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:
of February 28, 2017:2017 and May 31, 2016:
Description | Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | ||||||||||||
Derivative | - | - | - | (331,436 | ) | |||||||||||
Total | $ | - | $ | - | $ | - | $ | (331,436 | ) |
May 31, 2016:
Description | Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | ||||||||||||
Derivative | - | - | 351,041 | 128,331 | ||||||||||||
Total | $ | - | $ | - | $ | 351,041 | $ | 128,331 |
Description | Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | ||||||||
Derivative | - | - | 351,041 | |||||||||
Total | $ | - | $ | - | $ | 351,041 | $ | 128,331 |
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.
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 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 nine months ended February 28, 2017; therefore basic EPS equals diluted EPS. As of February 28, 2017 18,724,924 shares of common stock were not included in the calculations and the common shares are for convertible notes outstanding.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have any significant impact on the Company’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.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 $13,500 for donated management fees was charged to Shareholder Loan for the nine months ended February 28, 2017.
As of February 28, 2017, there are loans from the majority shareholder and related party totalling $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.
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 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 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’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 was $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 became due and payable with accrued interest on February 16, 2017. The Company had 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.
5.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. The 50-1 stock split has been shown retroactively.
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 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’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.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 was $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 became due and payable with accrued interest on February 16, 2017. The Company had 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.
On April 19, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principal amount of the loan was $30,000 (thirty thousand dollars) with an original issue discount of $3,500 (three thousand five hundred dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on April 19, 2017. Crown Bridge Partners, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate is at a discount of 48% applied to the lowest price for ten days prior to the actual date of conversion. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $124,890 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note. As of August 31, 2016, the Company fair valued the derivative at $39,161 resulting in a gain on the change in the fair value for the three months of $85,729. In addition, $11,014 of the debt discount has been amortized to interest expense.
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Adar Bays, LLC. The principal amount of the loan was $30,000 (thirty thousand dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017. Adar Bays, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest price for fifteen days prior to the actual date of conversion. The Company recorded the derivative liability at its fair value of $108,800 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note. On November 28, 2016, $3,000 of principal was converted into 229,850 shares of common stock. Due to the conversion within the terms of the agreement, no gain or loss was recognized. At the time of conversion, the Company valued the derivative at $40,273 resulting in a gain on the change in the fair value of $8,331. During the third quarter the remaining principal and accrued interest of $27,000 and $1,453, respectively, were fully converted into 22,030,353 shares of common stock resulting in the immediate amortization of the remaining debt discount of $13,159, a $32,001 loss on the change in fair value of the derivative and a $105,878 credit to additional paid in capital.
On May 9, 2016, the Company issued a Convertible Redeemable Note in favor of Eagle Equities, LLC. The principal amount of the loan was $30,000 (thirty thousand dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 9, 2017. Eagle Equities, LLC. had the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate is at a discount of 48% of the lowest trading price for fifteen days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The Company recorded the derivative liability at its fair value of $108,800 based on the Black Scholes Merton pricing model and a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the term of the note.. During the third quarter principal and accrued interest of $30,000 and $1,459, respectively, were fully converted into 16,845,031 shares of common stock resulting in the immediate amortization of the remaining debt discount of $13,151, a $71,501 loss on the change in fair value of the derivative and a $143,634 credit to additional paid in capital.
On May 10, 2016, the Company issued a Convertible Promissory Note in favor of Auctus Fund, LLC. The principal amount of the loan was $77,750 (seventy-seven thousand, seven hundred and fifty dollars) with an original issue discount of $6,750 (six thousand, seven hundred and fifty dollars) and carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on May 10, 2017. Auctus Fund, LLC. had the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% of the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $261,774 based on the Black Scholes Merton pricing model and a corresponding debt discount of $77,750 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $77,750 and $605, respectively, were fully converted into 43,741,990 shares of common stock resulting in the immediate amortization of the remaining debt discount of $20,282, a $295,729 loss on the change in fair value of the derivative and a $467,591 credit to additional paid in capital.
On June 2, 2016, the Company issued a Convertible Promissory Note in favor of JSJ Investments Inc. The principal amount of the loan was $55,000 (fifty-five thousand dollars), with an original issue discount of $3,000 three thousand dollars), a payment of $2,000 (two thousand dollars) in loan fees and it carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on June 2, 2017. JSJ Investments, Inc. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $167,895 based on the Black Scholes Merton pricing model and a corresponding debt discount of $55,000 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $55,000 and $2,395, respectively, were fully converted into 32,463,378 shares of common stock resulting in the immediate amortization of the remaining debt discount of $34,554, a $65,510 loss on the change in fair value of the derivative and a $190,914 credit to additional paid in capital.
On June 14, 2016, the Company issued a Convertible Promissory Note in favor of Black Forest Capital LLC. The principal amount of the loan was $80,000 (eighty thousand dollars), with an original issue discount of $8,000 (eight thousand dollars), a payment of $2,000 (two thousand dollars) for loan fees and it carried an interest rate of 8% per annum. It becomes due and payable with accrued interest on June 14, 2017. Black Forest Capital, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, at any time. The conversion rate will be at a discount of 48% applied to the lowest trading price for ten days prior to the actual date of conversion. The Company cannot prepay any amount outstanding after 180 days. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $228,110 based on the Black Scholes Merton pricing model and a corresponding debt discount of $80,000 to be amortized utilizing the interest method of accretion over the term of the note. During the third quarter principal and accrued interest of $80,000 and $3,254, respectively, were fully converted into 55,208,045 shares of common stock resulting in the immediate amortization of the remaining debt discount of $42,959, a $203,588 loss on the change in fair value of the derivative and a $396,470 credit to additional paid in capital.
On December 28, 2016, the Company issued a Convertible Promissory Note in favor of Crown Bridge Partners, LLC. The principal amount of the loan is $46,000 (forty-six thousand dollars) with an original issue discount of $4,500 (four thousand five hundred dollars) and carries an interest rate of 8% per annum. It becomes due and payable with accrued interest on December 28, 2017. Crown Bridge Partners, LLC. has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate will be at a discount of 45% applied to the lowest trading 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. As of February 28, 2017, $752 of the debt discount has been amortized to interest expense.
A summary of outstanding convertible notes as of February 28, 2017, is as 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 |
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 common shares
A summary of the activity of the derivative liability for the notes above is as follows:
Balance at May 31, 2015 | $ | - | ||
Increase to derivative due to new issuances | 479,374 | |||
Derivative (gain) due to mark to market adjustment | (128,333 | ) | ||
Balance at May 31, 2016 | 351,041 | |||
Increase to derivative due to new issuances | 434,591 | |||
Decrease due to debt settlement | (1,117,070 | ) | ||
Derivative loss due to mark to market adjustment | 331,438 | |||
Balance at February 28, 2017 | $ | - |
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended February 28, 2017 is as follows:
Inputs | February 28, 2017 | Initial Valuation | ||||||
Stock price | $ | .0047 - .0325 | $ | .52 – .74 | ||||
Conversion price | $ | .002 | $ | .14 – .27 | ||||
Volatility (annual) | 249% - 395% | 324% - 335% | ||||||
Risk-free rate | .51% - .90% | .51% - .52% | ||||||
Years to maturity | .08 - 1 | .76 - 1 |
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management
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8. CORRECTION OF ERRORSNOTE 7 – RESTATEMENT
The Company has discovered that thereMay 31, 2016 financial statements were errors in prior periods regardingrestated to record inventory for purchases previously recorded on a cash basis, eliminate accounts receivable, accounts payable and deferred revenue expenserecorded due to accounting errors; and derivative recognitionto account for derivatives related to the embedded conversion features offeature related to convertible notes. loans.
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 periods in thesesales and cost of goods sold, the financial statements have been adjusted. On April 6,for the nine months ended February 29, 2016 were restated to reflect these changes.
The statement of operations and cash flows for the nine months ended February 28, 2017 were restated to correct errors made when preparing the company filed an 8-K referencingfinancial statement. There were no changes to the errors.balance sheet as of February 28, 2017.
NOTE 8 - SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions that occurred after February 28, 2017 up through the date these financial statements were available for issuance. It has been determined that the following events need to be reported.
On March 20, 2017, the Company authorized and issued a Convertible Promissory Note in favor of Crown Bridge Partners for $114,000$114,000.
On March 27, 2017, the Company authorized and issued a Convertible Promissory Note in favor of JSJ Investments, Inc. for $125,000.
On April 4, 2017, the Company authorized and issued a Convertible Promissory Note in favor of Auctus Fund, LLC for $145,000.
Refer to the filing for the year ended May 31, 2017 for additional subsequent activity.
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements"“forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
Business Overview
Bemax Inc. is 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
Cash Flows
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 |
Nine Months Ended February 28, 2017 | Nine Months Ended February 29, 2016 | |||||||
Net Cash Used in Operating Activities | $ | (269,632 | ) | $ | (29,221 | ) | ||
Net Cash Used by Investing Activities | $ | - | $ | - | ||||
Net Cash Provided by Financing Activities | $ | 154,500 | $ | 56,400 |
We currently have minimal cash reserves. To date, the Company has covered operating deficits primarily through loans from the sole director and third partythird-party convertible 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 $1,427,971 since inception (November 28, 2012) to the period ended February 28, 2017 and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. However, these conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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
SalesRevenue
The Company had $24,960 in sales for the three months ended February 28, 2017 compared to $246,119 for period ended February 29, 2016. This reduction is due to inability to secure viable and less dilutive financing to effectively finance purchase orders.
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Sales for the nine months ended February 28, 2017 is $140,113 compared to $306,419$346,338 for the nine months ended 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$13,859 for the three months ended February 29, 2016 and $102,542 compared tofor the nine months ended February 28, 2017.2017 compared to $26,982 for the nine months ended February 29, 2016. The increase is due to increase in general and administrative expenses relating to product bagging, packaging and consulting.
The total costs of goods for the nine monthnine-month period ended February 28, 2017 is $106,200$279,197 compared to $266,864 for the same nine monthnine-month period ending February 29, 2016. The reason for the decrease is due to reduction in sales.sales and write done of inventory.
Interest Expenses
Total interest expense and loan fees for the nine months ended February 28, 2017 is $53,001 compared to $1,714 interest on loan during the nine monthnine-month period ended February 29, 2016.
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 February 29,28, 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 introducing the Company’s private label brands to other broad online market platforms such as Shopify and Amazon prime. The Company will continue to expand both manufacturing and distribution network with quality manufacturers and established distributors to enhance regional and global expansion strategy.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as(as defined in RuleRules 13a-15(e) promulgated underand 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), that are designed to ensurebe effective in providing reasonable assurance that information required to be disclosed by us in theour reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission's rules and formsCommission (the “SEC”), and that such information is accumulated and communicated to our sole officer, as appropriatemanagement to allow timely decisions regarding required disclosure. We carried out an evaluation, underOur Chief Executive Officer and Chief Financial Officer evaluated the supervision and with the participation of our sole officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended February 28, 2017. The following aspects of the Company were noted as potential material weaknesses:
● | 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 no change occurred in the Company’s internal controls over financial reporting during the quarter ended February 28, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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 | |
31.2 | |
32.1 |
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: | 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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