Notes
to the Financial Statements
February
28, 2017
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS
BEMAX
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.
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 February 28, 2017. The Company has incurred a loss
since inception resulting in an accumulated deficit of $1,427,971 as February 28, 2017and 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.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“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 not necessarily indicative of the results to be 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.
Derivative
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 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.
The
following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy
as of February 28, 2017 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
|
|
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’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.
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.
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.
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.
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
|
|
|
(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
NOTE
7 – RESTATEMENT
The
May 31, 2016 financial statements were restated to record inventory for purchases previously recorded on a cash basis, eliminate
accounts receivable, accounts payable and deferred revenue recorded due to accounting errors; and to account for the embedded
conversion feature related to convertible loans.
The
following table summarizes changes made to the 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
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.
NOTE
8 - 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.
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’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
This
report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking
statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items;
any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed
new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief;
and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks
and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
Business
Overview
Bemax
Inc. is a Nevada –based company focusing on the distribution of disposable baby diapers made in North America and Asia by
quality producers to wholesalers and retailers in Europe and the emerging markets. We are a development stage corporation and
have generated or realized minimal revenues from our business operations.
Liquidity
and Capital Resources
Cash
Flows
|
|
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-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’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.
Results
of Operations
Revenue
The
Company had $24,960 in sales for the three months ended February 28, 2017 compared to $246,119 for period ended February 29, 2016.
This reduction is due to inability to secure viable and less dilutive financing to effectively finance purchase orders.
Sales
for the nine months ended February 28, 2017 is $140,113 compared to $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 $13,859 for the three months ended
February 29, 2016 and $102,542 for the nine months ended February 28, 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-month period ended February 28, 2017 is $279,197 compared to $266,864 for the same nine-month
period ending February 29, 2016. The reason for the decrease is due to reduction in sales and write done of 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-month period ended February 29, 2016.
Off-Balance
Sheet Arrangements
As
of February 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 defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information
required to be disclosed in our reports 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 (the “SEC”), and that such information
is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness 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.
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:
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
|
14