The accompanying notes are an integral part of the audited financial statements.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31,2017 AND 2016
(UNAUDITED)
NOTE 1 – ORGANIZATION AND OPERATIONS
Jubilant Flame International, Ltd. (the "Company"), was formed on September 29, 2009 under the name Liberty Vision, Inc. On August 18, 2015, the Company changed its name to Jubilant Flame International, Ltd.
The Company currently has the right to develop and market medical products under a license from BioMark. The primary intended products include Bone-Induction Artificial Bone (“BIAB”) and Vacuum Sealing Drainage (“VSD”).
We currently are not deploying the licenses we hold for the BIAB or VSD products. We have no current operations at this time. For us to develop our business, we will need to raise capital, engage personnel and develop and implement a business plan.
The Company is also licensed to conduct research and development of BioMark's cancer detection scanning technology. To date, we have not taken any steps to pursue the research and development of a cancer detection scanning product.
Since third quarter of 2017, the company has been planning to sale Acropass series cosmetic products in USA market, and hired a marketing company to take promotion campaign for related products.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Interim Financial Information
Interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") as promulgated in Item 210 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position as of November 30, 2017, results of operations, changes in stockholders' equity (deficit) and cash flows for the nine month periods ended November 30, 2017 and 2016, as applicable, have been made. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K.
Use of Estimates and Assumptions
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. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The Company’s significant estimates include income tax provisions and valuation allowances of deferred tax assets; the fair value of financial instruments and the assumption that the company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Net Loss Per Common Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period.
NOTE 3 – GOING CONCERN
The 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. As at November 30, 2017 the Company had current assets of $17,394, and current liabilities total $855,488 resulting in a working capital deficit of $838,095. The Company currently has no profitable trading activities and has an accumulated deficit of $3,055,570 as at November 30, 2017. This raises substantial doubt about the Company's ability to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its new business plan in the medical and cosmetics sector on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
NOTE 4 – PREPAID EXPENSE
The Company is paying an annual fee for its OTC Markets service. The service period is from December 1, 2017 to November 30, 2018. The service charge is recorded as a prepaid expense and amortized using straight line amortization over the service period. The prepaid expense balance is $10,000 as of November 30, 2017.
NOTE 5 – CONVERTIBLE DEBT
On December 9, 2015, the Company issued a convertible note of $60,000 which was determined to contain embedded conversion features required to be bifurcated from the host contract and reported at fair value. During the second quarter ended at August 31, 2017, the company paid off the remaining outstanding note balance in full plus 140% interest. As a result, the convertible note balance net of discount amortization as of November 30, 2017 was zero.
The holder of the convertible note converted $52,600 and $6,600 of principal into 4,079,360 and 1,627,777 common shares during the year end February, 2017 and nine month end November 30, 2017 respectively. The following is a summary of the debt conversions:
Date
|
|
Principle Converted
|
|
|
Shares issued
|
|
|
Conversion Price
|
|
|
|
|
|
|
|
|
|
|
|
30-Jun-16
|
|
$
|
15,000
|
|
|
|
113,636
|
|
|
|
0.132
|
|
12-Jul-16
|
|
|
15,000
|
|
|
|
357,142
|
|
|
|
0.042
|
|
15-Aug-16
|
|
|
5,700
|
|
|
|
452,380
|
|
|
|
0.0126
|
|
24-Aug-16
|
|
|
3,100
|
|
|
|
469,696
|
|
|
|
0.0066
|
|
7-Sep-16
|
|
|
2,400
|
|
|
|
500,000
|
|
|
|
0.0048
|
|
20-Sep-16
|
|
|
2,400
|
|
|
|
500,000
|
|
|
|
0.0048
|
|
22-Sep-16
|
|
|
2,600
|
|
|
|
541,666
|
|
|
|
0.0048
|
|
28-Sep-16
|
|
|
2,600
|
|
|
|
541,666
|
|
|
|
0.0048
|
|
15-Dec-16
|
|
$
|
3,800
|
|
|
|
603,174
|
|
|
|
0.0063
|
|
Total year ended 2-28-17
|
|
$
|
52,600
|
|
|
|
4,079,360
|
|
|
|
|
|
16-Mar-17
|
|
|
2,900
|
|
|
|
805,555
|
|
|
|
0.0036
|
|
7-Apr-17
|
|
|
3,700
|
|
|
|
822,222
|
|
|
|
0.0045
|
|
Total period ended 9-30-2017
|
|
$
|
6,600
|
|
|
|
1,627,777
|
|
|
|
|
|
The following is the summary of outstanding convertible note balances
Description
|
|
Nov 30, 2017
|
|
|
Feb 28, 2017
|
|
One convertible promissory note in the amount of $60,000, with maturity date of December 9, 2018, bearing interest 0% per annum, convertible into common stock at conversion prices equal to 60% of the lowest price in the prior 20 trading days. The Company
|
|
$
|
800
|
|
|
$
|
7,400
|
|
Less: debt discount
|
|
|
-
|
|
|
|
(4,238
|
)
|
Less: debt payoff
|
|
|
(800
|
)
|
|
|
-
|
|
Total
|
|
|
-
|
|
|
|
3,162
|
|
Less: current portion
|
|
|
-
|
|
|
|
-
|
|
Long-term convertible debt, net
|
|
$
|
-
|
|
|
$
|
3,162
|
|
Debt Discount
During the nine months ended November 30, 2017 and the year ended February 28, 2017, the Company recorded debt discounts totaling $-0- and $4,238, respectively.
The Company amortized $4,238 and $49,448 during the nine months ended November 30, 2017 and the year ended February 28, 2017, respectively, to amortization of debt discount.
|
|
As of
|
|
|
As of
|
|
|
|
30-Nov-17
|
|
|
28-Feb-17
|
|
|
|
|
|
|
|
|
Debt discount
|
|
$
|
58,026
|
|
|
$
|
58,026
|
|
Accumulated amortization of debt discount
|
|
|
(58,026
|
)
|
|
|
(53,788
|
)
|
Debt discount - net
|
|
$
|
-
|
|
|
$
|
4,238
|
|
Derivative Liabilities
The following schedule shows the fair value of the derivative liabilities during the nine month periods ended November 30, 2017 and year end February 28, 2017:
As of nine month period ended November 30, 2017:
Derivative liabilities - February 28, 2017
|
|
$
|
9,156
|
|
Add fair value at the commitment date for convertible notes issued during the three months
|
|
|
-
|
|
Fair value reduction for derivatives due to note conversion
|
|
|
(12,276
|
)
|
Fair value mark to market adjustment for derivatives
|
|
|
4,362
|
|
Derivatives extinguishment due to debt payoff
|
|
|
(1,242
|
)
|
Derivative liabilities – November 30, 2017
|
|
|
-
|
|
Less: current portion
|
|
|
-
|
|
Long-term derivative liabilities November 30, 2017
|
|
$
|
-
|
|
As of year ended February 28, 2017
Derivative liabilities - February 28, 2016
|
|
$
|
83,049
|
|
Add fair value at the commitment date for convertible notes issued during year end February 28, 2017
|
|
|
-
|
|
Fair value reduction for derivatives due to note conversion
|
|
|
(76,387
|
)
|
Fair value mark to market adjustment for derivatives
|
|
|
2,494
|
|
Derivative liabilities – February 28, 2017
|
|
|
9,156
|
|
Less: current portion
|
|
|
-
|
|
Long-term derivative liabilities February 28, 2017
|
|
$
|
9,156
|
|
During the nine months ended November 30, 2017, the Company recorded change in derivatives liability of $4,362 and reduction of derivatives liability of $12,276 due to conversion and derivatives extinguishment of $1,242 due to debt payoff. During the nine months ended November 30, 2016, the Company recorded change in derivatives liability of $3,407 and reduction of derivatives liability of $66,643 due to conversion .
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following assumptions during the three-month period ended November 30, 2017:
|
|
Commitment
|
|
|
Re-measurement
|
|
Assumption
|
|
Date
|
|
|
Date
|
|
Expected dividends:
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility:
|
|
|
45
|
%
|
|
203.7%~245.3
|
%
|
Expected term (years):
|
|
|
3
|
|
|
1.39~1.73
|
|
Risk free interest rate:
|
|
|
1.22
|
%
|
|
1.19%~1.35
|
%
|
NOTE 6 – RELATED PARTY TRANSACTIONS
In support of the Company’s efforts and cash requirements, it must rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. The advances are considered temporary in nature and have not been formalized by a promissory note.
On August 30, 2017, Mr. Robert Ireland resigned as Secretary/Treasurer of the company. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the company and agreed to cancel all outstanding debt of $840 of the company that was owed to him for past compensation.
As at November 30, 2017, the Company had a $420,488 loan outstanding with its CEO, Ms. Yan Li and $-0- with its former treasurer Mr. Ireland. This compares with the outstanding balance of $282,889 for Ms. Yan Li and $840 for Mr. Ireland at February 28, 2017. The loans are non-interest bearing, due upon demand and unsecured.
A related party created a website, that was active beginning in August of 2015, and billed the Company $25,000. The expense of this website is being amortized over 36 months at the rate of $694 per month.
A related party is providing accounting service to the company, at an estimated annual service fee of $16,000.
NOTE 7 – ACCRUED OFFICER COMPENSATION
On December 15, 2015, the Company entered into employment agreements with its president, Ms. Yan Li, and its secretary and treasurer, Mr. Robert Ireland. Both agreements were retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, both Ms. Yan and Mr. Ireland shall receive an annual salary of $100,500 and 100,000 shares of the Company's common stock.
On August 30, 2017, Mr. Robert Ireland resigned as Secretary/Treasurer of the company. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the company and agreed to cancel all outstanding debt of the company that was owed to him for past compensation in the amount of $409,875.
As of November 30, 2017, $435,000 is reflected as accrued compensation payable to Ms. Yan Li and as of February 28, 2017 $359,625 was reflected as accrued compensation to each officer for a total accrual of $719,250.
NOTE 8 – STOCKHOLDERS EQUITY
During the quarter ended August 31, 2017, convertible debt of $6,600 was converted into 1,627,777 shares of common stock as provided for in the convertible note agreement. Associated with the note conversion, derivative liability was reduced by $12,276 at August 31, 2017.
On August 30, 2017, Mr. Lei Wang was appointed as the Chief Financial Officer by the company’s Board of Directors. Mr. Wang will be paid stock compensation time to time base on business progress. Mr. Wang was also granted 200,000 shares of restricted common stock at the time of his appointment, which vests immediately. The restricted stock has a value of $2,100 based on stock market price of $0.0105 per share at stock grant date.
On August 30, 2017, Mr. Kecheng Xu was appointed as Secretary/Treasurer by the company’s Board of Directors, effective immediately. Mr. Xu will be paid stock compensation time to time based on business progress. Mr. Xu was granted 50,000 shares of restricted common stock at the time of his appointment. The restricted stock has a value of $525 base on stock market price of $0.0105 per share at stock grant date.
For the nine-month periods ended November 30, 2017 and 2016, a total of $262,500 and $315,000, respectively has been recorded as share based compensation to Yan Li and Robert Ireland for 50,000 and 75,000 shares, respectively based on their December 2015 employment agreements.
During the nine-month period ended November 30, 2017, 175,000 granted shares valued at $367,500 have been canceled as stock compensation to Mr. Robert Ireland upon his resignation with the par value of $175 reducing the balance of common stock outstanding.
NOTE 9 – SUBSEQUENT EVENT
None.