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Bemax (BMXC)

Filed: 27 Sep 17, 8:00pm

 

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)

 

Nevada46-554081
(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)

 

 1 

 

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) /of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer☐ Non-accelerated filer ☐ Smaller reporting company ☒

 

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 whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

301,640,836 common shares issued and outstanding as of April 21, 2017.

 

 

 

 2 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION4
Item 1.Financial Statements 
 Balance Sheets (audited)5
 Statements of Operations (unaudited)6
 Statements of Cash Flows (unaudited)7
 Notes to the Financial Statements8
Item 2. Management's Discussion and Analysis of Financial condition and Resultos of Operations  
Item 3. Quantitative and Qualitative Disclosure about Market Risk  
Item 4. Controls and Procedures  
PART II – OTHER INFORMATION 
Item 1. Legal Proceedings:19
Item 2. Unregistered Sales Of Equity Securities19
Item 3. Default Upon Senior Securities 19
Item 4. Mining Safety Procedures19
Item 5.Other Information:20
Item 6.Signature20

 

 

 

 3 

 

 

  

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

The financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the period presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in our annual Report on Form 10-K filed therewith the U.S. Securities and Exchange Commission (SEC) on July 6, 2016 and amended on July 14, 2016, and can be found on the SEC website at www.sec.gov

 

 

 

BEMAX INC.

Financial Statements

(Expressed in US dollars)

(Unaudited)

 

 

 

 4 

 

 

BEMAX INC.

Balance Sheets (Stated in U.S. Dollars)

February 28, 2017 and May 31, 2016

 

Current Assets 

February 28, 2017

$

 

May 31, 2016

$

 Cash and cash equivalents  606   115,738 
 Pre-paid expenses  56,250   —   
 Inventory  177,551   16,827 
 Total current assets  234,407   132,565 
 Other assets        
 Equipment  500   500 
Total other assets  500   500 
 TOTAL ASSETS  234,907   133,065 
Commitments & Contingencies  —     —   
LIABILITIES & STOCKHOLDER’S EQUITY        
 CURRENT LIABILITIES        
    Derivative liability  —     351,041 
   Convertible loans  46,000   207,750 
   Debt discount  (3,748)  (134,148)
 Accrued interest on convertible loans  634   1,845 
Loan from shareholder and related party  51,736   38,236 
Total current liabilities  94,622   464,724 
         
 STOCKHOLDERS' EQUITY        
  Preferred stock series B, ($0.0001) par value, 50,000,000 shares authorized and issued as of February 28, 2017.  5,000   —   
 Common stock, ($0.0001 par value, 500,000,000 shares authorized; 301,640,836 shares issued and outstanding at February 28, 2017 and  258,792,500, at May 31, 2016, respectively  30,164   25,879 
Additional paid-in capital  1,533,092   36,876 
 Accumulated deficit  (1,427,971)  (394,414)
TOTAL STOCKHOLDERS' EQUITY  140,285   (331,659)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  234,907   133,065 

 

  

See Notes to Financial Statements

 

 5 

 

 

 

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

 

 

 

 6 

 

 

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

 

 

 

 7 

 

  

BEMAX INC.

Notes to the Financial Statements

February 28, 2017

(Unaudited)

 

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.

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. GOING CONCERN

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business one year from May 31, 2016. The Company has incurred a loss since inception resulting in an accumulated deficit of $1,427,971 as of February 28, 2017 and 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and are presented in US dollars. The Company’s Year End is May 31.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

 8 

 

BEMAX INC.

Notes to the Financial Statements

February 28, 2017

(Unaudited)

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of 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:

February 28, 2017:

 

 

Description Level 1 Level 2 Level 3 Total Gains and (Losses)
Derivative  -  -  -  (331,436)
Total $- $- $- $(331,436)

 

May 31, 2016:

 

 

Description Level 1 Level 2 Level 3 Total Gains and (Losses)
Derivative  -  -  351,041   
Total $- $- $351,041 $128,331

 9 

 

Income Taxes

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At 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. 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.

 10 

 

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.

 11 

 

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.

 12 

 

 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.

 13 

 

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 HolderIssue DateMaturity DateStated Interest RateAmount of NoteRepayments / ConversionsPrincipal Balance 2/28/2017
Crown Bridge Partners, LLC (1)2/16/20162/16/2017       8%   $   40,000   $       (40,000)$                -
Crown Bridge Partners, LLC4/19/20164/19/20178%30,000(30,000)-
Adar Bays, LLC5/9/20165/9/20178%30,000(30,000)-
Eagle Equities, LLC5/9/20165/9/20178%30,000(30,000)-
Auctus Fund, LLC5/10/20162/10/20178%77,750(77,750)-
JSJ Investments Inc.6/2/20162/26/20178%55,000(55,000)-
Black Forest Capital LLC6/14/20166/14/20178%80,000(80,000)-
Crown Bridge Partners, LLC12/28/201612/28/20178%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$-
Increase to derivative due to new issuances 479,374
Derivative (gain) due to mark to market adjustment (128,331)
Balance at May 31, 2016 351,040
Increase to derivative due to new issuances 434,591
Decrease due to debt settlement (1,117,070)
Derivative loss due to mark to market adjustment 331,436
Balance at February 28, 2017$-

 14 

 

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

 

8. CORRECTION OF ERRORS

The Company has discovered that there were errors in prior periods regarding revenue, expense and derivative recognition for derivatives related to the embedded conversion features of convertible notes. As a result, the prior periods in these financial statements have been adjusted. On April 6, 2017, the company filed an 8-K referencing the errors. 

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

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.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

 

Business Overview

Bemax Inc. is a Nevada –based company focusing on the distribution of disposable baby diapers made in North America and Asia by quality producers to wholesalers and retailers in Europe and the emerging markets. We are a development stage corporation and have generated or realized minimal revenues from our business operations. 

 

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 

 

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.

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Management's Fiscal Quarter Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements. Management has determined that internal control are not effective.

 

Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Results of Operations

 

Sales

 

The Company had $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 $306,419 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 for the three months ended February 29, 2016 and $102,542 compared to the nine months ended February 28, 2017. The increase is due to increase 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 $106,200 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.

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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.

 

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, 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

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our sole officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our sole officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2017.

 

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Based on the evaluation of these disclosure controls and procedures, our Chief Executive and Chief Financial Officer concluded that as of the end of the periods covered by this report, we have identified the following material weakness of our internal controls: Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

 

There were no changes in our internal control or in other factors during the last fiscal quarter covered by this report that have materially affected, or are likely to materially affect the Company's internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

N/A.

 

ITEM 5. OTHER INFORMATION

None.

 

ITEM 6. EXHIBITS 

 

Exhibits:

 

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

  
31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

  
32.1

Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d- 14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. 

 

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 BEMAX INC.  
  
Dated: September 28, 2017By: /s/Taiwo Aimasiko
  Taiwo Aimasiko, President and
Chief Executive Officer
 
Dated: September 28, 2017By: /s/Taiwo Aimasiko
  Taiwo Aimasiko, Chief Financial Officer  

 

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