UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended May 31, 2012
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to__________
	Commission File Number: 000-53712

 

Bioflamex Corporation

(Exact name of registrant as specified in its charter)

 

Nevada	Pending
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

Christiansvej 28, 2920 Charlottenlund, Denmark

(Address of principal executive offices)

 

646-233-1310

(Registrant’s telephone number)

___________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer	[ ] Accelerated filer
[ ] Non-accelerated filer	[X] 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 [X] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 150,550,121 as of May 31, 2012.

 

	TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4:	Controls and Procedures	8
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3:	Defaults Upon Senior Securities	10
Item 4:	Mine Safety Disclosures	10
Item 5:	Other Information	10
Item 6:	Exhibits	10

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of May 31, 2012 and February 29, 2012 (unaudited);
F-2	Statements of Operations for the three months ended May 31, 2012 and 2011 and period from August 25, 2004 (Inception) to May 31, 2012 (unaudited);
F-3	Statements of Cash Flows for the three months ended May 31, 2012 and 2011 and period from August 25, 2004 (Inception) to May 31, 2012 (unaudited);
F-4	Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended May 31, 2012 are not necessarily indicative of the results that can be expected for the full year.

BIOFLAMEX CORPORATION

(A Development Stage Company)

BALANCE SHEETS

 

		May 31,				February 29,
		2012				2012
			(Restated)				(Restated)
Current assets
Cash and cash equivalents		$	10,834			$	191
Prepaid expenses - other			7,313				—
Total current assets			18,147				191
Other assets
Intangible assets			1,191,000				1,191,000
Total other assets			1,191,000				1,191,000
Total assets		$	1,209,147			$	1,191,191
Current liabilities
Accounts payable and accrued expenses		$	33,487			$	202,170
Accrued expenses - related party			16,259				12,385
Accrued interest			2,040				95
Accrued interest - related party			421				258
Note payable - related party			4,034				4,034
Convertible notes payable			158,970				67,826
Total current liabilities			215,211				286,768
Stockholders' Equity
Common stock, par value $0.0001, 400,000,000 authorized,150,550,121 and 193,166,167 shares issued and outstanding as of May 31, 2012 and February 29, 2012, respectively			15,056				9,317
Additional paid-in capital			3,401,912				3,057,195
Common stock  authorized and unissued, 6,133,334 and 42,133,334 shares at May 31, 2012 and February 29, 2012, respectively			613				4,213
Unamortized share-based compensation			(52,225	)			(160,000	)
Foreign currency translation			—				876
Accumulated deficit			(2,371,420	)			(2,007,178	)
Total stockholders' equity			993,936				904,423
Total liabilities and stockholders' (deficit)		$	1,209,147			$	1,191,191

 

The accompanying notes are an integral part of these financial statements.

BIOFLAMEX CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

 

										August 25, 2004
		For the Three Months Ended								(Inception) to
		May 31,								May 31,
		2012				2011				2012
							(Restated)
Revenues		$	—			$	—			$	—
Operating Expenses
Consulting fees			61,516				47,250				1,268,155
Compensation expense - related party			120,000				—				680,000
Exploration costs			—				—				16,500
General and administrative			26,239				5,193				82,571
Professional fees			1,843				29,188				164,285
Total operating expenses			209,598				81,631				2,211,511
Net operating loss			(209,598	)			(81,631	)			(2,211,511	)
Other income (expense)
Interest expense, net			(3,191	)			(1,953	)			(8,535	)
Interest expense - related party			(163	)			—				(421	)
Finance costs			(151,872	)			—				(151,872	)
Gain (loss) on foreign currency			582				—				919
Total other income (expense)			(154,644	)			(1,953	)			(159,909	)
Net (loss)		$	(364,242	)		$	(83,584	)		$	(2,371,420	)
Basic and diluted loss per share		$	(0.00	)		$	(0.00	)
Weighted average shares outstanding			139,072,064				93,598,535

 

The accompanying notes are an integral part of these financial statements.

BIOFLAMEX CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

 

		The Three Months Ended								August 25, 2004
		May 31,								(inception) to
		2012				2011				May 31, 2012
Cash flows from operating activities:
Net (loss)		$	(364,242	)		$	(83,584	)		$	(2,371,420	)
Adjustments to reconcile net loss to net cash used by operating activities:
Shares issued for services			150,133				—				1,735,133
Shares issued for financing			151,872				—				151,872
Amortization of interest			1,144				1,953				6,395
Impairment of mineral rights			—				—				16,500
Decrease (increase) in assets:
Prepaid expenses			(7,313	)			—				(7,313	)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities			(169,457	)			39,318				33,589
Accrued expenses - related party			3,874				—				16,259
Accrued interest - related party			163				—				421
Accrued interest			1,945				—				2,040
Net cash provided (used) by operating activities			(231,881	)			(42,313	)			(416,524	)
Cash flows from investing activities:
Purchase of mineral rights			—				—				(16,500	)
Net cash (used) by investing activities			—				—				(16,500	)
Cash flows from financing activities:
Proceeds from notes payable - related party			—				—				22,703
Payments on notes payable - related party			—				—				(18,669	)
Proceeds from notes payable			8,883				—				8,883
Payments on notes payable			(8,883	)			—				(8,883	)
Proceeds from convertible debenture			242,524				—				314,024
Proceeds from sale of common stock			—				50,000				125,800
Net cash provided by financing activities			242,524				50,000				443,858
Net increase in cash			10,643				7,687				10,834
Cash, beginning of period			191				59				—
Cash, end of period		$	10,834			$	7,746			$	10,834
Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	—			$	—			$	—
Cash paid for interest		$	—			$	—			$	—
Supplemental non-cash disclosures:
Shares issued for assets		$	—			$	1,191,000			$	1,191,000
Shares issued for financing costs		$	151,872			$	—			$	151,872
Shares issued for debt conversion		$	152,524			$	—			$	152,524
Shares issued for services		$	150,133			$	—			$	1,735,133

 

The accompanying notes are an integral part of these financial statements.

BIOFLAMEX CORPORATION

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

MAY 31, 2012

 

NOTE 1 – Significant Accounting Policies and Procedures

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of May 31, 2012, and the results of its operations and cash flows for the three months and three months ended May 31, 2012 and 2011. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission (“the Commission”). The Company believes that the disclosures in the unaudited condensed consolidated financial statements are adequate to ensure the information presented is not misleading. However, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended May 31, 2012 filed with the Commission on July 30, 2012.

 

The accompanying consolidated financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Cash and cash equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At May 31, 2012 and February 29, 2012, the Company had no cash equivalents.

 

Revenue recognition

The Company has not yet generated revenue. When revenue is earned, the Company will recognize in accordance with ASC subtopic 605-10 (formerly SEC Staff Accounting Bulletin No. 104 and 13A, “Revenue Recognition”) net of expected cancellations and allowances.

 

The Company's revenues, which do not require any significant production, modification or customization for the Company's targeted customers and do not have multiple elements, are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the Company's fee is fixed and determinable; and (iv) collectability is probable.

 

Loss per share

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed exercise or conversion of stock options, warrants, and debt to purchase common shares, would have an anti-dilutive effect. At May 31, 2012 and February 29, 2012 the Company had approximately 11,321,000 and 6,835,000, respectively, related to its convertible notes payable that have been excluded from the computation of diluted net loss per share.

 

Income taxes

The Company follows ASC subtopic 740-10 for recording the provision for income taxes. ASC 740-10 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

 

Fair Value of Financial Instruments

The Company has financial instruments whereby the fair value of the financial instruments could be different from that recorded on a historical basis in the accompanying balance sheets. The Company's financial instruments consist of cash, receivables, accounts payable, accrued liabilities, and notes payable. The carrying amounts of the Company's financial instruments approximate their fair values as of May 31, 2012 and February 29, 2012 due to their short-term nature.

 

Long-lived assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost or carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and its fair value or disposable value. For the three months ended May 31, 2012, and the year ended February 29, 2012, the Company determined that none of its long-term assets were impaired.

 

Use of estimates

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 affects 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 could differ from those estimates.

 

Advertising

The Company expenses advertising costs as incurred. During the three months ended May 31, 2012 and 2011 and for the period from August 25, 2004 (inception) to May 31, 2012, the Company did not incur advertising expenses.

 

Research and development

Research and development costs are expensed as incurred. During the three months ended May 31, 2012 and 2011and for the period from August 25, 2004 (inception) to May 31, 2012, the Company did not incur research and development costs.

 

Concentration of Business and Credit Risk

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. The Company’s financial instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank accounts which may at times, exceed federally-insured limits.

 

Foreign currency transactions

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 820, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income.

 

Share-Based Compensation

The Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.

 

The Company accounts for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.

The Company calculates the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns.

 

The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award.

 

For the three months ended May 31, 2012 and 2011 and for the period from August 25, 2004 (inception) to May 31, 2012, 2012, the Company recorded share-based compensation expense related to equity granted in connection with services to the Company of $150,133, $0 and $1,735,133, respectively.

 

Recent accounting pronouncements

 

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 

International Financial Reporting Standards:

 

In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to follow the proposed roadmap for future developments.

 

Year-end

The Company has adopted February, as its fiscal year end.

 

NOTE 2 – Going concern

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has not yet achieved profitable operations and since its inception (August 25, 2004) through May 31, 2012 the Company had accumulated losses of $2,371,420 and a working capital deficit of $197,064. Management expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives, including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.

NOTE 3 – Intangible assets

 

On January 25, 2011, the Company entered into an Asset Purchase Agreement to acquire certain intellectual property related to a line of fire extinguishing and prevention products that are based on environment friendly and biological formulations. In consideration for the newly acquired assets, the Company issued 38,000,000 shares at $0.013 per share, totaling $1,191,000 to two individuals. The Company followed SAB Topic 5 G in determining value as the transaction was considered a non-monetary related party transaction. Value was determined based on historical costs associated with testing, patenting and trademarking the intellectual property and also supported by an independent valuation of the intellectual property. In accordance with ASC 350, the entire purchase price was allocated to non-amortizable intellectual property due to the uncertainty of the assets remaining useful life. At May 31, 2012 and February 29, 2012, the Company evaluated the carrying amount of the asset for possible impairment and concluded the carrying amount represents the fair value of the asset at the balance sheet date.

 

NOTE 4 – Related party transactions

 

Asset purchase agreement

On January 25, 2011, the Company entered into an Asset Purchase Agreement with Messer’s Schiørring and Henrik for the purchase of intellectual property. Pursuant to the agreement, each of the aforementioned individuals were issued 19,000,000 shares of the Company’s common stock valued at $1,191,000. Further, the Company’s sole officer, at the time of the transaction cancelled a total of 75,643,333 shares of his common stock and agreed to sell Messer’s Schiørring and Henrik in a private transaction, his remaining shares totaling 12,856,666 whereby effectuating a change in control. Upon completion of the collective transactions, Messer’s Schiørring and Henrik accepted positions as the sole officers and directors of the Company.

 

Accrued expenses

During the three months ended May 31, 2012, officers of the Company paid $3,874 of operating expenses on behalf of the Company. As of May 31, 2012, the amount owed to officers of the Company totaled $16,259.

 

Note payable

On September 30, 2011, the Company issued a promissory note to an officer in the amount of $4,034 for cash advanced to the Company for operating expenses. The loan bears interest at a rate of 15% per annum and is due on demand. As of May 31, 2012, the Company recorded interest expense of $163. The principle together with accrued interest totaled $4,455.

 

Executive compensation

On March 5, 2012, the Company entered into employment agreements with each of its two executives for a term of three years. Pursuant to the agreements, each officer would receive annual compensation of $240,000. Additionally, the agreements allowed for share-based compensation of 5,000,000 shares each, issuable three months from the effective date (March 5, 2012) of the agreements. On July 13, 2012, the Company entered into a Plan and Agreement of Triangular Merger with Terra Asset Management, Inc. In connection with the merger, the March 5, 2012 Employment Agreements were superseded with new agreements that are deemed “At Will” and can be terminated at any time upon 30-day written notice. Per the July 13, 2012 agreements, each officer is to receive annual compensation of $100,000 which may be increased based on revenue benchmarks of $1,000,000 and $2,000,000. At each benchmark, annual compensation will increase to $175,000 and $240,000, respectively.

 

On March 28, 2012, the Company issued 6,000,000 shares each to the Company’s two officers, previously authorized, as compensation for services rendered in 2011.

 

On May 21, 2012, the Company issued 12,000,000 shares each to the Company’s officers, previously authorized as compensation for services rendered for the period beginning January 1, 2012 through June 30, 2012. In connection with the grant, the officers agreed to waive their right to the 5,000,000 shares due them per their respective employment agreements. The fair value of the 24,000,000 shares issued totaled $240,000 and is being amortized over the six month term of the agreement. At May 31, 2012, the Company recorded additional executive compensation of $120,000 in connection with the grant.

NOTE 5 – Convertible notes payable

 

Armitage S.A.

On December 13, 2010, the Company issued a convertible promissory note in the amount of $60,500. The note is convertible at any time upon the election of the holder at a conversion rate of $0.01. The note is non-interest bearing and matures on December 13, 2012. Further, the Company can elect to convert the note at any time at the stated conversion rate in an amount equal to 120% of the outstanding balance at the time of election. The Company imputed interest at a rate of 8% and recorded a discount of $8,925. The discount is being amortized over the term of the note. As of May 31, 2012, the principle balance, net of its remaining discount of $2,530, totaled $5,970 additionally the Company recorded an imputed interest expense of $1,144.

 

Laurag Associates S.A.

On January 9, 2012, the Company issued a convertible promissory note in the amount of $11,000. The note is unsecured, bears interest at a rate of 6% per annum and matures on January 8, 2013. The note is convertible into shares of the Company’s common stock at a rate equal to the market value of the common stock on the date of conversion notice. As of May 31, 2012, the unpaid principal balance together with accrued interest totaled $11,421.

 

Magna Group I, LLC

On March 29, 2012, the Company issued an 8% convertible promissory note to Magna Group I, LLC (“Magna”) in exchange for the assumption of $143,786 of the Company’s previously accrued liabilities. The note matures on March 29, 2012 and is convertible at any time at the option of the holder at a conversion rate equal to a 35% discount of the three lowest trading amounts in the ten day period prior to the election to convert. During the three months ended May 31, 2012, Magna elected to convert a total of $113,786 of the note into 8,575,620 shares of common stock. The fair value of the shares issued totaled $211,093. The Company recorded additional financing costs of $97,307 in connection with the conversion representing the excess fair value of the shares issued over the debt converted.

 

On May 14, 2012, the Company issued a second 12% convertible promissory note to Magna in exchange for the assumption of $37,737 of the Company’s previously accrued liabilities. The note matures on May 14, 2013 and is convertible at any time at the option of the holder at a conversion rate equal to a 35% discount of the three lowest trading amounts in the ten day period prior to the election to convert. On May 22, 2012, Magna elected to convert the full amount due into 5,730,400 shares of common stock. The fair value of the shares issued totaled $93,406. The Company recorded additional financing costs of $54,566 in connection with the conversion representing the excess fair value of the shares issued over the debt converted.

 

Hanover Holdings I, LLC

On March 29, 2012, the Company issued an 8% convertible promissory note to Hanover Holding I, LLC in the amount of $60,000. The note is unsecured, bears interest at a rate of 8% per annum and matures on March 29, 2013. The note is convertible into shares of common stock at a conversion rate equal to the market price on the date of election to convert. As of May 31, 2012, the Company has recorded interest expense of $829 and the principle balance together with accrued interest totaled $60,829.

 

Svane Thomsen

On March 6, 2012, the Company issued a promissory noted in the amount of $8,883 to Svane Thomsen. The note is unsecured, bears interest at a rate of 10% per annum and matures on or before December 31, 2012. As of May 31, 2012, the Company repaid the full amount of the note.

 

NOTE 6 – Commitments

 

Front Range Consulting

On December 1, 2010, the Company entered into a consulting agreement with Front Range Consulting for a term of two years expiring on November 30, 2012. Pursuant to the initial agreement, Front Range will provide business consulting services in exchange for cash compensation in the amount of $19,500 to be amortized over the term of the agreement. On January 28, 2011, the Company agreed to amendment the December 2010 agreement with the inclusion of additional compensation of 1,000,000 shares of the Company’s common stock fair valued at $200,000 to be deemed fully earned on the date of amendment. On September 20, 2011, the Company agreed to further amend the December agreement for the issuance of an additional 2,500,000 shares of common stock fair valued at $375,000 also deemed to be fully earned on the date of amendment. As May 31, 2012 and 2011, the Company has recorded consulting expense of $2,348 and $2,348, respectively related to the cash compensation due under the agreement.

NOTE 7 – Fair value measurement

 

The Company adopted ASC Topic 820-10 at the beginning of 2009 to measure the fair value of certain of its financial assets required to be measured on a recurring basis. The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or results of operations. ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

 

Level I – Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

 

Level II – Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

 

Level III – Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.

 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of May 31, 2012 and February 29, 2012:

 

				Level I				Level II				Level III				Fair Value
May 31, 2012
	Cash			$	10,834			$	—			$	—			$	10,834
	Prepaid expenses				—				7,313				—				7,313
	Intellectual property				—				1,191,000				—				1,191,000
	Accounts payable and accrued				—				(52,207	)			—				(52,207	)
	Notes payable				—				(163,004	)			—				(163,004	)
				$	191			$	983,102			$	—			$	993,936
February 29, 2012
	Cash			$	191			$	—			$	—			$	191
	Intellectual property				—				1,191,000				—				1,191,000
	Accounts payable and accrued				—				(214,908	)			—				(214,908	)
	Notes payable				—				(71,860	)			—				(71,860	)
				$	191			$	904,232			$	—			$	904,423

 

NOTE 8 – Shareholders’ equity

 

Recapitalization

Effective May 14, 2012, the Company amended its articles of incorporation to increase it authorized capital from 200,000,000 to 400,000,000 shares of common stock.

 

Common stock issuances

From August 24, 2011 (inception), the Company issued 43,800,000 shares of its restricted common stock at a price of $0.001 per share and total cash proceeds of $43,800.

 

On October 25, 2004, the Company issued 1,050,000 shares of its restricted common stock at a price of $0.01 per share and total cash proceeds of $10,500.

 

On January 5, 2005, the Company issued 260,000 shares of its restricted common stock at a price of $0.05 per share and total cash proceeds of $13,000.

On June 24, 2008, the Company issued 85,000,000 shares of its restricted common stock at a price of $0.0001 per share and total cash proceeds of $8,500.

 

On January 25, 2011, the Company issued 38,000,000 shares of its restricted common stock at a price of $0.313 per share or $1,191,111, pursuant to an asset purchase agreement dated January 25, 2011.

 

On January 25, 2011, in connection with the aforementioned Asset Purchase Agreement, the Company’s former director and chief executive officer returned 75,643,333 shares of common stock for cancellation. The Company recorded a reduction in additional paid in capital of $7,564 representing the par value of the cancelled shares.

 

On January 28, 2011, the Company authorized the issuance of 1,000,000 shares of common stock to Front Range Consulting for services valued at $200,000. The shares were subsequently issued on March 19, 2012 and April 18, 2012.

 

On April 26, 2011, the Company authorized the issuance of 333,334 shares of common stock pursuant to a subscription agreement for cash proceeds of $50,000. As of May 31, 2012, the shares are unissued.

 

On August 15, 2011, the Company authorized the issuance of 1,000,000 shares of common stock to Front Range Consulting for services valued at $150,000. The shares were subsequently issued on April 18, 2012.

 

In September 2011, the Company authorized the issuance of 2,000,000 shares of common stock to an individual for advisory services valued at $300,000. As of May 31, 2012 1,800,000 shares were unissued of which 1,000,000 shares were subsequently issued on April 17, 2012,

 

On September 20, 2011, the Company authorized the issuance of 2,500,000 to Front Range Consulting for services valued at $375,000. The shares were subsequently issued on May 15, 2012.

 

On March 28, 2012, the Company issued 12,000,000 shares of its common stock fair valued at $480,000 to its officers’ for services rendered in 2011.

 

On May 21, 2012, the Company issued 24,000,000 of its common stock fair valued at $240,000 for services to the Company for the period beginning January 1, 2012 and ending on June 30, 2012. As of May 31, 2012, the Company has recorded compensation expense of $120,000 and the remaining unamortized portion totaled $40,000.

 

On March 29, 2012, the Company issued an 8% convertible promissory note in the amount of $143,786 to Magna Group for the assumption of liabilities. The note was converted in to a total of 13,034,501 shares of common stock.

 

On May 14, 2012, the Company issued a promissory note in the amount of $38,787 to Magna Group for the assumption of liabilities. The note was converted the note in to 5,730,400 shares of common stock on May 17, 2012.

 

On May 14, 2012, the Company entered into an Investment Agreement with Dutchess Opportunity Fund II to sell up to an aggregate of $10,000,000 of the Company’s common stock at a 5% discount to market. Per the agreement, the Company issued 1,327,434 shares of its common stock as a preparation fee to Dutchess and an additional 500,000 shares to be held in escrow for future “Puts” by the Company. The Company has record consulting fees of $150,133 in connection with the transaction.

On May 23, 2012, the Company entered into a six month Consulting Agreement with Grey Bridge Capital and issued 750,000 shares of common stock valued at $12,225. Cash compensation due under the agreement totals $10,000. As of May 31, 2012, the Company recorded unamortized share-based compensation in the amount of $12,225 to be amortized over the six month term of the agreement.

 

As of May 31, 2012, the Company had no outstanding stock options or warrants.

 

NOTE 9 – Correction of an error

 

In June 2012, the Company identified errors in previously reported financial statements relating to the accrual of various expenses incurred and unrecorded from December 2010 through November 30, 2011. The following table represents the effects of the errors for the three months ended May 31, 2011 and February 29, 2012.

 

		February 29, 2012
		As Originally				Error				As
			Filed				Corrections				Restated
BALANCE SHEET
Current assets
Cash and cash equivalents		$	191				—			$	191
Prepaid expenses - other			—				—				10,000
Total current assets			191				—				10,191
Other assets
Intangible assets:			1,191,000				—				1,191,000
Total assets		$	1,191,191				—			$	1,201,191
Current liabilities
Accounts payable and accrued expenses			159,589				42,581				202,170
Accrued expenses - related party			12,385				—				12,385
Accrued interest			7,047				(6,952	)			95
Accrued interest - related party			—				258				258
Note payable - related party			4,034				—				4,034
Convertible note			60,500				7,326				67,826
Total current liabilities			243,555				43,213				286,768
Stockholders' (Deficit)
Common stock			9,300				17				9,317
Additional paid-in capital			1,337,500				1,719,695				3,057,195
Common stock authorized and unissued			—				4,213				4,213
Foreign currency translation			—				876				876
Unamortized share-based compensation			—				(160,000	)			(160,000	)
Accumulated deficit			(399,164	)			(1,608,014	)			(2,007,178	)
Total stockholders' equity			947,636				(43,213	)			904,423
Total liabilities and stockholders' (deficit)		$	1,191,191				—			$	1,191,191

 

STATEMENT OF OPERATIONS		May 31, 2011
Revenues		$	—				—			$	—
Operating Expenses
Consulting fees			—				47,250				47,250
General and administrative			5,194				—				5,194
Professional fees			29,188				—				29,188
Total operating expenses			34,382				47,250				81,632
Interest expense, net			—				(1,953	)			(1,953	)
Net (loss)		$	(34,382	)			(45,297	)		$	(79,679	)
Basic and diluted loss per share		$	(0.00	)			—			$	(0.00	)
Weighted average shares outstanding			96,463,745				—				139,072,064

 

NOTE 10 – Subsequent events

 

In accordance with ASC 855, management evaluated all activity of the Company through the date of filing, (the issue date of the financial statements) and concluded that no other subsequent events have occurred that would require recognition or disclosure in the financial statements other than those detailed below.

On June 11, 2012, the Company issued a convertible promissory note to Asher Enterprise in the amount of $37,500 at a rate of 22% per annum maturing March 13, 2013 and convertible at a 49% discount to market.

 

On July 13, 2012, the Company entered into and consummated a plan of Merger with Terra Asset Management in a triangular reverse merger where Terra Asset Management is the accounting survivor of the transaction.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Company Overview

 

Voice and Data Solutions

 

On July 16, 2012, we executed an Agreement and Plan of Merger (the “Merger Agreement”) by and between our company and our wholly owned subsidiary, Bioflamex Merger Sub, Inc., a Nevada corporation (“Subsidiary”) on the one hand, and Terra Asset Management, Inc., a Delaware corporation (“TAM”), on the other hand. Pursuant to the Merger Agreement, on the effective date, TAM will merge with Subsidiary, with Subsidiary surviving the merger and TAM ceasing to exist (the “Merger”). The effective date of the Merger is when we file articles of merger for the Subsidiary and TAM in Nevada and Delaware, respectively.

 

Terra Asset Management is an industry leader in designing, implementing and supporting state-of-the art converged voice and data solutions. Terra Asset Management is positioned to provide turnkey services solutions for all phases of the telecommunications equipment lifecycle. The company is ISO9001:2000 and TL9000 certified, has developed into a one-stop solution provider to major U.S. tier one carriers, equipment vendors, and enterprise customers.

 

Carriers and enterprise customers have recognized the benefit of outsourcing many of the network services that have traditionally been self-performed. Today, carriers and enterprise customers realize that service companies like Terra Asset Management can better leverage personnel over multiple carriers, multiple brands of OEM equipment and across overlapping geographies. As a result, Terra Asset Management should continue to benefit from the industry trend of outsourcing network services.

 

The company is organized into two distinct, but complementary business units: (1) The Enterprise Solutions Division, which offers IP-based communications, unified communications, and voice, video and data connectivity services to small, medium and large businesses, and (2) The Carrier Class Solutions Division, which offers backbone, backhaul and broadband networks for wireless operations. A backbone network provides a path for the exchange of information between different LAN(s) or subnetworks. Backhaul networks are typically used to move data from remote POPs (point of presence) or concentration points to a centralized location. Not everyone is within the reach DSL nor do all service providers have access to copper or fiber. That’s why Terra Asset Management proposes a range of broadband wireless access solutions.

WiMax/Wimesh: Terra Asset Management provides complete Broadband Wireless services from concept and design to installation and maintenance. Terra Asset Management’s expertise with Broadband wireless technologies includes In-building WiFi, Municipal WiFi (WiMesh), WiMax, and fixed broadband wireless services. Terra Asset Management utilizes the latest in system design tools and test equipment to ensure your broadband wireless success. WiMesh networks offer consumers and businesses the ability to have mobile broadband communications. The WiMesh solution can be easily deployed in communities, industrial parks, in municipal buildings and campus settings, and in many other high-density communal settings. The popularity of WiMesh technology has found its way into various city municipalities and business enterprises as well.

 

Microwave: Terra Asset Management was named a Preferred Supplier for microwave engineering, deployment and turn-up services for Alcatel-Lucent in late 2006. In late 2007, Terra Asset Management was selected as a national partner for Nera.

 

UMTS. Universal Mobile Telecommunications System (UMTS) is the standardization of third generation (3G) cellular systems. UMTS services involve preparing and expanding cell sites for new equipment. Terra Asset Management provides the preparatory work ahead of equipment manufacturers, installing cabinets, running cable and clearing space for new equipment.

 

Maintenance/Operations: The operations division is responsible for the general maintenance and support for carriers’ networks, including T1 testing and network audits.

 

Fire Extinguisher and Prevention Products

 

We are also in the business of developing, producing, and marketing high performance fire extinguishing and prevention products that are based on environment friendly and biological formulations.

 

We intend to build a leading position within the niche of environmentally friendly fire fighting and prevention solutions in the United States and internationally, both through organic growth and the acquisition of complementary companies and patents. We believe the time is right for our products. The general emphasis on environmental protection and the increased focus on health hazards in chemicals used in conventional fire fighting products paves the way for the substitution of chemical-based fire combatant products with “greener,” non-harmful products.

 

For this strategy to become a viable one, we have collaborated with Indonesian corporation Hartindo Industries. We are a preferred partner of Hartindo Industries, with Hartindo Saudi as its principal supply partner for logistical reasons. Hartindo Industries and its founder have developed an unparalleled line of biological extinguishing and retardant formulations, which we have utilized as a basis for our proprietary application innovations. We have also acted as an exclusive partner in the sales and marketing of the biological bulk product line of Hartindo Industries.

 

Fire extinguishers available on the market today mainly use dry chemical powder, chemical foam, CO2 or halon type of gaseous media as bases. These products in general will extinguish fires with a varying efficacy, but most also contain chemical substances that harm the environment or compose a hazard to people. In addition, they can be messy and damage metals (corrosion), increasing the collateral damage. Our products offer water-based clean alternatives which are completely harmless to humans and the environment, and are non-toxic. Combined with their exceptional extinguishing characteristics, we believe these products point to the future of professional and personal fire fighting. In conventional forest fire fighting, the primary media is water which offers good extinguishing power, but has some drawbacks: it must be used in large quantities; it evaporates relatively quickly; and has a short lifespan in hot environments. Chemical AFFF foams and agents are often used to enhance the fire extinguishing or retardant capabilities, but these chemicals affect the environment and leave long-lasting toxic residue. The toxins found in foams accumulate in the food-chain and are detectable in human organs. We believe our products will have no such negative effect upon life.

Our primary focus for 2012 and 2013 is the production and market penetration of our proprietary Bioflamex aerosol extinguishers intended for everyday consumers. We are now preparing the first production batches. The collaboration agreement with our key partner and supplier of core raw materials (biological fire extinguishing/retardant media), Hartindo Saudi, has been drafted but not yet finalized. We also have a draft agreement, not yet finalized, with our aerosol production partner, Dansoll A/S. The collaboration agreement with our key partner and supplier of core raw materials (biological fire extinguishing/retardant media), Hartindo Saudi, has been drafted. We also have an agreement in place with our aerosol production partner, Dansoll A/S. We have acquired the core raw materials needed for production.

 

Parallel to this, we have commenced the closing of key distribution agreements and we are focused on the sales and marketing of our aerosol products to consumer and business segments. We intend to submit UL and DIN certifications for our products during June-August 2012. These certifications will enable us to effectuate sales and deliveries to key clients and partners in the U.S., Europe and selected Asian markets.

 

We have submitted a patent application for our Bioflamex aerosols in January 2011 to ensure the security of our intellectual property rights and enhance the market response to our product propositions. We expect to have more information on the patent process during Q3 2012. We plan to build a solid portfolio of intellectual property within the “clean tech” fire prevention industry. 

 

Due to the death of our key partner in the development and completion of the Sentinel forest fire detection and suppression system, the process of producing a prototype of the system for testing and certification has been delayed, and we are currently exploring alternative partners to build and/or supply the thermal/infrared fire detection units. The most probable partner will be Hartindo Saudi and its parent corporation Hartindo Industries Malaysia. Due to the above we expect to submit the patent application for this product during Q4 2012/Q1 2013.

 

Results of operations for the three months ended May 31, 2012 and 2011, and for the period from August 25, 2004 (date of inception) through May 31, 2012

 

We have not earned any revenues since our inception on August 25, 2004. We do not anticipate earning revenues until such time that we have fully developed and are able to market our products.

 

We incurred operating expenses in the amount of $209,598 for the three months ended May 31, 2012, compared with operating expenses of $81,631 for the three months ended May 31, 2011. Our operating expenses were mainly for consulting fees and stock based compensation for the three months ended May 31, 2012, compared with consulting fees and professional fees associated with a prior business for the three months ended May 31, 2011.

 

We incurred operating expenses in the amount of $2,211,511 for the period from August 25, 2004 (Inception) to May 31, 2012.

 

We incurred other expenses of $154,644 for the three months ended May 31, 2012, as compared with only $1,953 in other expenses for the same period ended 2011. Other expenses for the three months ended May 31, 2012 are mainly attributable to finance costs in the amount of $151,872. Our other expenses for the period from August 25, 2004 (Inception) to May 31, 2012 were $159,909.

 

We incurred a net loss in the amount of $364,242 for the three months ended May 31, 2012, as compared with a net loss in the amount of $83,584 for the three months ended May 31, 2011. We incurred a net loss in the amount of $2,371,420 for the period from August 25, 2004 (Inception) to May 31, 2012. Our losses for each period are attributable to operating and other expenses together with a lack of any revenues.

 

Liquidity and Capital Resources

 

As of May 31, 2012, we had current assets of $18,147. We had total assets of $1,209,147 as of May 31, 2012. We had current liabilities of $215,211 and total liabilities of the same as of May 31, 2012. We had a working capital deficit of $197,064 as of May 31, 2012.

Operating activities used $231,881 in cash for three months ended May 31, 2012. Our net loss of $364,242 and accounts payable and accrued liabilities of $169,457 were the main contributing factors to our negative operating cash flow, offset mainly by shares issued for services of $150,133 and shares issued for financing of $151,872. Investing activities used $0 for the three months ended May 31, 2012. Financing activities for the three months ended May 31, 2012 generated $242,524 mainly as a result of $242,524 as proceeds from convertible debentures.

 

We will require a cash injection of $2,000,000 to: begin operations, launch a full marketing and branding campaign, manufacture and deliver products and to begin and increase revenues from its products.

 

On May 14, 2012, we entered into an Investment Agreement (the “Investment Agreement”) with Dutchess Opportunity Fund, II, LP, a Delaware limited partnership (the “Investor”), pursuant to which the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 of the our common stock, par value $0.01 per share (the “Common Stock”), over a period of 36 months from the first trading day following the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant to the Investment Agreement (the “Equity Line”).

 

We may draw on the facility from time to time, at our discretion. The maximum amount that we are entitled to put to the Investor in any one draw down notice is up to five million shares (5,000,000) multiplied by the daily volume weighted average price (VWAP) on the day prior to the put date. The purchase price shall be set at ninety-five percent (95%) of the lowest VWAP of the our Common Stock during the five (5) consecutive trading day period beginning on the date of delivery of the applicable draw down notice. The Investor will not be obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares of the our common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, we are not permitted to draw on the facility unless there is an effective Registration Statement (as defined below) to cover the resale of the shares. Upon notice to the Investor, the Company is entitled at any time in its discretion to terminate the Investment Agreement.

 

The Investment Agreement further provides that we and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement, or as a result of any lawsuit brought by a third-party arising out of or resulting from the other party’s execution, delivery, performance or enforcement of the Investment Agreement or the Registration Rights Agreement.

 

Pursuant to the terms of a Registration Rights Agreement dated as of May 14, 2012 between us and the Investor (the “Registration Rights Agreement”), we are obligated to file a registration statement (the “Registration Statement”) within 30 days with the Securities and Exchange Commission (“SEC”) to register the resale by Investor of the shares of Common Stock issued or issuable under the Investment Agreement. We are required to initially register 16,000,000 shares of Common Stock. We are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the filing of the Registration Statement.

 

As of May 31, 2012, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of May 31, 2012, there were no off balance sheet arrangements.

Going Concern

 

Our financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations for our next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. We have not yet achieved profitable operations and since our inception (August 25, 2004) through May 31, 2012, we have accumulated losses of $2,371,420 and a working capital deficit of $197,064. Management expects to incur further losses in the development of our business, all of which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet out obligations and repay our liabilities arising from normal business operations when they come due.

 

We expect to continue to incur substantial losses as we execute our business plan and do not expect to attain profitability in the near future. Since our inception, we have funded operations through short-term borrowings and equity investments in order to meet our strategic objectives. Our future operations are dependent upon external funding and our ability to execute our business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet our business objectives, including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that we will be able to obtain sufficient funds to continue the development of our business operation, or if obtained, upon terms favorable to us.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

 

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending February 28, 2013, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended May 31, 2012 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On March 28, 2012, we issued 6,000,000 shares to Mr. Kristian Schiørring, our Chief Executive Officer, and 6,000,000 shares to Mr. Henrik Dahlerup, our Chief Operating Officer, as compensation for their services to our company in 2011.

 

On April 17, 2012, we issued 1,000,000 shares of common stock previously authorized to Mr. Phil Sands for advisory services.

 

On May 21, 2012, we issued 12,000,000 shares each to our officers as compensation for services rendered for the period beginning January 1, 2012 through June 30, 2012. In connection with the grant, the officers agreed to waive their right to the 5,000,000 shares due them per their respective employment agreements that were entered into on March 5, 2012.

 

On March 29, 2012, we issued an 8% convertible promissory note in the amount of $143,786 to Magna Group for the assumption of liabilities. The note was converted into a total of 13,034,501 shares of common stock.

 

On May 14, 2012, we issued a promissory note in the amount of $38,787 to Magna Group for the assumption of liabilities. The note was converted the note in to 5,730,400 shares of common stock on May 17, 2012.

 

On May 14, 2012, we entered into an Investment Agreement with Dutchess Opportunity Fund II. to sell up to an aggregate of $10,000,000 of the Company’s common stock at a 5% discount to market. Per the agreement, the Company issued 1,327,434 shares of its common stock as a preparation fee to Dutchess and an additional 500,000 shares to be held in escrow for future “Puts.”

 

On May 23, 2012, we entered into a Consulting Agreement with Grey Bridge Capital and issued 750,000 shares of common stock valued at $12,225. Cash compensation totaled due under the agreement totals $10,000.

 

The above shares were issued pursuant to the exemption from registration found in Regulation S. Each purchaser represented to us that the purchaser was a Non-US Person as defined in Regulation S. We did not engage in a distribution of this offering in the United States. Each purchaser represented their intention to acquire the securities for investment only and not with a view toward distribution. All purchasers were given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 formatted in Extensible Business Reporting Language (XBRL).

**Provided herewith

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Bioflamex Corporation
Date:	August 2, 2012
By:	/s/ Kristian Schiorring Kristian Schiorring
Title:	Chief Executive Officer and Director