ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.
ITEM 2. PROPERTIES
The Company leases office space in Los Angeles, California, at 3150 Wilshire, Suite 2215.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Currently, the Company is not involved in any pending litigation or legal proceeding.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is currently quoted on the OTCQB Bulletin Board under the symbol "JFIL". Because we are quoted on the OTCQB Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.
Holders
As of February 29, 2016, there were 38 total record holders of 8,678,571 shares of the Company's common stock.
Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent sales of unregistered securities
On July 28, 2015 the Company issued 178,571 shares of its common stock to Premier Venture Partners, LLC ("PVP"). The Shares were issued in consideration of the execution of an Equity Purchase Agreement entered into on June 18, 2015 between the Company and PVP. The issuance of shares to PVP was made in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act") and Rule 506 of Regulation D promulgated by the SEC under the 1933 Act.
On December 9, 2015 the Registrant issued to Peak One Opportunity Fund, L.P. a Convertible Debenture in the principal amount of $60,000. The issuance of the debenture was disclosed on Form 8-K filed on December 15, 2015. The debenture matures on December 9, 2018.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended February 29, 2016 and February 28, 2015.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or our behalf. We disclaim any obligation to update forward-looking statements.
Results of Operations
Revenue
We recognized no revenues during the year ended February 29, 2016 or February 28, 2015 as we have yet to generate any sales from our new business in the medical sector.
Operating Costs and Expenses
The major components of our expenses for the years ended February 29, 2016 and February 28, 2015 are outlined in the table below:
The $132,595 increase in our operating costs for the year ended February 29, 2016 compared to the year ended February 28, 2015, was mainly due to the $116,250 increase in officers compensation, $6,000 increase in rent, $5,000 increase in investor marketing, $4,861 increase in website amortization expense, $3,763 increase in legal fee and $3,061 increase in accounting fees. The increases were partially offset by a decrease in OTC filing fees of $9,625. The increased accounting expense was due in part to accounting work completed in preparation of our registration statement on Form S-1 which was filed on March 9, 2016.
Other Expenses
Other expenses increased to $456,876 for the year ended February 29, 2016, from other income of $12 for the year ended February 28, 2015. Other expenses consisted primarily of $419,642 write off of deferred financing fees and $37,234 of combined other interest expense. The interest expense increase is due to a convertible promissory note issued on December 19, 2016.
Net Loss
During the years ended February 29, 2016 and February 28, 2015, the Company realized a net loss of $833,931 and $244,448 respectively.
Liquidity and Capital Resources
The increase in the Company's working capital deficit from February 28, 2015 to February 29, 2016 reflects the impact of net loss recognized by the Company for the year.
Cash Flows
The table below, for the periods indicated, provides selected cash flow information:
Cash Flows from Operating Activities
During the year ended February 29, 2016, we used $98,445 in operating activities compared to $59,909 during the year ended February 28, 2015.
During the year ended February 29, 2016, we incurred a net loss of $833,931 which was partially reduced for cash flow purposes by an increase of $167,250 in accrued officer compensation, an increase of 105,000 issuable stock compensation and the non-cash write off of deferred financing costs totaling $419,642 and reduced by a $9,494 reduction in accounts payable.
During the year ended February 28, 2015, we incurred a net loss of $244,448 which was partially reduced for cash flow purposes by an increase of $156,000 in accrued officer compensation and the non-cash write off of deferred financing costs totaling $30,000 and reduced by a $1,461 reduction in accounts payable.
Cash Flows from Investing Activities
During the year ended February 29, 2016, we spent $25,000 cash to develop the company's website as of investing activities. We did not generate or use any cash from investing activities during the year ended February 28, 2015.
Cash Flows from Financing Activities
During the year ended February 29, 2016, we generated $123,445 in financing activities compared to $59,921 during the year ended February 28, 2015.
During the year ended February 29, 2016, we received $70,945 by way of loan payable related party compared to $59,921 received by way of loan payable related party during the year ended February 28, 2015. We also received $52,500 proceeds from a convertible note on December 9, 2015.
Future Financings
Effective June 18, 2015, we entered into an Equity Purchase Agreement, and a Registration Rights Agreement with Premier Venture Partners, LLC, a California limited liability company.
Pursuant to the terms of the Agreements, the Premier Venture shall invest up to Five Million U.S. Dollars ($5,000,000) to purchase the Company's common stock in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), Rule 506 of Regulation D promulgated by the SEC under the 1933 Act, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the sales of shares of the Common Stock made pursuant to the Agreements. The Company has filed a registration statement to register the shares of common stock sold to the Investor pursuant to the 1933 Act, and the rules and regulations promulgated thereunder.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JUBILANT FLAME INTERNATIONAL, LTD.
(FORMERLY JIU FENG INVESTMENT HONG KONG, INC.)
FOR THE YEARS ENDED FEBRUARY 29, 2016 AND FEBRUARY 28, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and shareholders of
Jubilant Flame International, Inc.
Shanghai, China
We have audited the accompanying balance sheet of Jubilant Flame International, Inc (the "Company") as of February 29, 2016 and the related statements of operations, stockholders' deficit and cash flows for the year then ended, and the related notes to the financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 29, 2016 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company suffered a loss from operations during the year ended February 29, 2016, has yet to establish a reliable, consistent and proven source of revenue to meet its operating costs on an ongoing basis and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Pritchett, Siler & Hardy P.C.
Farmington, Utah
June 29, 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Jubilant Flame International, Ltd
Shanghai, China
We have audited the accompanying balance sheets of Jubilant Flame International, Ltd as of February 28, 2015 and the related statement of operations, changes in stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jubilant Flame International, Ltd.) as of February 28, 2015, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements the Company has suffered losses from operations and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cutler & Co., LLC
Wheat Ridge, formerly Arvada, Colorado
June 5, 2015
JUBILANT FLAME ITERNATIONAL, LTD
(formerly Jiu Feng Investment Hong Kong Ltd)
Balance Sheets
The accompanying notes are an integral part of the audited financial statements.
JUBILANT FLAME ITERNATIONAL, LTD
(formerly Jiu Feng Investment Hong Kong Ltd)
Statements of Operations
The accompanying notes are an integral part of the audited financial statements.
JUBILANT FLAME INTERNATIONAL, LTD
(formerly Jiu Feng Investment Hong Kong Ltd)
Statements of Changes in Stockholders' Deficit
The accompanying notes are an integral part of the audited financial statements.
JUBILANT FLAME INTERNATIONAL, LTD
(formerly Jiu Feng Investment Hong Kong Ltd)
Statements of Cash Flows
The accompanying notes are an integral part of the audited financial statements.
JUBILANT FLAME INTERNATIONAL, LTD
(FORMERLY JIU FENG INVESTMENT HONG KONG LTD.)
NOTES TO AUDITED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED FEBRUARY 29, 2016 AND FEBRUARY 28, 2015
NOTE 1 - ORGANIZATION AND OPERATIONS
Jubilant Flame International, Ltd. (the "Company"), was formed on September 29, 2009 under the name Liberty Vision, Inc. The Company provided web development and marketing services for clients. On December 5, 2012 the Company disposed of its subsidiary corporation to a shareholder for a nominal sum, as well as other management operations.
On December 16, 2012, the Company changed its name to Jiu Feng Investment Hong Kong Ltd.On July 24, 2013, the Company changed its business sector to the medical sector. On September 30, 2013, the Company entered into a world-wide five year licensing agreement with BioMark Technologies (Asia) Limited ("BioMark") whereby the Company is licensed to sell, market and, or, distribute certain products pertaining to the health care industry; and to conduct research and development of BioMark's cancer detection scanning technology. The Company's president, Ms. Yan Li is also president of, and exercises control over, BioMark.
On August 18, 2015, the Company changed its name to Jubilant Flame International, Ltd.
On November 16, 2015, the Company entered into the cosmetic sector by entering into a Distribution / License Agreement with Rubyfield Holdings LTD ("Rubyfield"), a company organized under the laws of Hong Kong, whereby the Company is Rubyfield's exclusive independent authorized Master Distributor for all of North America for certain products pertaining to the cosmetics industry. The Company's president, Ms. Yan Li, is also president of, and exercises control over Rubyfield.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.GAAP").
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The Company's significant estimates include income tax provisions and valuation allowances of deferred tax assets; the fair value of financial instruments and the assumption that the company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Fiscal Year End
The Company elected February 28 as its fiscal year end date.
Foreign Currency Transactions
The Company applies the guidelines as set out in Section 830-20-35 of the FASB Accounting Standards Codification ("Section 830-20-35") for foreign currency transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards Codification, foreign currency transactions are transactions denominated in currencies other than U.S Dollar, the Company's reporting currency. Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the reporting currency and the currency in which a transaction is denominated increases or decreases the expected amount of reporting currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction generally shall be included in determining net income for the period in which the transaction is settled. The exceptions to this requirement for inclusion in net income of transaction gains and losses pertain to certain intercompany transactions and to transactions that are designated as, and effective as, economic hedges of net investments and foreign currency commitments.
Pursuant to Section 830-20-25 of the FASB Accounting Standards Codification, the following shall apply to all foreign currency transactions of an enterprise and its investees: (a) at the date the transaction is recognized, each asset, liability, revenue, expense, gain or loss arising from the transaction shall be measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date as defined in Section 830-10-20 of the FASB Accounting Standards Codification; and (b) at each balance sheet date, recorded balances that are denominated in currencies other than the functional currency or reporting currency of the recording entity shall be adjusted to reflect the current exchange rate.
All of the Company's operations are carried out in U.S. Dollars. The Company uses the U.S. Dollar as its reporting currency as well as its functional currency.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.
Website and Amortization
Website development costs are capitalized and stated at cost, less accumulated amortization. Amortization is provided using the straight-line method over the estimated useful life of three years.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, are included in operating expense in the accompanying statements of income and comprehensive income (loss).
New accounting standard for Debt Issue Cost and Debt Discount
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 amends previous guidance to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted ASU No.2015-03 regarding the presentation of debt issuance cost in the year end of February 29, 2016.
The Company may pay debt issue costs and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are treated as debt discount and are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issuance Discount
For certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as convertible features in convertible debts or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the binomial option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale date of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
·
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
·
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
·
Level 3: Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
The carrying amounts of the Company's financial assets and liabilities, such as cash, accounts payable and accrued expenses, approximate their fair values because of the current nature of these instruments. Debt approximates fair value based on interest rates available for similar financial arrangements. Derivative liabilities which have been bifurcated from host convertible debt agreements are presented at fair value.
The following are the major categories of liabilities measured at fair value on a recurring basis as of February 29, 2016 and February 28, 2015, using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments, such as warrants, are also valued using the binomial option-pricing model.
Income Taxes
Deferred income tax assets and liabilities are provided for based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Net Loss Per Common Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period.
The computation of basic and diluted loss per share at February 29, 2016 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
NOTE 3 - GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at February 29, 2016 the Company had current assets, of $10,623, comprised of $4,998 in cash and $5,625 in prepaid expenses. Current liabilities total $752,217 resulting in a working capital deficit of $741,594. The Company currently has no profitable trading activities and has an accumulated deficit of $1,740,447 as at February 29, 2016. This raises substantial doubt about the Company's ability to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its new business plan in the medical and cosmetics sector on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
NOTE 4 - CONVERTIBLE DEBT
On December 9, 2016, the Company issued convertible promissory notes totaling $60,000. At the time of issuance, the notes were evaluated and were determined to contain embedded conversion options that must be bifurcated and reported at fair value with original issue discounts. As a result, a derivative discount on convertible promissory notes was recorded, which net of discount amortization for the year ended February 29, 2016 amounted to $6,315.
Debt Discount
During the year ended February 29, 2016, the Company recorded debt discounts totaling $58,026.
The Company amortized debt discount of $4,341 during year ended February 29, 2016.
Debt discount consisted of the following at February 29, 2016:
Derivative Liabilities
The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.
The following schedule shows the change in fair value of the derivative liabilities during the year end February 29, 2016:
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded derivative interest expenses for the year ended February 29, 2016 of $50,443.
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions during the year:
NOTE 5- RELATED PARTY TRANSACTIONS
In support of the Company's efforts and cash requirements, it must rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. The advances are considered temporary in nature and have not been formalized by a promissory note.
As at February 29, 2016, the Company had a $216,473 loan outstanding with a shareholder of the Company and a loan of $8,000 with the treasury and secretary of the Company. This compares with the outstanding balance of $153,528 for the shareholder and $0 for the treasury and secretary at the fiscal year end of February 28, 2015. The loans are non-interest bearing, due upon demand and unsecured.
A related party created a website, that was active beginning in August of 2015, and billed the Company $25,000. The expense of this website will be amortized over 36 months at the rate of $694 per month.
NOTE 6 - INCOME TAX
At February 29, 2016, the Company had unused federal and state net operating loss carryforwards available of approximately $1,414,628, which may be applied against future taxable income, if any, and which expire in various years through 2036.
This loss carry forward expires according to the following schedule:
The Company's deferred tax assets as of February 29, 2016 and February 28, 2015 are as follows:
There were no material permanent differences or other reconciling items to reconcile the tax provision for the years ended February 29, 2016 and February 28, 2015, other than the change in valuation allowance of $283,537 and $83,112 respectively . All tax years from inception remain open for examination by the tax authorities.
NOTE 7 - ACCRUED OFFICER COMPENSATION
On April 17, 2013 the Company entered into Employment Agreements with its president and its secretary and treasurer. Its president's agreement is retroactively effective as of December 4, 2012, for a term of 36 months (measured from December 4, 2012). Pursuant to the agreement, The company's president shall receive an annual salary of $78,000 and shall act as the Company's Chief Executive Officer.
The company's secretary and treasurer agreement is retroactively effective as of December 4, 2012, for a term of 36 months (measured from December 4, 2012). Pursuant to the agreement the officer shall receive an annual salary of $78,000 and shall act as the Company's Secretary and Treasurer.
On December 15, 2015, the Company entered into employment agreements with its president, Ms. Yan Li, and its secretary and treasurer, Mr. Robert Ireland. Ms. Yan's agreement is retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, Ms. Yan shall receive an annual salary of $100,500 and 100,000 shares of the Company's common stock and shall act as the company CEO. Mr. Ireland's agreement is retroactively effective as of December 4, 2015 for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, Mr. Ireland shall receive an annual salary of $100,500 and 100,000 shares of the Company's common stock and shall act as the Company's secretary and treasurer. The Company valued these shares of stock compensation at $2.1 per share based on the quoted market price of shares of common stock on the effective date of the agreement.
As at February 29, 2016, a total of $518,250 had been accrued as compensation payable to the two officers.
NOTE 8 - LEASED PREMISES OBLIGATION
On December 1, 2015 the Company entered into a lease for office space in Los Angeles, California. The Company paid a deposit of $2,000 and is obligated for a period of 36 months ending on November 30, 2018 to pay a rental fee of $2,000 per month.
Minimum future lease commitments are as follows:
NOTE 9 - STOCKHOLDERS' DEFICIT
The Company has authorized share capital of 75,000,000 shares of common stock authorized with a par value of $0.001 per share.
No shares of common stock were issued during the year ended February 28, 2015.
Effective June 18, 2015 the Company issued 178,571 common shares pursuant to the terms of.an Equity Purchase Agreement entered into with Premier Venture, a California limited liability company.
Pursuant to the terms of the Equity Purchase Agreement, Premier Venture committed to purchase up to $5,000,000 of our common stock during the Open Period. From time to time during the Open Period, we may deliver a put notice (the "Put Notice") to Premier Venture which states the dollar amount that we intend to sell to Premier Venture on a date specified in the Put Notice. The maximum investment amount per notice shall not exceed the lesser of (i) 200% of the average daily trading volume of our common stock on the five trading days prior to the day the Put Notice is received by Premier Venture and (ii) 110% of any previous put amount during the maximum thirty-six (36) month period (however the amount for the preceding (ii) shall never be less than 75,000 shares). The total purchase price to be paid, in connection with each Put Notice, by shall be calculated at The Purchase Price for the Securities for each Put shall be the Put Amount multiplied by seventy percent (70%) of the lowest individual daily volume weighted average price ("VWAP") of the common stock during the five (5) consecutive trading days immediately after the applicable date of the Put Notice, less six hundred dollars ($600.00).
In consideration of the execution and delivery of the Equity Purchase Agreement by Premier Venture, we issued Premier Venture 178,571 shares of our common stock. We value these shares of stock at $2.35 per share based on the quoted market price of shares of common stock on the date we entered into the Equity Purchase Agreement.
Referenced in NOTE 7, On December 15, 2015, the Company entered into Employment Agreements with its president and its secretary and treasurer, the agreements are retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, each officer will receive 100,000 shares of the Company's common stock as compensation each year. The company valued these shares of stock compensation at $2.1 per share based on the quoted market price of shares of common stock on the effective date of the Agreement. By the year end, no compensation shares have been issued and $105,000 stock compensation expense was recorded.
Total shares issued and outstanding as at February 29, 2016 were 8,678,571.
NOTE 10 - DEFERRED FINANCING COST
During the third quarter, the company issued 178,571 shares of common stock associated with the Equity Purchase Agreement referenced is Note 9. Total share value of $419,642 was recorded as "Deferred financing costs". At the year end, the deferred financing cost of $419,463 was written off due to the uncertain nature of the capital raising.
NOTE 11 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, "Subsequent Events", the Company has analyzed its operations subsequent to February 29, 2016 to June 28, 2016, the date when the financial statements were issued. The Management of the Company determined that there were no reportable events that occurred during that subsequent period to be disclosed or recorded.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and 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 as of the evaluation date that our disclosure controls and procedures were not effective. Our management reached the conclusion that our disclosure controls and procedures were not effective upon the realization that the issuance to Premier Venture Partners, LLC of 178,571 shares of our common stock were not properly reflected in our quarterly report on Form 10-Q for the period ended August 31, 2015 filed with the Securities and Exchange Commission on October 2, 2015. The Company's management is currently examining how to enhance our disclosure controls and procedures to ensure that our reports are timely and accurate.
Limitations on the Effective of Controls
Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
Based upon their evaluation of our controls, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective. Our management reached the conclusion that our disclosure controls and procedures were not effective upon the realization that the issuance to Premier Venture Partners, LLC of 178,571 shares of our common stock were not properly reflected in our quarterly report on Form 10-Q for the period ended August 31, 2015 filed with the Securities and Exchange Commission on October 2, 2015. The Company's management is currently examining how to enhance our disclosure controls and procedures to ensure that our reports are timely and accurate.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
On December 15, 2015, the Company entered into Employment Agreements with its president, Ms. Yan Li, and its secretary and treasurer, Mr. Robert Ireland. Ms. Yan's agreement, which is attached to this Annual Report on Form 10-K as Exhibit 10.1, is retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, Ms. Li shall receive an annual salary of $100,500 and 100,000 shares of the Company's common stock, and shall act as the company's CEO. Mr. Ireland's agreement, which is attached to this Annual Report on Form 10-K as Exhibit 10.2, is retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, Mr. Ireland shall receive an annual salary of $100,500 and 100,000 shares of the Company's common stock, and shall act as the company's Secretary and Treasurer.
On December 1, 2015, the Company entered into a sublease agreement to lease space for retail sales and inventory storage. The leased premises are located in Los Angeles, California, at 3150 Wilshire, Suite 2215. The lease if for a term of 36 months, beginning on December 1, 2015, at a cost of $2000 per month.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our officers, directors and significant employees as of the date of this Report:
Each director serves until our next annual meeting of the stockholders or unless they resign earlier. The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors.
Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. At the present time, members of the board of directors are not compensated for their services to the board.
Biographical Information Regarding Officers and Directors
Ms. Yan Li, (47), is a permanent resident of Canada and has lived in Vancouver since 2008. Prior to living in Vancouver Ms. Li lived in Shanghai China. Ms. Li manages and is a member of the board of directors of several companies, including: Jiu Feng Investment Ltd from 2008 to date; Jiu Feng Investment Management Shanghai Ltd from 2000 to date; Shanghai Xiu Ling Hanhe Landscaping Engineering Ltd from 1999 to date; Biomark China Inc from 2008 to date; and JF-NAIC from 2012 to date. Her companies employ thousands of employees worldwide. Ms. Li holds a degree in financial and bank management from the Shanghai Financial Economical University.
Robert Ireland, (50), is a resident of Canada, and has been CEO of Next Alternative Inc. since 2008 and was a prior CEO of Virtual Wave Inc. Mr. Ireland has served on several boards including Next Alternative Inc, Satelinx Inc, RoadStar GPS, and Virtual Wave Inc. Mr. Ireland has over 19 years of experience being a member of a Board of Directors for both public and private companies. His experience in this area of Internet and Web development comes from his company Virtual Wave Inc. which initially was an internet provider in the early years of the Internet and later developed several GPS applications for military, police etc., all web oriented. Mr. Ireland was Chairman and CEO of Virtual Wave Inc. and in 2005 had 42 offices in 39 countries with over 5000 employees. Mr. Ireland's background is in law and computer science. He studied at the University of British Columbia and Carleton University. Mr. Ireland still holds an office at Carleton University. From 1985 to 1995 Mr. Ireland served as an adjudicator for the Province of Ontario and when he stepped down in 1995 he was a Senior Adjudicator for the province. He then started teaching at Carleton University and started Virtual Wave Inc.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers, during the past ten years, has been involved in any legal proceeding of the type required to be disclosed under applicable SEC rules, including:
1.
Any petition under the Federal bankruptcy laws or any state insolvency law being filed by or against, or a receiver, fiscal agent or similar officer being appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2.
Conviction in a criminal proceeding, or being a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
Being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i.
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii.
Engaging in any type of business practice; or
iii.
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4.
Being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) of this section, or to be associated with persons engaged in any such activity;
5.
Being found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6.
Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7.
Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i.
Any Federal or State securities or commodities law or regulation; or
ii.
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii.
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8.
Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Code of Ethics
We have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We expect to adopt a code by the end of the current fiscal year.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Officers
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2016 and 2015 awarded to, earned by or paid to our executive officers.
Summary Compensation Table
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change in the responsibilities of an executive following a change in control of our company.
Directors' Compensation
The persons who served as members of our board of directors, including executive officers did not receive any compensation for services as director for 2015 and 2016.
Option Exercises and Stock Vested
There were no options issued, outstanding, exercised or vested during the years ended February 29, 2016 and February 28, 2015.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not maintain any qualified retirement plans or non-nonqualified deferred compensation plans for its employees or directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of our common stock as of February 29, 2016 and as of the date of this Report: (i) by each of our directors, (ii) by each of the Named Executive Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than five percent (5%) of any class of our outstanding shares. As of February 29, 2016, there were 8,500,000 shares of our common stock outstanding:
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the years ended February 29, 2016 and February 28, 2015, Li Yan personally paid $70,945 and $59,921 for trade accounts payable on behalf of Jubilant Flame International Ltd.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.
None of our directors are independent, as described in the standards for independence set forth in the Rules of the American Stock Exchange.
Director Independence
Our common stock is quoted on the OTC bulletin board interdealer quotation system, which does not have director independence requirements. Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. All of our directors are also officers of the Company, and we therefore have no independent directors.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During the years ended February 29, 2016 and February 28, 2015, we engaged Cutler & Co. LLC ("Cutler") as our independent auditor. On December 15, 2015, Cutler resigned as the Company's independent registered public accounting firm and the Company engaged Pritchett, Siler & Hardy PC as the Company's independent registered public accounting firm due to the merge of Culter and Pritchett, Siler & Hardy PC.
For the years ended February 29, 2016, and February 28, 2015, we incurred fees as discussed below:
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and review of our quarterly financial statements.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee's policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our audit committee approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV
ITEM 15.
ITEM 15. EXHIBITS
______________
*Incorporated by reference (filed on Form S-1 on April 12, 2011) ** Incorporated by reference (filed on Form 8-K on December 15, 2015)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JUBILANT FLAME INTERNATIONAL, LTD.
Date: June 29, 2016
By:
/s/ Li Yan
Li Yan
President, Chief Executive Officer
Principal Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 29, 2016
By:
/s/ Li Yan
Li Yan
President, Chief Executive Officer
Principal Executive Officer and Director
Date: June 29, 2016
By:
/s/ Robert Ireland
Robert Ireland
Treasurer, Chief Financial Officer
Principal Financial Officer