Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended May 31, 2011, for Bioflamex Corporation (formerly Deer Bay Resources Inc.), a Nevada corporation. The company is classified as a development stage company and a smaller reporting company. On January 25, 2011, the company pivoted from mineral resource exploration to acquiring intellectual property for environmentally friendly fire extinguishing and prevention products. As of the reporting date, the company has not generated any revenue and has not commenced significant commercial operations.
Key Financial Metrics
| Metric | Three Months Ended May 31, 2011 | Three Months Ended May 31, 2010 |
|---|---|---|
| Revenues | $0 | $0 |
| Net Loss | $(34,380) | $(14,401) |
| Operating Expenses | $34,380 | $14,401 |
| Cash and Cash Equivalents (End of Period) | $7,746 | $1,074 |
| Total Assets | $1,208,746 | N/A (Balance sheet not provided for 2010) |
| Total Liabilities | $60,907 | N/A |
| Convertible Debt | $60,500 | N/A |
| Working Capital | $17,339 | N/A |
Notes: The company holds $1,191,000 in intangible assets (patents and trademarks) acquired via stock issuance. The company has an accumulated deficit of $(168,961) since inception.
Material Changes vs. Prior Period
- Operating Expenses: Increased by approximately 139% from $14,401 in the prior year quarter to $34,380. This increase is primarily driven by higher professional fees ($29,188 vs. $10,720) and office expenses.
- Net Loss: Widened from $(14,401) to $(34,380) due to the rise in operating expenses with no offsetting revenue.
- Liquidity: Cash balances increased from $59 at the beginning of the period to $7,746, driven by a $50,000 cash infusion from a private placement of common stock on April 26, 2011.
- Capital Structure: The company issued 38,000,000 shares in January 2011 to acquire intellectual property (non-cash transaction) and 333,334 shares for cash in April 2011.
Guidance, Outlook, and Risks
Outlook and Capital Needs: Management states the company requires a cash injection of $2,000,000 to begin operations, launch marketing, manufacture products, and generate revenue. As of May 31, 2011, the company has insufficient cash to operate for the next twelve months. Future success is contingent upon securing additional equity or debt financing, for which there are no formal commitments.
Going Concern: The financial statements include a "Going Concern" warning. Due to the lack of significant revenue and history of losses, the company's ability to continue as a going concern is dependent on obtaining additional financing.
Internal Controls: Management concluded that disclosure controls and procedures were not effective as of May 31, 2011. Material weaknesses include inadequate segregation of duties and insufficient written accounting policies. Remediation is planned but dependent on securing additional financing.
Risks: The company faces risks related to the availability of capital, the ability to obtain necessary product certifications and patents, and the competitive landscape of fire-fighting products.
Investor Verification Checklist
- Capital Sufficiency: Verify if the company has secured the stated $2,000,000 needed to launch operations, given the current cash balance of only $7,746.
- Convertible Debt Status: Confirm the status of the $60,500 convertible debt (maturity date listed as December 13, 2010, which is prior to the reporting date of May 31, 2011).
- Product Development: Assess the progress of product testing, patent applications, and regulatory certifications required for market entry.
- Internal Controls: Monitor the company's ability to remediate material weaknesses in internal controls, which is currently tied to funding availability.
- Related Party Transactions: Review the valuation of the $1,191,000 intangible asset acquired via stock issuance to the new Board of Directors and officers.