Bionik Laboratories Corp. - Quarter Report: 2014 September (Form 10-Q)

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “should,” “plan,” “project” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.

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Drywave Technologies, Inc.

(A Development Stage Company)

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

Condensed Consolidated Balance Sheets

See accompanying notes to unaudited condensed consolidated financial statements

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Drywave Technologies, Inc.

(A Development Stage Company)

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Month Periods Ended September 30, 2014 and 2013 and the Period from January 8, 2010 (Inception) to September 30, 2014
(Unaudited)

Note 1 Nature of Operations

Drywave Technologies, Inc., formerly known as Strategic Dental Management Corp. (the “Company”), was incorporated on January 8, 2010 (Inception) in the State of Colorado.  On July 16, 2013, the Company changed its name from Strategic Dental Management Corp. to Drywave Technologies, Inc. and changed its state of incorporation from Colorado to Delaware.  The Company has had limited activity and revenue and is in the development stage. The Company provides consulting and management services to the dental industry.

On March 6, 2013, the Company came under new ownership and currently has minimal activity. The Company intends to seek new business opportunities including the acquisition of, or merger with, an existing business.  See Form 8-K filed on March 12, 2013 for additional information pertaining to the change in control.

In the first quarter of 2013, the Company entered into preliminary negotiations with Drywave Technologies USA, Inc., a Delaware corporation (“Drywave USA”) whereby the Company would acquire Drywave USA and Drywave USA would become its wholly-owned operating subsidiary (the “Reverse Merger”). These negotiations have not been finalized and while they are still in progress the Company continues to seek and evaluate potential alternative business opportunities for its future growth and development.

The Company has chosen December 31 as a year end.

Note 2 Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed on April 15, 2014, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the year ended December 31, 2013.  

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Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended September 30, 2014 are not necessarily indicative of results for the full fiscal year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Drywave Technologies, Inc. and its sole wholly owned subsidiary.  All intercompany accounts and transactions have been eliminated in consolidation.  

Development Stage

The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities,” and among the additional disclosures required as a development stage company are that our financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of our inception (January 8, 2010) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has not elected to early adopt these provisions and consequently these additional disclosures are included in these financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and the accompanying notes. Such estimates and assumptions impact, among others, the following: assessment of the recoverability of long-lived assets and the valuation allowance for deferred tax assets due to continuing and expected future losses.

Cash and cash equivalents

All cash and short-term investments with original maturities of three months or less are considered cash and cash equivalents, since they are readily convertible to cash. These short-term investments are stated at cost, which approximates fair value.

Property and equipment

The Company has no property or equipment at this time.

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Due to Related Party

Due to related party represents an obligation to pay for goods or services that were used in the ordinary course of business and paid for by a related party on the Company’s behalf.  Due to related party is classified as a current liability as payment is due within one year or less.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned.  We consider revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collection is reasonably assured.

Advertising expenses

Advertising costs are expensed when incurred.  No advertising expenses were incurred during the three and nine month periods ended September 30, 2014 or 2013.

Income taxes

Income taxes are accounted for in accordance with ASC 740, using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. 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 income in the period that includes the enactment date.  The Company is currently filing its income tax returns on the cash basis.

Earnings (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.  No potentially dilutive debt or equity instruments were issued or outstanding during the three and nine month periods ended September 30, 2014 or 2013.

On July 16, 2013, the Company executed a 22.75 for 1 stock split.  As a result of the split, each outstanding share of the Company before the split represents 22.75 shares of common stock after the split.   All share and per share amounts have been retroactively restated to reflect the split.

Financial Instruments

The carrying value of the Company’s financial instruments, including accrued payables and due to related party, as reported in the accompanying balance sheet, approximates fair value due to the short term maturities of these financial instruments.

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Stock based compensation

The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.   No stock based compensation was issued or outstanding during the three and nine month periods ended September 30, 2014 or 2013.

Reclassification

Certain amounts reported in prior years in the financial statements have been reclassified to conform to the current year’s presentation.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the early adoption of the new regulations relating to Development Stage Entities as discussed above.

Note 3 Going Concern

As reflected in the accompanying financial statements, the Company has a net loss of $5,862 and net cash used in operations of $2,427 for the nine months ended September 30, 2014, and a deficit accumulated during the development stage of $40,885 at September 30, 2014.  In addition, the Company is in the development stage and has not yet generated significant revenues. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company expects that its current cash resources as well as expected lack of operating cash flows will not be sufficient to sustain operations for a period greater than one year.  

The ability of the Company to continue its operations is dependent on Management's plans, which include continuing to raise equity based financing.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 Related Party Transactions

All Company revenues for the nine months ended September 30, 2014 and 2013 of $4,500 and $3,700 and the three months ended September 30, 2014 and 2013 of $1,500 and $1,500, respectively, are from a LLC related by common control of a Company director.  The revenue was earned from providing payroll accounting and human resource consulting.

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In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or complete a business acquisition or merger.  There is no formal written commitment for continued support by related party affiliates.  Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.  As of September 30, 2014 and December 31, 2013, the Company had a due from related party balance outstanding with an affiliate of the Company in the amount of $20,874 and $14,082, respectively. The due from related party balance is non-interest bearing, due upon demand and unsecured.

Note 5 Shareholders’ Equity

Preferred Stock - The Company as of September 30, 2014 and December 31, 2013 had 10,000,000 shares of authorized preferred stock, $0.001 par value, with none issued and outstanding, with rights, preferences and designations to be determined by the Board of Directors.

Common Stock - The Company as of September 30, 2014 and December 31, 2013 had 200,000,000 shares of authorized common stock, $0.001 par value, with 116,218,383 shares issued and outstanding.

Note 6 Income Taxes

As of September 30, 2014, the Company provided a full valuation allowance against deferred tax assets based on the weight of the available evidence, both positive and negative, including the Company’s operating losses, which indicate that it is more likely than not that such benefits will not be realized.

Note 7 Commitments and Contingencies

Legal Matters - From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of September 30, 2014, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our interest.

Note 8 Subsequent Events

In accordance with ASC855-10. “Subsequent Events” the Company has analyzed its operations subsequent to September 30, 2014 to the date of these financial statements were issued on November 14, 2014 and has determined that it does not have any material subsequent events to disclose in these financial statements.  

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

General

Plan of Operation

Drywave Technologies, Inc. (“the Company”, “we”, “us”, or “our”) is a development stage company, formed to build dental practices from scratch or to acquire existing dental practices and manage all aspects of the dental practices including payroll, human resources, collections, personnel, training etc.  In addition, we planned to consult with other dental practices and train employees, manage day to day operations, provide all financial and accounting services etc.  However, due to the costs associated with these plans, while we are continuing to pursue our initial business plan at this time, we have decided to pursue other business opportunities for our future growth and development.

As described below, in the first quarter of 2013, the Company entered into preliminary negotiations with Drywave Technologies USA, Inc., a Delaware corporation (“Drywave USA”) whereby the Company would acquire Drywave USA and Drywave USA would become its wholly-owned operating subsidiary (the “Reverse Merger”). These negotiations have not been finalized and while they are still in progress the Company continues to seek and evaluate potential alternative business opportunities for its future growth and development.

Our current plan of operation is to raise additional capital to maintain the Company in good standing and to explore new business opportunities. We currently have no definitive agreements with any prospective business combination. There are no assurances that we will find a suitable business with which to combine.

As a result of our limited resources, we expect to target only a single business combination. Accordingly, the prospects for our success will be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate several business combinations or entities operating in multiple industries or multiple segments of a single industry, we will not have the resources to diversify our operations or benefit from possible spreading of risks or offsetting of losses. A target business may be dependent upon the development or market acceptance of a single or limited number of products, processes or services, in which case there will be an even higher risk that the target business will not prove to be commercially viable.

Any new business opportunities will likely require additional capital. We anticipate additional funding will be in the form of equity financing from the sale of our common stock. However, we have no assurance that we will be able to raise sufficient funding from the sale of our common stock to fund all of our anticipated expenses. We do not have any arrangements in place for any future equity financing.

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Recent Corporate Developments

We were incorporated in the State of Colorado on January 8, 2010 under the name “Strategic Dental Management Corp.” In the first quarter of 2013, we entered into preliminary negotiations with Drywave Technologies USA, Inc., a Delaware corporation (“Drywave USA”) whereby we would acquire Drywave USA and Drywave USA would become our wholly-owned operating subsidiary (the “Reverse Merger”).  On March 6, 2013, we came under new ownership through the purchase of 93.5% of our issued and outstanding common stock.  We filed a Current Report on Form 8-K with the SEC noticing the change of control.  As a condition precedent to the proposed Reverse Merger, we agreed to effectuate the following corporate actions: (1) Name change (the “Name Change”) from “Strategic Dental Management Corp” to “Drywave Technologies, Inc.” (2) reincorporation (the “Reincorporation”) from the State of Colorado to the State of Delaware; and (3) twenty two and seventy five hundredths  (22.75) for one (1) forward-split (the “Forward-Split”) of our shares (the Name Change, Reincorporation and Forward-Split are referred to collectively herein as the “Corporate Actions”). On May16, 2013 our Board and our majority stockholder approved the Corporate Actions. On June 20, 2013, we filed a definitive information statement on Schedule 14C describing the Corporate Actions. The Financial Industry Regulatory Authority (“FINRA”) notified us that the Corporate Actions had been approved with an effective date of July 16, 2013.   As of the date of this Report, negotiations with Drywave are ongoing and the Reverse Merger has not been completed.

Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations.

Results of Operations

For Three and Nine Months Ended September 30, 2014 and 2013

For the three and nine months ended September 30, 2014, we received $1,500 and $4,500 in revenue and had general and administrative expenses of $2,878 and $10,362.  As a result, we had a loss from operations of $1,378 and $5,862 for the three and nine months ended September 30, 2014, respectively.

Comparatively, for the three and nine months ended September 30, 2013, we received $1,500 and $3,700 in revenue and had general and administrative expenses of $3,275 and $14,177.  As a result, we had a loss from operations of $1,775 and $10,477 for the three months and nine months ended September 30, 2013, respectively.  

The decreased loss from operations between the three months ended September 30, 2014 and 2013 was due to a decrease in general and administrative expenses for 2014.  The decreased loss from operations between the nine months ended September 30, 2014 and 2013 was due to both an increase in revenue and a decrease in general and administrative expenses for 2014.

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General and administrative expenses, which consist of fees paid for legal, accounting, and auditing services, were incurred primarily to enable the Company to satisfy the requirements of a United States reporting company.

Cashflow for the Nine Months Ended September 30, 2014 and 2013

At September 30, 2014, the Company had a cash balance of $8,787 a $4,365 increase from the $4,422 balance at December 31, 2013.  

Operating Activities

For the nine months ended September 30, 2014, we had a net loss of $5,862, which together with an increase of $3,435 in accrued payables resulted in net cash used in operating activities of $2,427.  Comparatively, for the nine months ended September 30, 2013, we had a net loss of $10,477, and paid $1,500 for accrued payables, resulting in net cash used in operating activities of $11,977.

Investing Activities

During the nine month periods ended September 30, 2014 and 2013, we neither generated nor used funds in investing activities.

Financing Activities

For the nine months ended September 30, 2014 and 2013, we had an increase in advances from related party of $6,792 and $9,995, respectively.

Going Concern

The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations in our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.  There are no assurances that we will be able to obtain additional financing through either private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us.  These conditions raise substantial doubt about our ability to continue as a going concern.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the new regulations relating to Development Stage Entities as discussed above.  

Off-Balance Sheet Arrangements

We had no off-balance sheet transactions.

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ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal accounting officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), as of September 30, 2014.  Based on this evaluation, our principal executive officer and principal accounting officer has concluded such controls and procedures to be effective as of September 30, 2014 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Act are accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting

During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

We were not subject to any legal proceedings during the three and nine months ended September 30, 2014 or 2013 and, to the best of our knowledge; no legal proceedings are pending or threatened.

ITEM 1A.  RISK FACTORS.

Not required for smaller reporting companies.

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

No sales of unregistered equity securities were completed in the three and nine month periods ended September 30, 2014 or 2013.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

No senior securities were issued or outstanding during the three and nine month periods ended September 30, 2014 or 2013.

ITEM 4.  MINE SAFETY DISCLOSURES.

Not applicable to our Company.

ITEM 5.  OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS.

*Filed herewith

**Furnished herewith

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SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

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