Cann American Corp. - Quarter Report: 2011 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Bioflamex Corporation

(Exact name of registrant as specified in its charter)

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 93,000,001 common shares as of November 30, 2011.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

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 November 30, 2011 are not necessarily indicative of the results that can be expected for the full year.

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS

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

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

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

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

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

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF OPERATIONS

The accompanying unaudited interim financial statements have been prepared by Bioflamex Corp. ( the “Company”) pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the audited financial statements of the Company for the fiscal year ended February 28, 2011.

The results of operations for the nine months ended November 30, 2011 are not indicative of the results that may be expected for the full year.

The Company was incorporated as Deer Bay Resources Inc. in the State of Nevada, United States of America on August 25, 2004. The Company’s fiscal year end is February 28, 2012.

The Company’s principal business up to January 25, 2011 was the acquisition and exploration of mineral resources. 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. We have not produced any revenues from the Company’s newly acquired assets or commenced significant business operations and are considered a development stage company as defined by SEC Guide 7 with reference to Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) topic 915.

The Company's financial statements are prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not begun to generate significant revenues, and has incurred a significant operating loss as of November 30, 2011.

The Company is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. Without sufficient financing, or the achievement of profitable operations, it would be unlikely for the Company to continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis

These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States 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 year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long –lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the assets; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will be more likely than not be sold or disposed significantly before the end of its estimated useful life.

Loss Per Share

Net income (loss) per common share is computed based on the weighted average number of common shares outstanding and common stock equivalents, if not anti-dilutive. The Company has not issued any potentially dilutive common shares.

Basic loss per share is calculated using the weighted average number of common shares outstanding and the treasury stock method is used to calculate diluted earnings per share. For the years presented, this calculation proved to be anti-dilutive.

Dividends

The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the period shown.

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Income Taxes

The Company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.

Recent Accounting Pronouncements

The Company’s management has evaluated all recent accounting pronouncements since the last audit through the issuance date of these financial statements. In the Company’s opinion, none of the recent accounting pronouncements will have a material effect on the financial statements.

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, totalling $ 1,191,000 to two individuals who became the entire Board of Directors and the two senior officers of the Company. 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. The entire purchase price was allocated to the intangible asset category of Patents and Trademarks.

BIOFLAMEX CORP.

(formerly known as Deer Bay Resources Inc.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 4 – LOAN PAYABLE – Related Party

On October 1, 2011, the Company entered into a promissory note with an officer and shareholder of the Company in the amount of $4,034. The note bears interest at a rate of 15% per annum, is unsecured, callable at the option of the holder, and matures no later than December 31, 2012. At November 30, 2011, the principal balance due was $4,034 and accrued interest totaled $101.

NOTE 5 – CONVERTIBLE DEBT

On December 13, 2010, the Company entered into a Convertible Debenture and Subscription Agreement in the amount of $60,500. The debenture is convertible at a rate of $0.01 at the option of the holder for a period of two years. In the event of acceleration or conversion on default, the holder may at its discretion declare the amount outstanding to be immediately due and payable in an amount equal to 120% of the outstanding loan amount payable in cash or shares of the Company’s common stock.

NOTE 6 –COMMON STOCK

On April 26, 2011, the Company issued 333,334 shares of its restricted common stock for cash proceeds of $ 50,000.

During the period ended November 30, 2011, the Company issued 200,000 shares of its common stock for services provided to the Company. The fair value of the shares issued was $30,000 and has been recorded as compensation expense.

At November 30, 2011, there were no outstanding stock options or warrants.

NOTE 7 – SUBSEQUENT EVENTS

Subsequent to November 30, the Company issued a convertible promissory note in the amount of $ 11,000. The Convertible Promissory Note (the "Convertible Note") bears interest at a rate of 6% per annum is unsecured and due on demand.

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

We are 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.

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 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.

We are in the final stages of testing and development of our proprietary range of products. Our goal is to develop 5-10 unique product formulations and application concepts covering fire fighting and fire prevention. We intend to market our products under the trademarks Bioflamex® and SAFIRE®. Our goal is to penetrate the key United States and international markets with our “clean” fire extinguishing products and fire retardants.

We are currently preparing and submitting United States and international patent applications for our product concepts to ensure the security of our intellectual property rights and enhance the market response to our product propositions. We hope to build a solid portfolio of intellectual property within the industry that can be licensed to third parties. We are currently in the process of applying for patents on our revolutionary products and processes.

We are also preparing the materials necessary to complete the necessary tests, approvals and certifications in the United States and key international markets, that are the prerequisite for sales and marketing. With these approvals and certifications, we hope to gain a solid geographical presence in the United States, key markets in Europe, the Middle East and parts of Asia. We intend to work through distribution partners, agents and/or license holders, and through that presence achieve strong sales with the consumers, professional, business, industrial and government service market segments.

Results of operations for the three and nine months ended November 30, 2011 and 2010, and for the period from Inception (August 25, 2004) to November 30, 2011

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 $43,805 for the three months ended November 30, 2011, compared with operating expenses of $15,593 for the three months ended November 30, 2010. Our operating expenses were mainly for stock based compensation, office and professional fees for the three months ended November 30, 2011, compared with mineral property costs associated with a prior business for the three months ended November 30, 2010.

We incurred operating expenses in the amount of $95,261 for the nine months ended November 30, 2011, compared with operating expenses of $35,668 for the nine months ended November 30, 2010. The increase in operating expenses for the nine months ended November 30, 2011 compared to the same period ended November 31, 2010 is mainly attributable to stock based compensation of $30,000 an increase in professional fees of $13,210, office expense of $16,791 and consulting fees of $3,979.

We incurred operating expenses in the amount of $219,844 for the period from August 25, 2004 (Inception) to November 30, 2011. 

We incurred a net loss in the amount of $49,001 for the three months ended November 30, 2011, as compared with a net loss in the amount of $15,593 for the three months ended November 30, 2010. We incurred a net loss in the amount of $100,497 for the nine months ended November 30, 2011, as compared with a net loss in the amount of $35,668 for the nine months ended November 30, 2010. We incurred a net loss in the amount of $235,080 for the period from August 25, 2004 (Inception) to November 30, 2011. Our losses for each period are attributable to operating expenses together with a lack of any revenues.

Liquidity and Capital Resources

As of November 30, 2011, we had total current assets of $10,276. Our total current liabilities as of November 30, 2011 were $89,556. As a result, we had a working capital deficit of $79,280 as of November 30, 2011.

Operating activities used $53,817 in cash for the nine months ended November 30, 2011. Our net loss of $100,497 offset by stock based compensation of $30,000 and an increase in accounts payable and accrued expenses of $16,680 were the contributing factors to our negative operating cash flow. Investing activities used no cash for the nine months ended November 30, 2011. Financing activities for the nine months ended November 30, 2011 generated $54,034 as a result of the issuance of our common stock in the amount of $50,000 and proceeds from a loan from our officer and director in the amount of $4,034.

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. In April of 2011, we raised $50,000 in a private placement to an accredited investor. Notwithstanding, as of November 30, 2011, 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 November 30, 2011, there were no off balance sheet arrangements.

Going Concern

Our financial statements are prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, we have not begun to generate significant revenues, and have incurred a significant operating loss as of November 30, 2011.

We are dependent upon our ability to secure equity and/or debt financing and there are no assurances that we will be successful. Without sufficient financing, or the achievement of profitable operations, it would be unlikely for us to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are set forth in Note 2 to the financial statements. Management does not believe that our accounting policies are critical enough to mention in the body of this quarterly report on Form 10-Q.

Recently Issued Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.

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, 2012, 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 November 30, 2011 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

None

Item 3. Defaults upon Senior Securities

None

Item 4. Removed and Reserved

Item 5. Other Information

None

Item 6. Exhibits

SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.