Jubilant Flame International, Ltd - Quarter Report: 2016 August (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-173456

Nevada
(State or other jurisdiction of incorporation or organization)

2293 Hong Qiao Rd., Shanghai, China 200336
(Address of principal executive offices, including zip code.)

+ 86 21 64748888

(Registrant's telephone number, including area code)

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. Yes x No o

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-Y (§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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o No  x

As of September 30, 2016, there are 12,304,757 shares of common stock outstanding.

All references in this Report on Form 10-Q to the terms “we”, “our”, “us”, the “Company” and the “Registrant” refer to Jubilant Flame International Ltd unless the context indicates another meaning.

JUBILANT FLAME INTERNATIONAL LTD

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM1. FINANCIAL STATEMENTS

JUBILANT FLAME INTERNATIONAL LTD

FOR THE SIX MONTH PERIOD ENDED AUGUST  31, 2016 AND 2015

Index to Unaudited Financial Statements

JUBILANT FLAME INTERNATIONAL, LTD

Balance Sheets

(Unaudited)

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

JUBILANT FLAME INTERNATIONAL, LTD

 Statements of Operations

(Unaudited)

The accompanying notes are an integral part of the audited financial statements.

JUBILANT FLAME INTERNATIONAL, LTD

Statements of Cash Flows

(Unaudited)

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

JUBILANT FLAME INTERNATIONAL, LTD

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED AUGUST 31, 2016 AND AUGUST 31, 2015

NOTE 1 – ORGANIZATION AND OPERATIONS

Jubilant Flame International, Ltd. (the “Company”), was formed on September 29, 2009 under the name Liberty Vision, Inc. 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”).

Interim Financial Information

Interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") as promulgated in Item 210 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position as of August 31, 2016, results of operations, changes in stockholders' equity (deficit) and cash flows for the six month periods ended August 31, 2016 and 2015, as applicable, have been made. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K.

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.

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.

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 August 31, 2016 the Company had current assets of $3,108, and current liabilities total $902,429 resulting in a working capital deficit of $899,321. The Company currently has no profitable trading activities and has an accumulated deficit of $2,125,266 as at August 31, 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 six months ended August 31, 2016 amounted to $15,527.

From June 30, 2016 to August 24, 2016, the debt holder converted total $38,800 of note principle to stock based on the convertible note agreement. The following is a summary of the Company’s conversion:

The following is the summary of outstanding convertible note balance

Debt Discount

During the six months August 31, 2016 and 2015, the Company recorded debt discounts totaling $15,527 and $-0-, respectively.

The debt discount recorded pertains to convertible debt that contains embedded conversion options that are required to bifurcated and reported at fair value and original issue discounts and debt issue cost.

The Company amortized $42,499 and $4,341 during the six months ended August 31, 2016 and the year ended February 29, 2016, respectively, to amortization of debt discount expense and relieved $31,566 during the six months ended August 31, 2016 due to conversions.

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 six months ended August 31, 2016 and February 29, 2016 respectively:

The Company can record 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 expense for the six months ended August 31, 2016 of $- , change in derivatives liability of $25,233 and reduction of derivatives liability of $39,661 due to conversion.

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 six month:

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 August 31, 2016, the Company had a $275,265 loan outstanding with the shareholder of the Company and a loan of $7,840 with the treasurer and secretary of the Company. This compares with the outstanding balance of $216,473 for the shareholder and $8,000 for the treasurer at February 29, 2016. The loans are non-interest bearing, due upon demand and unsecured.

NOTE 6 – ACCRUED OFFICER COMPENSATION

As at August 31, 2016, a total of $618,750 had been accrued as salary compensation payable to the two officers compared to $518,250 at February 29, 2016.

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 August 31, 2016, a total of $315,000 stock compensation had been recorded compared to $105,000 at February 29, 2016 to the two officers.

NOTE 7 – STOCKHOLDERS EQUITY

During the quarter ended August 31, 2016, convertible debt of $38,800 was converted into 1,392,854 shares of common stock as provided for in the convertible note agreement. Associated with the note conversion, derivatives liability were reduced by $39,661 for the period.

During the quarter ended August 31, 2016 a total of $210,000 Shares issuable for officer stock compensation has been recorded.

The stockholder equity change are outlined in the table below:

NOTE 8 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, “Subsequent Events”, the Company has analyzed its operations subsequent to August 31, 2016 to September 30, 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 except following:

From September 7, 2016 to September 28, 2016, a holder of the Company’s convertible debt elected to convert a portion of that debt into 2,083,332 shares of the Company’s common stock.

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

The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.

Our Business

Jubilant Flame International, Ltd., (the "Company", "the "Registrant", "we", "us" or "our") 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, Inc. On January 27, 2013, the Company announced the change of its ticker symbol from "LBYV" to "JFIL." 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. On May 18, 2015 the Company changed its name to Jubilant Flame International, Ltd. 

The Company develops and plans to market medical products under license from BioMark. The licensed products include Bone-Induction Artificial Bone ("BIAB") products and Vacuum Sealing Drainage ("VSD") products. The Company is also licensed to conduct research and development of BioMark's cancer detection scanning technology. In the event that the research and development of BioMark's cancer detection scanning technology provides marketable technology, the Company shall have the right of first refusal to a license to market, sell and distribute such cancer detection scanning technology. 

Results of Operations 

Revenue

We recognized no revenue in the three and six months ended August 31, 2016 and 2015 as we have not commenced operations as yet. 

Operating Expenses

For the three months ended August 31,2016 compared to the three months ended August 31,2015

The major components of our operating expenses for the three months ended August 31, 2016 and 2015 are outlined in the table below: 

The $142,435 increase in our operating costs for the three months ended August 31, 2016 compared to three months ended August 31, 2015, was mainly due to the $116,250 increase in officers’ compensation, $12,500 increase in investor marketing expense and $6,920 increase in professional fee.

For the six months ended August 31,2016 compared to the three months ended August 31,2015

The major components of our operating expenses for the six months ended August 31, 2016 and 2015 are outlined in the table below: 

The $264,783 increase in our operating costs for the six months ended August 31, 2016 compared to six months ended August 31, 2015, was mainly due to the $232,500 increase in officers’ compensation, $12,844 increase in office expense, $12,500 increase in investor marketing expense. The increases were partially offset by the $2,239 decrease in legal and accounting fee.

Other Expenses

Other expenses increased to $7,335 for the three months ended August 31, 2016, from $0 for the three months ended August 31, 2015. Other expenses consisted primarily of $33,287 debt discount amortization expense and offset by $25,952 of change in derivatives liability.

Other expenses increased to $12,925 for the six months ended August 31, 2016, from $0 for the six months ended August 31, 2015. Other expenses consisted primarily of $38,158 debt discount amortization expense and offset by $25,233 of change in derivatives liability.

The debt discount amortization and interest expense increase is due to a convertible promissory note issued on December 9, 2015.

Net Loss 

For the three months ended August 31, 2016, we recognized a net loss of $205,843 compared to the net loss of $56,074 for the corresponding period in 2015. 

For the six months ended August 31, 2016, we recognized a net loss of $384,819 compared to the net loss of $107,111 for the corresponding period in 2015. 

Liquidity and Capital Resources

Working Capital 

As of August 31, 2016, the Company had current assets, comprising of cash of $295 and prepaid expenses of $2,813, and current liabilities of $902,429 resulting in a working capital deficit of $899,321. The Company currently has no profitable trading activities and has an accumulated deficit of $2,125,266 as at August 31, 2016. This raises substantial doubt about the Company's ability to continue as a 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 

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 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. 

Cash Flow for the six months ended August 31, 2016 compared to the six months ended August 31, 2015

The table below, for the periods indicated, provides selected cash flow information: 

Cash Flows from Operating Activities

Our net cash used in operating activities increased by $34,222 in the six months ended August 31, 2016 compared to that in the six months ended August 31, 2015, representing an increase of 117.6%. The increase in net cash used in operating activities was primarily the result of new rent expense of $12,000 and investor marketing expense of $12,000 during the six months ended August 31, 2016 as compared to $0 during the six months ended August 31, 2015. 

Cash Flows from Investing Activities

We did not generate or use any cash from investing activities during the six months ended August 31, 2016 or 2015. 

Cash Flows from Financing Activities

Our cash provided by financing activities increase from $29,111 for the six months ended August 31, 2015 to $58,631 for the six months ended August 31, 2016. In both periods, cash was provided by way of loans from related parties.

Future Financings

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock, through an offering of debt securities, or through borrowings from financial institutions or related parties. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months.

Effective June 18, 2015, Jubilant Flame International, LTD (the "Company") entered into an Equity Purchase Agreement, and a Registration Rights Agreement (collectively the "Agreements") with Premier Venture Partners, LLC, a California limited liability company (the "Investor"). 

Pursuant to the terms of the Agreements, the Investor 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 further agreed to register the shares of common stock sold to the Investor pursuant to the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws. 

Recent Accounting Pronouncements

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 fore 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.

Off Balance Sheet Arrangements 

As of August 31, 2016, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K. 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 

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 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. We are presently examining changes to our procedures and policies to ensure a more timing reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We were not subject to any legal proceedings during the three months ended August 31, 2016 or 2015, respectively, and currently we are not involved in any pending litigation or legal proceedings.

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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

No unregistered sales of equity were completed in the six months ended August 31, 2016 or 2015, respectively. On July 28, 2015, in consideration of the execution and delivery of the Equity Purchase Agreement by Premier Venture Partners, LLC, we issued 178,571 shares of our common stock to Premier Venture.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

No senior securities were issued and outstanding during the six months ended August 31, 2016 or 2015, respectively.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable to our Company.

ITEM 5. OTHER INFORMATION.

Not applicable to our Company

ITEM 6. EXHIBITS

The following documents are filed as a part of this report:

______ 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

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