ITEM 2 PROPERTIES
We do not own any real property. Our business is presently operated from office provided by our CEO, Ms. Yan Li at 2293 Hong Qiao Rd, Shanghai China, 200336, without paying any rent.
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. Although there is trading in our common stock from time to time, there is no established market for our common stock. In the past year, it has traded the price per share has been in the $0.01 to $0.04 range. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transaction values.
Holders
As of February 28, 2018, there were 40 total record holders of 18,410,708 shares of the Company’s common stock. We believe we have additional shareholders who hold their shares on a beneficial basis in “street name.”
Dividends
The Company has not paid any cash dividends to date and does not anticipate paying dividends in the foreseeable future. It is the 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.
Recentsales of unregistered security
Between December 2015 and February 28, 2018, the Company issued 225,000 shares of common stock to its CEO, Ms. Yan Li, under her employment agreement, 250,000 shares to its current CFO, Mr. Lei Wang, and 50,000 shares to its current Secretary/Treasurer, Mr. Kecheng Xu, for compensation purposes. The issuance of shares to officers were made in reliance upon the exemption from securities registration afforded by Section 4(2) of the 1933 Act. (See Item 11 - Executive Compensation - Employment Agreements and Related Transactions.)
On October 27, 2016, the Company issued an aggregate of 3,500,000 shares of common stock to repay advances in the aggregate amount of $49,000 made by its Chief Executive Officer and President, to the Company. The issuance of shares was made in reliance upon the exemption from securities registration afforded by Section 4(2) of the 1933 Act. (See Item 13 - Certain Relationships and Related Transactions, and Director Independence.)
On August 30, 2017, 175,000 granted shares have been canceled as stock compensation to the Company’s former treasurer Mr. Robert Ireland upon his resignation.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended February 28, 2018 and 2017.
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
Sales
From last quarter of the fiscal year ended February 28, 2018, we started to promote and sell our new cosmetic products in the United States market. We purchase the Acropass Products from an affiliated company in China under a Resale Agreement. We recognized $5,103 and $0 revenues during the fiscal years ended February 28, 2018 and 2017 respectively.
Advertising expense
To promote our new cosmetics products, Acropass series, in the United States market, we entered a contract with a third party to run a marketing campaign and manage the sales of the products. We incurred a total of $44,472 in marketing expenses for the year ended February 28, 2018.
Cost and operating expense
The major components of our expenses for the fiscal years ended February 28, 2018 and 2017 are outlined in the table below:
Our cost and operating expenses decreased $137,478 for the year ended February 28, 2018, compared to the fiscal year ended February 28, 2017. The decrease was mainly due to $153,325 decrease in officer compensation. We have also incurred a new expense of $44,472 related to campaign marketing expenses in 2018.
Other Expenses
Other expenses decreased to $7,678 for the year ended February 28, 2018, from $51,942 for the year ended February 28, 2017. The decrease in was mainly due to the payoff of convertible notes during the year ended February 28, 2018.
Net Loss
During the years ended February 28, 2018 and 2017, the Company realized a net loss of $594,249 and $781,094, respectively.
Liquidity and Capital Resources
The decrease in the Company’s working capital deficit between the fiscal years ended February 28, 2018 and 2017 was mainly due to the decrease in accrued officer compensation for the officer who resigned during the fiscal year ended February 28, 2018.
Cash Flows
The table below, for the periods indicated, provides selected cash flow information:
Cash Flows from Operating Activities
During the fiscal year ended February 28, 2018, we used $102,757 in operating activities compared to $109,601 during the fiscal year ended February 28, 2017.
During the fiscal year ended February 28, 2018, we incurred a net loss of $594,249, which was partially reduced for cash flow purposes by an increase of $150,750 in accrued officer compensation, and $317,625 in stock compensation.
During the fiscal year ended February 28, 2017, we incurred a net loss of $781,094, which was partially reduced for cash flow purposes by an increase of $201,000 in accrued officer compensation, and $420,700 in stock compensation as well as the non-cash debt discount amortization expense totaling $49,447.
Cash Flows from Investing Activities
We did not spend funds in investing activities during the year ended February 28, 2018 and 2017.
Cash Flows from Financing Activities
During the year ended February 28, 2018, we generated $107,139 in financing activities compared to $108,256 during the year ended February 28, 2017.
During the year ended February 28, 2018, we received $107,939 by way of a loan payable to a related party compared to $108,256 received by way of a loan payable to a related party during the year ended February 28, 2017.
Going Concern
The audit report of the Company’s independent registered accounting firm includes a matter of emphasis related to our ability to continue as a going concern.
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.
FOR THE YEARS ENDED FEBRUARY 28, 2018 AND FEBRUARY 28, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholders of
Jubilant Flame International, Ltd.
Shanghai, China
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Jubilant Flame International, Ltd. (the “Company”) as of February 28, 2018 and 2017, and the related statements of operations, stockholders’ deficit and cash flows for the years in the two-year period ended February 28, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended February 28, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform an audit to obtain reasonable assurance that the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to ontain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Matter of Emphasis
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding 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.
/S/ Thayer O’Neal Company, LLC
Thayer O’Neal Company, LLC
We have served as the Company’s auditor since 2017
Houston, TX
May 17, 2018
JUBILANT FLAME INTERNATIONAL, LTD
BALANCE SHEETS
FEBRUARY 28, 2018 AND 2017
The accompanying Notes are an Integral Part of these Financial Statements
JUBILANT FLAME INTERNATIONAL, LTD
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 2018 AND 2017
The accompanying notes are an integral part of these financial statements.
JUBILANT FLAME INTERNATIONAL, LTD
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2018 AND 2017
The accompanying notes are an integral part of these financial statements
JUBILANT FLAME INTERNATIONAL, LTD
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED FEBRUARY 28, 2018 AND 2017
The accompanying notes are an integral part of these financial statements.
JUBILANT FLAME INTERNATIONAL, LTD
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 2018 AND 2017
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 August 18, 2015, the Company changed its name to Jubilant Flame International, Ltd.
From the fourth quarter of the fiscal year ended February 28, 2018, the Company started to market and sell cosmetics products imported from Asia, Acropass Series products, in the United States market. The Company purchased the inventory from a related party company in China. The Company contracted with a third party to operate the online shopping platform and marketing campaign in the United States.
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.
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.
Receivables
Receivables are stated at their carrying values, net of a reserve for doubtful accounts. Receivables consist primarily of amounts due from Amazon reserve holding balance
Inventories
The Company values inventories at the lower of cost or market as determined primarily by the retail inventory method of accounting, using the first-in, first-out (“FIFO”) method.
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).
Recent Accounting Pronouncements
Pronouncements Adopted in Fiscal 2018
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU represents a single comprehensive model to recognize revenue to depict the transfer of promised goods or services to a customer at an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company plans to adopt this ASU for the interim period ending May 31, 2018, under the modified retrospective approach. The implementation of this ASU will result in no adjustment to retained earnings and current financial statements.
On December 22, 2017, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), in response to the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Company has elected to record provisional amounts, as allowed by SAB 118, during a measurement period not to extend beyond one year of the enactment date. Management expects to complete the analysis within the measurement period in accordance with SAB 118
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 28, 2018 and 2017, 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.
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.
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.
Revenue Recognition
Sales
The Company recognizes eCommerce sales revenue, net of sales taxes and estimated sales returns, upon delivery to the customer. Additionally, estimated sales returns are calculated using historical experience of actual returns as a percent of sales. No sales returns were recorded by the year end February 28, 2018.
Cost of Sales
Cost of sales includes actual product cost, the cost of transportation to the Company’s distribution facilities.
Operating, Selling, General and Administrative Expenses
Operating, selling, general and administrative expenses include all operating costs of the Company, except cost of sales, as described above.
Advertising Costs
Advertising costs are expensed as incurred, consist primarily of video advertisements and are recorded in operating, selling, general and administrative expenses in the Company’s Statements of Income. Advertising costs $44,472 and zero for fiscal 2018 and 2017, respectively.
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 28, 2017 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 of February 28, 2018, the Company had a working capital deficit of $841,731. The Company currently has limited profitable trading activities and has an accumulated deficit of $3,115,790 as of February 28, 2018. 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - CONVERTIBLE DEBT
On December 9, 2015, the Company issued a convertible debenture of $60,000 which was determined to contain embedded conversion features required to be bifurcated from the host contract and reported at fair value. During the second quarter ended at August 31, 2017, the company paid off the remaining outstanding balance of $800 in full plus 40% interest. As a result, the convertible debenture balance net of discount amortization as of February 28, 2018 was zero.
The holder of the convertible note converted $6,600 and $52,600 of principal into 1,627,777 and 4,079,360 common shares during the year end February 28, 2018 and the year end February 28, 2017 respectively. The following is a summary of the debt conversions:
The following is a detail of convertible debt as of February 28, 2018 and February 28, 2017:
Debt Discount
During the year ended February 28, 2018 and the year ended February 28, 2017, the Company recorded debt discounts totaling $-0- and $4,238, respectively.
The Company amortized $4,238 and $49,447 during the year ended February 28, 2018, and February 28, 2017, respectively, to amortization of debt discount.
Debt discount consisted of the following at February 28, 2018 and February 28, 2017, respectively:
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 fair value of the derivative liabilities for the years ending February 28, 2018 and February 28, 2017.
For the year ended February 28, 2018
For the year ended February 28, 2017
During the year ended February 28, 2018, the Company recorded change in derivatives liability of $4,362 and reduction of derivatives liability of $12,276 due to conversion and derivatives extinguishment of $1,242 due to debt payoff. During the year ended February 28, 2017, the Company recorded change in derivatives liability of $2,494 and reduction of derivatives liability of $76,387 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 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.
On August 30, 2017, the Company’s former CFO, Mr. Robert Ireland, resigned as Secretary/Treasurer of the Company. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the Company and agreed to cancel outstanding debt of $840 and accrued salary of $409,875 of the company that was owed to him for past compensation.
As of February 28, 2018, the Company had a $390,828 loan outstanding with its CEO, Ms. Yan Li and $-0- with its former treasurer Mr. Ireland. This compares with the outstanding balance of $282,889 for Ms. Yan Li and $840 for Mr. Ireland at February 28, 2017. 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 is being amortized over 36 months at the rate of $694 per month.
A related party is providing accounting service to the company at an estimated annual service fee of $16,000.
From November 2017, the Company started to purchase cosmetic products from a related party controlled by our CEO. By the end of February 28, 2018, the Company purchased a total of $8,842 in inventory from the related party.
NOTE 6- ACCRUED OFFICER COMPENSATION AND STOCK COMPENSATION
On December 15, 2015, the Company entered into employment agreements with its president, Ms. Yan Li, and its secretary and treasurer, Mr. Robert Ireland. Both agreements were retroactively effective as of December 4, 2015, for a term of 36 months (measured from December 4, 2015). Pursuant to the agreement, both Ms. Yan and Mr. Ireland shall receive an annual salary of $100,500 and 100,000 shares of the Company’s common stock.
On August 30, 2017, Mr. Robert Ireland resigned as Secretary/Treasurer of the company. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the company and agreed to cancel all outstanding debt of the company that was owed to him for past compensation in the amount of $410,715.
As of February 28, 2018, a total of $460,125 had been accrued as salary compensation payable to the officers of the Company compared to $719,250 at February 28, 2017. As of February 28, 2018, a total of $317,625 in stock compensation had been recorded to four officers, including one resigned officer, compared to $420,700 for the same period in the prior year to two officers.
NOTE 7 - 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 was obligated for a period of 36 months to pay a rental fee of $2,000 per month. At the end of May 31, 2017, the Company terminated the lease and the security deposit was returned during the fiscal year ended February 28, 2018.
NOTE 8 - INCOME TAX
At February 28, 2018, the Company had unused federal and state net operating loss carryforwards available of approximately $819,898, which may be applied against future taxable income, if any, and which expire in various years through 2037.
This loss carry-forward expires according to the following schedule:
The following is a reconciliation of the tax provision as calculated at the statutory tax rate to the provision as recognized for the years ended February 28, 2018 and February 28, 2017:
There were permanent differences and temporary differences to reconcile the tax provision for the years ended February 28, 2018 and 2017, other than the change in valuation allowance of $41,590 and $107,958, respectively. All tax years from inception remain open for examination by the tax authorities.
Deferred tax assets as of February 28, 2018 and 2017, all related to accrued officer compensation not deductible until paid for income tax purposes amounted to $52,763 and $70,350, respectively.
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.
As referenced in Note 6, 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 $2.10 per share based on the quoted market price of shares of common stock on the effective date of the Agreement.
On October 27, 2016, the Company issued 50,000 shares to its interim CFO at $0.014 per share for his services and recognized share-based compensation expense in the amount of $700. Based on above Employment Agreements, total $420,000 stock compensation to two officers was recorded during year ended February 28,2017.
During the year ended February 28, 2017, a total of 3,500,000 shares were issued to two officers at a cost of $0.014 per share for a total equity issuance of $49,000 to settle an advance from a related party.
On August 30, 2017, 175,000 granted shares valued at $367,500 have been canceled as stock compensation to the former Company treasury upon his resignation with the par value of $175 reducing the balance of common stock outstanding. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the company and agreed to cancel all outstanding debt of the company that was owed to him for past compensation in the amount of $410,715.
On August 30, 2017, the company granted its new Chief Financial Officer 200,000 shares of restricted common stock at the time of his appointment, which vests immediately. The restricted stock has a value of $2,100 based on stock market price of $0.0105 per share at stock grant date.
On August 30, 2017, the company granted its new Secretary, Treasurer 50,000 shares of restricted common stock at the time of his appointment. The restricted stock has a value of $525 base on stock market price of $0.0105 per share at stock grant date.
During the year ended February 28, 2018, total 150,000 shares valued at $315,000 stock compensation to two officers, including one resigned officer, was recorded based on above Employment Agreements.
During the year ended February 28, 2017, convertible debt of $52,600 was converted into 4,079,360 shares of common stock based on the convertible note agreement. Associated with the note conversion, derivative liability was reduced by $76,387.
During the year ended February 28, 2018, convertible debt of $6,600 was converted into 1,627,777 shares of common stock as provided for in the convertible note agreement. Associated with the note conversion, derivative liability was reduced by $12,276.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, “Subsequent Events”, the Company has analyzed its operations subsequent to February 28, 2018 to May 17, 2018, 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
On July 5, 2016 (the “Engagement Date”), the Company engaged Thayer O’Neal Company LLC (“Thayer O’Neal”), 101 Parklane Blvd., #201, Sugar Land, TX 77478 as its independent registered public accounting firm for the Company’s fiscal year ended February 28, 2017. The decision to engage Thayer O’Neal as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors.
During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with Thayer O’Neal regarding either: (1) the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that Thayer O’Neal concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).
ITEM 9A
ITEM 9A CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management as appropriate, to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, the sole officers, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on management’s evaluation as of the end of the period covered by this Annual Report, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) were ineffective as of the end of the period covered by this annual report.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, the sole officers, evaluated the effectiveness of the Company’s internal control over financial reporting as of February 28, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on that evaluation, our management concluded that, as of February 28, 2018, our internal controls over financial reporting were ineffective because: (1) the Company lacks a functioning audit committee and there is a lack of independent directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) due to the lack of employees, the Company has inadequate segregation of duties consistent with control objectives; and (3) the Company has ineffective controls over its period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of February 28, 2018. Because of our overall limited financial resources, we cannot estimate when we may begin to remediate any of the foregoing deficiencies and the time frame in which they will be remediated if and when begun.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that exempt smaller reporting companies from such requirement.
Changes in internal controls
There have been no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during our last fiscal quarter that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.
ITEM 9B
ITEM 9B OTHER INFORMATION.
None
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 stockholders or until his or her successor is elected and qualified, unless he or she resigns earlier or is removed. The Board of Directors elects the officers of the Company and their terms of office are at the discretion of the Board of Directors, unless they resign. At the present time, members of the board of directors are not compensated for their services on the board of directors.
There are no family relationships among our officers and directors.
Biographical Information Regarding Officers and Directors
Ms. Yan Li is a permanent resident of Canada and has been living in Vancouver since 2008. Ms. Li is our President and Chief Executive Officer and is a member of the Board of Directors. Ms. Yan Li also manages and is a board member of several private 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. Ms. Li holds a bachelor degree in financial and bank management from the Shanghai Financial Economical University.
Lei Wang is a resident of USA. Mr. Wang has been our Chief Financial Officer and a member of the Board of Directors since August 30, 2017. Mr. Wang has over 19 years of accounting and audit work experience at public and private companies, including reconciliation supervisor at financial administration office of Prairie View A&M University from 2011 to 2013;auditor at a CPA firm Thayer O’Neal Company, LLC in Houston from 2013 to 2016; the owner of financial and accounting service firm Wang LSC Consulting LLC from 2017 to date. Mr. Wang holds a master degree in accounting from Texas A&M university and is a licensed CPA member in Texas, USA.
Kecheng Xu is a resident of China. Mr. Xu has been our Secretary, Treasurer and a member of the Board of Directors since August 30, 2017. Mr. Xu has over 5 years financial work experience at private sector, including: Jiu Feng Investment Management Shanghai Ltd from 2012 to date; Equity investment manager at TFTR Investment Co. Ltd from 2016 to date. Mr. Xu holds a Financial MBA from Shanghai Advanced Institute of Finance (SJTU), and received a bachelor degree in Economics from UBC in Canada.
Corporate Governance; Audit Committee and Other Committees
We do not have a separately-designated standing audit committee, and we do not have an “audit committee financial expert” as defined by SEC regulation. The Company’s Board of Directors performs some of the same functions of an audit committee, such as recommending a firm of independent certified public accountants to audit the financial statements; reviewing the auditors’ independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.
We do not have any other committees of the board of directors, such as compensation or nomination committees. The functions of these types of committees are currently carried out by the Board of Directors.
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 rule.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity securities that are registered pursuant to Section 12 of the Securities Exchange Act, to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. During the fiscal year ended February 28, 2018, our reporting persons have filed the required reports on Forms 3 and 4.
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.
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 fiscal years 2018 and 2017 awarded to, earned by or paid to our executive officers.
Summary Compensation Table
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1 On December 15, 2015, the Company entered into employment agreements with its president, Ms. Yan Li, the agreements were 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.
2 Lei Wang became the Chief Financial Officer on August 30, 2017. Mr. Wang receives no salary compensation. Mr. Wang is paid stock compensation from time to time base on the performance of the Company. On October 27, 2016, the company issued 50,000 shares to Mr. Wang, its interim CFO, at $0.014 per share for his services and recognized share-based compensation expense in the amount of $700. When Mr. Wang was appointed as the Chief Financial Officer by the Company’s Board of Directors on August 30, 2017, he was granted 200,000 shares of restricted common stock. The restricted stock has an aggregate value of $2,100 based on stock market price of $0.0105 per share at stock grant date. All other amounts are paid to a corporation which is a separate legal entity controlled by Mr. Wang.
3 Mr. Kecheng Xu became the Secretary, Treasurer and a director of the Company on August 30, 2017. Mr. Xu receives no salary compensation. Mr. Xu was paid stock compensation from time to time based on the performance of the Company. Mr. Xu was granted 50,000 shares of restricted common stock on August 30, 2017 when he was appointed as the Secretary, Treasurer and Director of the Company. The restricted stock has a value of $525 base on stock market price of $0.0105 per share at stock grant date.
4. Mr. Ireland resigned as the Secretary and Treasurer of the Company on August 30, 2017. Upon his resignation, he surrendered all outstanding equity compensation to the company and agreed to cancel all outstanding debt of the company that was owed to him for past compensation in the amount of $409,875.
Employment Agreements and Related Arrangements
On December 15, 2015, the Company entered into employment agreements with its president and chief executive officer, Ms. Yan Li, and its former 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. Li received an annual salary of $100,500 and 100,000 shares of the Company’s common stock. 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 receives an annual salary of $100,500 and 100,000 shares of the Company’s common stock. The Company valued the stock compensation under both agreements at $2.10 per share based on the quoted market price of shares of common stock on the effective date of the agreements.
Mr. Robert Ireland resigned as the secretary and treasurer of the Company on August 30, 2017. Upon his resignation, 175,000 shares that were granted to him as stock compensation and were valued at $367,500 were cancelled with the par value of $175 reducing the balance of common stock outstanding. He agreed to cancel all outstanding debt of the company that was owed to him for past compensation in the amount of $409,875.
Our current Chief Financial Officer and Secretary/Treasurer receive no salary compensation instead been paid stock compensation from time to time based on the performance of the Company.
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, who are also our executive officers, did not receive separate compensation for their services as directors in fiscal years ended February 28, 2018 and 2017.
Option Exercises and Stock Vested
There were no options issued, outstanding, exercised or vested during the years ended February 28, 2018 and February 28, 2017. There were no unvested stock awards outstanding at the same dates.
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 May 17, 2018: (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 May 17, 2018, there were 18,410,708 shares of our common stock outstanding. We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
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(1) The address of each of our executives is c/o the Company at 2293 Hong Qiao Rd, Shanghai China, 200336.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the fiscal years ended February 28, 2018 and February 28, 2017, Ms. Yan Li, our President, CEO, and a director, personally paid $107,939 and $108,256, respectively, for various expenses on behalf of Jubilant Flame International Ltd. The Company did not enter into any loan agreement with respect to those advances.
On October 27, 2016, we settled accounts payable arising from advances to the Company of funds from Ms. Yan Li, the President and Chief Executive Officer, for working capital in the aggregate amount of $42,000 by issuing an aggregate of 3,000,000 shares at a cost of $0.014 per share.
On August 30, 2017 Lei Wang became an Executive Financial Officer. Mr. Wang receives no salary compensation. Mr. Wang was paid stock compensation time to time base on business progress. On October 27, 2016, the company issued 50,000 shares to its interim CFO at $0.014 per share for his services and recognized share based compensation expense in the amount of $700. Mr. Wang was granted 200,000 shares of restricted common stock at the time of his appointment. The restricted stock has a value of $2,100 based on stock market price of $0.0105 per share at stock grant date. The company paid a separate legal entity controlled by Mr. Wang for service fee of $16,000 during year end of February 28, 2018 and $17,775 during the year end of February 28, 2017 respectively.
Mr. Kecheng Xu became Secretary, Treasurer and a director of the Company on August 30. Mr. Xu receives no salary compensation. Mr. Xu was paid stock compensation time to time based on business progress. Mr. Xu was granted 50,000 shares of restricted common stock at the time of his appointment. The restricted stock has a value of $525 base on stock market price of $0.0105 per share at stock grant date.
On August 30, 2017, the Company’s former CFO, Mr. Robert Ireland, resigned as Secretary/Treasurer of the Company. Additionally, upon his resignation, he surrendered all outstanding equity compensation to the Company and agreed to cancel outstanding loan to the company of $840 and all outstanding debt of the company that was owed to him for past compensation in the amount of $409,875.
As at February 28, 2018, the Company had a $390,829 loan outstanding with its CEO, Ms. Yan Li and $-0- with its former treasurer Mr. Ireland. This compares with the outstanding balance of $282,889 for Ms. Yan Li and $840 for Mr. Ireland at February 28, 2017. 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 is being amortized over 36 months at the rate of $694 per month.
A related party is providing accounting service to the company, at an estimated annual service fee of $16,000.
From November 2017, the Company started to purchase Acropass Products from related party owned and controlled by our CEO for the products’ resale in the United States. By the end of February 28, 2018, the Company purchase total $8,842 inventory from the related party.
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.
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 therefore, we have no independent directors.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During the years ended February 28, 2018 and February 28, 2017, we engaged Thayer O’Neal Company, LLC and Pritchett, Siler & Hardy PC, respectively, as the Company’s independent registered public accounting firm.
For the years ended February 28, 2017, and February 28, 2018, 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.
The policy of the Board of Directors 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. Pre-approval by our Board of Directors of accountant services is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the board of directors may also pre-approve particular services on a case-by-case basis. Our Board of Directors approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV
ITEM 15
ITEM 15 EXHIBITS
_________
* Previously Filed
** Filed herewith
+ Management employment arrangement
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: May 17, 2018
By:
/s/ Yan Li
Yan Li
President and Chief Executive Officer
(Principal Executive Officer)
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: May 17, 2018
By:
/s/ Yan Li
Yan Li
President, Chief Executive Officer
(Principal Executive Officer) and Director
Date: May 17, 2018
By:
/s/ Lei Wang
Lei Wang
Chief Financial Officer
(Principal Financial Officer) and Director