Filing Overview
The provided filing is B-Maven, Inc.’s Form 10-K for the fiscal year ended June 30, 2014, not an Iqstel Inc. filing or a 2013 Q4 report. B-Maven is a Nevada development-stage company developing and marketing the E-Scentual natural skin-care product line. The company had one employee and one director, Restituto S. Cenia Jr., who also served as CEO, CFO, secretary and treasurer.
Business Context and Reporting Period
B-Maven reported limited product sales and continued product development, testing, marketing and distributor discussions. It had no patents or trademarks and relied on third-party financing and related-party loans. Four Hawk Management Co. owned 75% of the 10,000,000 outstanding common shares following a May 2013 change in control.
Key Financial Metrics
| Metric | Fiscal year ended June 30, 2014 | Fiscal year ended June 30, 2013 |
|---|---|---|
| Revenue | $7,707 | $1,755 |
| Cost of goods sold | $924 | $318 |
| Gross profit | $6,783 | $1,437 |
| Gross margin | 88.0% | 81.9% |
| Consulting and other expense | $29,948 | $33,737 |
| Net income/(loss) | $(25,158) | $20,562 |
| Cash and cash equivalents | $0 | $0 |
| Operating cash flow | $(34,474) | $(10,925) |
| Financing cash flow | $34,474 | $11,242 |
| Working capital | $(44,360) | Not clearly provided |
| Stockholders’ equity/(deficit) | $(44,360) | $(19,202) |
The filing also reports a $31,759 accumulated deficit during the development stage and $44,453 of current liabilities at June 30, 2014, including $33,855 owed to the CEO and $619 owed to an unrelated party or founder. The balance sheet presentation contains a labeling error for the comparative date, but the surrounding disclosures identify the comparative period as June 30, 2013.
Material Changes Versus the Prior Period
- Revenue increased approximately 339% to $7,707 from $1,755, although the business remained at a very limited operating scale.
- Gross margin improved to 88.0% from 81.9%.
- The company moved from net income of $20,562 to a net loss of $25,158. The prior-year result included a nonrecurring $55,638 gain from debt relief; fiscal 2014 included $889 of interest expense instead.
- Operating cash usage increased to $34,474 from $10,925 and was fully offset by borrowings.
- Consulting and other expenses declined to $29,948 from $33,737, while audit and accounting expense increased to $10,000 from $8,500.
- Inventory declined to $93 from $212, and intangible product-formula assets were fully amortized by June 30, 2014.
Liquidity, Debt and Going-Concern Matters
The independent auditor included an explanatory paragraph stating that operating losses raise substantial doubt about the company’s ability to continue as a going concern. The company had no cash, negative working capital of $44,360 and no committed financing source at year-end. Management stated that operations were dependent on achieving profitable sales or obtaining additional debt or equity financing.
During fiscal 2014, the CEO provided approximately $33,855 of loans, including $21,000 bearing interest at 6% and 4% and generally due in September 2014, plus $12,855 of non-interest-bearing loans due on demand. The company also reported approximately $4,979 of accrued professional-service liabilities. After year-end, it received an additional $11,500 related-party loan on August 22, 2014.
Outlook, Risks and Unusual Items
- Management expected to require additional financing for inventory, packaging, labeling, marketing, product development and public-company compliance costs. The filing estimates public-company costs at approximately $50,000 annually.
- Management estimated that commercial-scale product development could exceed $100,000 and that an additional $50,000 to $100,000 could be needed for raw materials, packaging and introductory marketing.
- No financing commitment had been obtained, and management warned that failure to secure funding could require the company to scale back or cease operations.
- The company had limited sales history, no established manufacturing agreements, no patent or trademark protection, and significant competition from larger cosmetics companies.
- The company was classified as a shell company and had no established trading market despite quotations on the OTCBB and OTCQB. No trades had occurred, and the common stock was expected to be subject to penny-stock restrictions.
- Governance was highly concentrated: one person served as the sole director and all principal executive and financial officers. There was no independent audit or compensation committee.
- The company had no employment agreements, paid no executive or director compensation during the reported periods, and did not expect to pay dividends.
- The filing states that there were no material legal proceedings, off-balance-sheet arrangements or unresolved staff comments.
Important Facts for Investors to Verify
- Verify the issuer and reporting period: the supplied filing is for B-Maven, Inc. and fiscal 2014, not Iqstel Inc. or 2013 Q4.
- Confirm the company’s ability to continue as a going concern given zero cash, negative working capital and reliance on additional financing.
- Review the terms, maturity dates and subsequent funding of the CEO’s related-party loans.
- Determine whether reported revenue growth represents sustainable commercial demand or only limited product placement and small-scale sales.
- Assess the effect of potential equity or convertible-debt financing on dilution and capital structure.
- Review the auditor’s going-concern qualification and the absence of an independent board or audit committee.
- Confirm actual trading activity and liquidity of the common stock; quoted prices may not represent completed transactions.