SEC Form 10-Q Summary
Filing entity and period: The supplied filing is for B-Maven, Inc., not Iqstel Inc. It covers the quarter and six months ended December 31, 2013, within the fiscal year ending June 30, 2014. The interim financial statements are unaudited.
Business Context and Reporting Period
B-Maven is a Nevada development-stage company developing, manufacturing, marketing, and selling the E-Scentual skin-care collection. The company owns the related product formulas but has no patents or trademarks. It reported one employee as of March 12, 2014, and occupied space provided by its chief executive officer without a written lease.
The company reported that it was a shell company and had limited operations, limited sales, no committed financing, and no established public trading market for its common stock. It had 10,000,000 common shares outstanding as of March 12, 2014.
Financial Metrics
| Metric | Three months ended Dec. 31, 2013 | Three months ended Dec. 31, 2012 | Six months ended Dec. 31, 2013 | Six months ended Dec. 31, 2012 |
|---|---|---|---|---|
| Revenue | $0 | $625 | $3,802 | $625 |
| Cost of goods sold | $0 | $105 | $421 | $105 |
| Gross profit | $0 | $520 | $3,381 | $520 |
| Gross margin | Not meaningful | 83.2% | 88.9% | 83.2% |
| Net loss | $(6,852) | $(13,347) | $(17,139) | $(23,993) |
| Basic and diluted loss per share | $(0.00) | $(0.00) | $(0.00) | $(0.00) |
Six-month operating expenses were $19,401, including $19,300 of consulting and other expenses and $101 of samples and marketing costs. Interest expense was $319 for the six months and $284 for the quarter. No amortization expense was recorded in the six months ended December 31, 2013 because the product formulas and samples were fully amortized by December 31, 2013.
At December 31, 2013, cash and cash equivalents were $0, inventory was $181, total assets were $181, and total liabilities were $36,522. Liabilities included $9,517 of accrued expenses, $5,000 of customer advances, and $22,005 of unsecured related-party loans from the chief executive officer. Stockholders’ deficit was $36,341 on the balance sheet; the filing separately describes a development-stage accumulated deficit of $23,740.
Operating activities used $22,005 of cash during the six months, while financing activities provided $22,005, entirely from related-party loans. Ending cash remained $0. The company had no bank line of credit or other bank financing arrangement.
Material Changes Versus the Prior Comparable Period
- Six-month revenue increased to $3,802 from $625, although quarterly revenue fell to $0 from $625.
- Six-month gross profit increased to $3,381 from $520, and gross margin improved to 88.9% from 83.2%.
- Six-month net loss narrowed to $17,139 from $23,993, primarily because consulting and other expenses declined from $22,362 to $19,300 and amortization declined from $625 to $0.
- Related-party loans increased from $0 at June 30, 2013 to $22,005 at December 31, 2013. The loans bear interest at 4% and 6% and mature in September 2014.
- Inventory declined from $212 at June 30, 2013 to $181 at December 31, 2013, while total liabilities increased from $19,414 to $36,522.
- The company reported approximately $6,000 of additional related-party loans received on March 6, 2014, bringing related-party financing described in the MD&A to approximately $28,000 as of March 12, 2014.
Guidance, Outlook, Risks, and Unusual Items
Management stated that commercial-scale product development could cost more than $100,000 and estimated a need for at least $50,000 to $100,000 for raw materials, packaging, labeling, marketing, and advertising. The company expects to seek additional equity or debt financing, but reported no financing commitment and gave no assurance that funding will be available on acceptable terms.
The filing contains a going-concern warning. At December 31, 2013, the company had negative working capital of $36,341, no cash, limited revenue, an accumulated development-stage deficit, and no committed source of capital. Management stated that continuation depends on achieving profitable operations or obtaining adequate financing. The financial statements contain no adjustments that might be required if the company cannot continue as a going concern.
Key risks include limited operating history and revenue, inability to raise capital, potential dilution from new equity issuance, reliance on related-party financing and a single executive, competition from substantially larger companies, lack of patent protection, dependence on third-party manufacturers, uncertain consumer acceptance, possible product-liability exposure, regulatory changes, shell-company restrictions, penny-stock trading limitations, and the absence of a liquid public market.
No legal proceedings, unregistered equity sales, defaults on senior securities, or off-balance-sheet arrangements were reported. Management stated that disclosure controls and procedures were effective as of December 31, 2013 and that no material changes occurred in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing names B-Maven, Inc., while the request identifies Iqstel Inc.
- Verify the company’s current corporate name, ticker, exchange status, and whether a trading market actually exists.
- Reconcile the reported stockholders’ deficit of $36,341 with the development-stage accumulated deficit of $23,740 described elsewhere in the filing.
- Review the terms, maturity dates, accrued interest, and related-party nature of the approximately $22,005 of loans outstanding at December 31, 2013 and the additional approximately $6,000 received afterward.
- Assess whether the company obtained the $50,000 to $100,000 or greater financing management identified as necessary for commercial production.
- Evaluate the going-concern disclosure, zero cash balance, negative working capital, continuing losses, and ability to fund operations beyond the short term.
- Confirm product demand and revenue quality, given that six-month revenue was only $3,802 and quarterly revenue was zero.
- Review dilution, control, and liquidity risks associated with 100,000,000 authorized common shares, 1,000,000 authorized preferred shares, restricted shares, and the absence of an established market.