Filing and Reporting Context
The provided filing is a Form 10-K for B-Maven, Inc., not Iqstel Inc. It covers the fiscal year ended June 30, 2013, with comparative fiscal-year information for June 30, 2012. It does not represent a 2012 fourth-quarter filing for Iqstel Inc. B-Maven was a Nevada development-stage company and reported itself as a shell company and smaller reporting company.
Business Context
B-Maven was developing the E-Scentual Skin Care Collection, based on natural ingredients and a proprietary anti-aging formulation. The company had one employee and one director, Restituto S. Cenia Jr., who also served as president, chief executive officer, chief financial officer, secretary and treasurer. No saleable product line had been commercially established, and operations remained dependent on additional financing.
On May 14, 2013, control transferred from founder Anna C. Jones to Four Hawk Management Co., which acquired 75% of the outstanding common stock. Mr. Cenia was appointed to all principal executive and financial positions.
Financial Highlights
| Metric | Year ended June 30, 2013 | Year ended June 30, 2012 |
|---|---|---|
| Revenue | $1,755 | $0 |
| Cost of goods sold | $318 | $0 |
| Gross profit | $1,437 | $0 |
| Gross margin | 81.9% | Not applicable |
| Total operating expenses | $35,713 | $21,498 |
| Gain on debt relief | $55,638 | $0 |
| Net income/(loss) | $20,562 | $(21,498) |
| Net income/(loss) per share | $0.00 | $(0.00) |
| Cash and cash equivalents | $0 | $317 |
| Total assets | $212 | $62,536 |
| Total liabilities | $19,414 | $82,199 |
| Stockholders’ equity/(deficit) | $(19,202) | $(19,663) |
Revenue consisted of limited initial product sales beginning in December 2012. The reported 2013 net income was driven primarily by the nonrecurring $55,638 gain from forgiveness or settlement of debt, rather than by operating profitability. Excluding that gain, the company would have reported a substantial loss.
Cash Flow, Debt and Liquidity
- Cash used in operating activities was $10,925 in 2013, compared with $13,347 in 2012.
- Cash provided by financing activities was $11,242 in 2013, including $25,000 of common-stock offering proceeds, $13,080 of unrelated-party borrowings and $101 of related-party borrowings, partly offset by $26,939 of deferred offering costs paid.
- Cash was $0 at June 30, 2013, and the company reported a working-capital deficit of $19,202.
- Accrued expenses were $14,414 and sales revenue received in advance was $5,000 at June 30, 2013.
- Founder and unrelated-party loans were reported at zero at year-end because they were paid or forgiven in connection with the change in control.
- The company had no bank financing, lines of credit or committed financing source.
Material Changes Versus the Prior Period
- Revenue increased from $0 to $1,755, reflecting the company’s first limited product sales.
- Operating expenses increased to $35,713 from $21,498, primarily because of higher consulting, administrative, audit and accounting costs.
- The company moved from a $21,498 net loss to $20,562 net income, but this change was principally attributable to the $55,638 debt-relief gain.
- Cash declined from $317 to zero, while total assets fell substantially after deferred offering costs and the product-formula intangible asset were eliminated.
- Debt and other liabilities declined substantially following forgiveness or settlement of approximately $56,000 of obligations.
- Shares outstanding increased from 7.5 million to 10 million following the sale of 2.5 million shares for $25,000.
Guidance, Outlook and Risks
Management stated that product development could cost more than $100,000 and that an additional $50,000 to $100,000 would be needed for initial inventory, marketing and advertising. The company expected to seek equity or debt financing and stated that product revenues might begin within 12 months after obtaining sufficient funds. No financing commitment had been obtained, and no assurance was provided that financing or meaningful revenue would be achieved.
The independent auditor included a going-concern explanatory paragraph. Management disclosed substantial doubt about the company’s ability to continue operations because of losses, limited revenue, zero cash, negative working capital and the absence of committed capital.
- High risk of business failure and dependence on additional financing.
- No established commercial product, manufacturing agreement, patent or trademark protection.
- Dependence on third-party manufacturers, suppliers, distributors and marketing firms.
- Intense competition from substantially larger skincare companies.
- Uncertainty regarding consumer acceptance, product effectiveness, regulatory requirements and potential product-liability claims.
- Potential dilution from future equity or convertible-debt financing.
- Single-person management and board structure, with no independent directors or separate audit or compensation committees.
- No established trading market or reported trades in the common stock, despite quotations on the OTCBB and OTCQB; shares were expected to be subject to penny-stock restrictions.
Investor Verification Priorities
- Verify the company and period: the supplied document identifies B-Maven, Inc. and June 30, 2013, not Iqstel Inc. or 2012 Q4.
- Confirm whether the $20,562 net income is being interpreted appropriately, given the nonrecurring $55,638 debt-forgiveness gain.
- Reconcile the reported zero cash balance, $19,202 working-capital deficit and approximately $15,000 of remaining liabilities.
- Review the terms and documentation of the May 2013 change-of-control transaction and debt forgiveness.
- Assess whether additional financing was obtained after the filing date and whether the company remained a going concern.
- Confirm the status of product commercialization, manufacturing arrangements, intellectual-property protection and regulatory compliance.
- Verify the actual trading status, liquidity and transfer restrictions of the common stock.