SEC Form 10-Q Summary
Filing discrepancy: The request metadata identifies Iqstel Inc. and 2011 Q2, but the supplied filing is for B-Maven, Inc., a Nevada development-stage cosmetics company, for the quarter and six months ended December 31, 2012. The report was filed February 8, 2013.
Business Context and Reporting Period
B-Maven develops, manufactures, markets and sells the E-Scentual skin-care collection. The company had limited operating history, one employee, no patents or trademarks, and relied substantially on its founder. It completed a registered offering on August 1, 2012, issuing 2.5 million shares to 17 investors for $25,000. The company stated it was no longer a shell company because it had made product sales and received additional purchase orders.
Financial Highlights
| Metric | Six Months Ended Dec. 31, 2012 | Six Months Ended Dec. 31, 2011 |
|---|---|---|
| Revenue | $625 | $0 |
| Cost of goods sold | $105 | $0 |
| Gross margin | $520; 83.2% | $0 |
| Total expenses | $23,713 | $10,077 |
| Net loss | $(23,993) | $(10,077) |
| Operating cash flow | $(360) | $(10,107) |
For the three months ended December 31, 2012, revenue was $625, gross margin was $520, total expenses were $13,867 and net loss was $13,347, compared with no revenue and a $4,233 net loss in the prior-year quarter. Basic and diluted loss per share was reported as $(0.00) for both periods.
| Balance Sheet Metric | Dec. 31, 2012 | June 30, 2012 |
|---|---|---|
| Cash | $3,579 | $317 |
| Inventory | $425 | $530 |
| Total assets | $4,629 | $62,536 |
| Total liabilities | $69,725 | $82,199 |
| Stockholders’ deficit | $(65,096) | $(19,663) |
Current liabilities included $45,500 of accrued expenses, $5,000 of customer deposits or revenue received in advance, $1,338 of related-party loans and $17,887 of loans from unrelated parties. The loans were unsecured, non-interest-bearing and had no stated repayment terms. The company had no bank financing or credit lines.
Financing cash flow for the six months was $3,622, including $25,000 from common stock issuance, $5,460 of loans from unrelated parties and $101 of related-party loans, offset by $26,939 of offering costs. Cash increased from $317 to $3,579.
Material Changes Versus the Prior Comparable Period
- The company generated its first reported revenue of $625, with an 83.2% gross margin, but remained substantially pre-revenue.
- Net loss increased to $23,993 from $10,077, primarily because consulting and other expenses rose to $22,362 from $8,364 and the company recorded $800 of state income tax expense.
- Operating cash use improved to $360 from $10,107, largely because of increases in accrued expenses and customer deposits.
- Shares outstanding increased from 7.5 million at June 30, 2012 to 10 million at December 31, 2012 following the registered offering.
- Total assets declined substantially because deferred offering costs were offset against additional paid-in capital; accrued offering-related costs remained in liabilities.
Guidance, Outlook, Risks and Unusual Items
Management expected to introduce products more broadly during the first or second calendar quarter of 2013, subject to financing. It estimated that commercial-scale product development could exceed $100,000 and that an additional $50,000 to $100,000 would be needed for raw materials, packaging, labeling, marketing and advertising.
The company disclosed substantial doubt about its ability to continue as a going concern. It reported negative working capital of $65,721, an accumulated development-stage deficit of $51,157, cash of only $3,579 and no committed financing sources. Management stated that existing resources were sufficient for approximately three to six months and that it spent approximately $3,000 to $4,000 per month.
Continuation of operations depended on obtaining additional equity or debt financing, increasing sales and achieving profitable operations. Management warned that failure to obtain financing could require it to scale down or cease operations. Additional financing could materially dilute existing shareholders or increase debt obligations.
- The business depended heavily on the founder, who was the sole employee, chief executive officer and sole director and had no employment agreement.
- The company had no established commercial manufacturing arrangements, no patent protection and significant competition from substantially larger skin-care companies.
- Product acceptance, regulatory requirements, product liability, manufacturing quality and distribution remained uncertain.
- There was no established public market for the common stock; the company received FINRA approval for its Form 15c2-11 application and trading symbol BMAV on January 29, 2013, but disclosed no assurance that an active market would develop.
- The company had no pending litigation and no off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective and reported no material changes in internal control over financial reporting.
Investor Verification Items
- Verify the issuer and period: the supplied filing is B-Maven, Inc. for December 31, 2012, not Iqstel Inc. for 2011 Q2.
- Verify the going-concern disclosure, negative working capital, accrued liabilities and the company’s stated three-to-six-month funding runway.
- Confirm the nature and collectability of the $5,000 customer advance and the terms of the $19,225 in related- and unrelated-party loans.
- Review the offering-cost accounting, including the $60,439 offset against additional paid-in capital and the remaining $19,500 of deferred offering costs included in accrued expenses.
- Assess whether the initial $625 sale and purchase order represent repeatable commercial demand.
- Evaluate prospective dilution from planned equity financing and the governance risks associated with a founder-controlled, one-director company.