Filing Context and Reporting Period
This filing is a Form 10-Q for PureSnax International, Inc., not Iqstel Inc. It covers the three and nine months ended March 31, 2016, with comparisons to March 31, 2015. The filing identifies the company as an early-stage wellness and healthy-snacks business. The request metadata refers to “Iqstel Inc.” and “2015 Q3,” which does not match the filing text.
Key Financial Metrics
| Metric | Three months ended March 31, 2016 | Nine months ended March 31, 2016 | Comparable period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Gross margin | No meaningful margin; no revenue | No meaningful margin; no revenue | No revenue |
| Operating expenses | $72,614 | $120,444 | $6,039 and $22,295, respectively |
| Net loss | $(124,060) | $(171,890) | $(6,337) and $(23,989), respectively |
| Basic and diluted loss per share | $(0.00) | $(0.00) | $(0.00) |
| Operating cash flow | Not separately presented | $(89,982) | $(23,550) |
At March 31, 2016, total assets were $8,365, consisting of $441 of cash and $7,924 of inventory. Total liabilities were $173,961, including $47,387 of accounts payable and accrued expenses, $15,723 of related-party loans, $9,901 of convertible notes payable, net, and a $100,950 derivative liability. Stockholders’ deficit was $(165,596).
Financing activities provided $90,423 during the nine months, comprising $13,923 of related-party loans and $76,500 of proceeds from convertible notes. The company reported no investing cash flows and ended the period with $441 in cash. It had no bank credit facility or line of credit.
Material Changes Versus Prior Comparable Period
- Revenue remained at zero for both the quarter and nine-month period.
- Quarterly net loss increased to $124,060 from $6,337; nine-month net loss increased to $171,890 from $23,989.
- Nine-month operating expenses rose to $120,444 from $22,295, driven principally by consulting and other expenses of $115,352 versus $22,295.
- Nine-month operating cash use increased to $89,982 from $23,550.
- The company incurred $44,514 of derivative expense and recognized $7,997 of interest expense for the nine-month period.
- The capital structure changed materially: 300 million common shares were cancelled in exchange for 1 million Series A convertible preferred shares, convertible at 120 common shares per preferred share. Common shares outstanding at March 31, 2016 were 100 million versus 400 million at June 30, 2015.
- New convertible notes were issued in February and March 2016. The notes generally bear 10% interest and include conversion terms that could result in substantial future common-stock issuance and dilution.
Outlook, Commentary, Risks, and Unusual Items
Management stated that it expected sales to begin in the first quarter of 2016, but the filing reports no revenue through March 31, 2016. The company plans to manufacture, distribute, sell, and market licensed PureSnax products under a 10-year exclusive worldwide trademark license. The license requires a royalty of 10% of net sales, payable in cash or common stock at a 20% discount.
Management estimates that commercial-scale product development could exceed $100,000 and that an additional $50,000 to $100,000 may be needed for raw materials, packaging, labeling, marketing, and advertising. The company expects to seek additional equity, convertible debt, related-party loans, or strategic funding, but reported no financing commitment from any source.
The financial statements were prepared on a going-concern basis, but management disclosed substantial doubt about the company’s ability to continue as a going concern. Continued operations depend on shareholder support, additional financing, and achieving profitable operations. Failure to obtain funding could require the company to scale down or cease operations.
Significant risks include the absence of revenue, minimal liquidity, recurring losses, dependence on financing, potential dilution from equity and convertible debt issuance, regulatory requirements for food products and labeling, pending U.S. trademark approval, and ineffective disclosure controls and procedures as of March 31, 2016. The filing reports no material litigation and no significant off-balance-sheet arrangements.
Subsequent to quarter-end, the company entered into three common-stock subscription agreements in April 2016 for aggregate proceeds of $55,000 and 161,766 restricted shares.
Investor Verification Items
- Confirm the issuer and period: the filing is for PureSnax International, Inc. for the quarter ended March 31, 2016, not Iqstel Inc. or 2015 Q3.
- Verify the company’s ability to obtain near-term financing and fund its stated $50,000 to $100,000 working-capital needs.
- Review the conversion and warrant terms of the February and March 2016 notes, including potential dilution and derivative-liability accounting.
- Assess whether projected product launches and sales materialized after March 31, 2016, since reported revenue remained zero.
- Review related-party loans, the related-party license relationship, and the 10% royalty arrangement.
- Follow the going-concern disclosure, cash balance, accounts payable, and subsequent financing activity.
- Investigate the disclosed ineffective disclosure controls and any remediation or later restatement risk.