Business Context and Reporting Period
PureSnax International, Inc. (PureSnax) is a Nevada-based wellness brand focused on healthy, functional snacks and foods, including sugar-free and non-GMO products. This Form 10-Q covers the quarterly period ended September 30, 2015. The Company is classified as a smaller reporting company and a shell company. As of the reporting date, PureSnax had 100,000,000 shares of common stock outstanding and 1,000,000 shares of Series A Convertible Preferred Stock outstanding. The Company has limited revenue to date and its continuation as a going concern is dependent on obtaining additional financing.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2015 | Three Months Ended Sep 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(26,794) | $(11,752) |
| Total Assets | $187 | N/A |
| Total Liabilities | $36,924 | N/A |
| Cash and Cash Equivalents | $187 | $0 |
| Accumulated Deficit | $(91,424) | N/A |
| Net Cash Used in Operating Activities | $(9,531) | $(12,050) |
| Net Cash Provided by Financing Activities | $9,718 | $12,050 |
Debt and Liquidity: The Company holds $11,518 in loans from related parties (unsecured, non-interest bearing) and $25,406 in accrued expenses. Cash on hand is $187. The filing states the Company has no lines of credit or bank financing arrangements.
Material Changes vs. Prior Period
- Expenses: Total expenses increased from $10,656 in the prior year period to $26,794. This increase was driven primarily by higher consulting and other expenses ($21,781 vs. $10,656), which included audit, accounting, and legal fees associated with public reporting.
- Capital Structure: The Company executed a significant equity restructuring. On September 21, 2015, 300,000,000 common shares were cancelled in exchange for the issuance of 1,000,000 shares of Series A Convertible Preferred Stock. This followed a 40-for-1 forward stock split approved in June 2015.
- Related Party Loans: Related party loans increased from $1,800 as of June 30, 2015, to $11,518 as of September 30, 2015, funded by Mr. Patrick Gosselin and two other related parties to cover working capital.
Outlook, Risks, and Management Commentary
- Going Concern: Management explicitly states that substantial doubt exists regarding the Company's ability to continue as a going concern. Operations are dependent on continued financial support from shareholders and the ability to obtain equity financing.
- Business Strategy: On August 6, 2015, the Company entered a Trademark License Agreement with Pure Snax Company, Inc. (PSC) to acquire exclusive worldwide rights to various trademarks for 10 years. The Company plans to pay a 10% royalty on net sales or issue common stock at a 20% discount. Sales are expected to begin in the first quarter of 2016.
- Capital Needs: Management estimates a need for an additional $50,000 to $100,000 to purchase raw materials, packaging, and for introductory marketing. Without this funding, the Company cannot proceed with commercial production.
- Risks: Risks include the inability to raise capital, dilution of existing shareholders through future equity issuances, and the uncertainty of product sales and distribution. The Company currently has no full-time employees; the sole officer works part-time.
- Subsequent Events: On November 1, 2015, the Company entered a three-month investor relations agreement with LiveCall IR for a fee of $7,500.
Investor Verification Checklist
- Going Concern Status: Verify the Company's ability to secure the estimated $50,000–$100,000 required for commercial production given current cash of only $187.
- Related Party Transactions: Review the terms of the $11,518 in related party loans and the 10% royalty agreement with Pure Snax Company, Inc., where the CEO holds a minority interest.
- Equity Dilution: Confirm the impact of the 300 million share cancellation and the issuance of 1 million preferred shares (convertible at 120:1) on shareholder ownership.
- Revenue Timeline: Validate the management projection that sales will commence in Q1 2016, noting the Company has generated zero revenue to date.
- Accrued Liabilities: Investigate the composition of the $25,406 in accrued expenses, which includes legal fees and professional services.