Filing Overview
The supplied filing is B-Maven, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2013, the first quarter of its fiscal year ending June 30, 2014. The request identifies the company as Iqstel Inc.; the filing text itself identifies the registrant as B-Maven, Inc. B-Maven was a Nevada development-stage company focused on the E-Scentual skin-care product line and reported as a shell company.
Key Financial Metrics
| Metric | Three months ended September 30, 2013 | Three months ended September 30, 2012 |
|---|---|---|
| Revenue | $3,802 | $0 |
| Cost of goods sold | $421 | $0 |
| Gross profit | $3,381 | $0 |
| Gross margin | 88.9% | Not applicable |
| Total operating expenses | $13,633 | $9,846 |
| Interest expense | $35 | $0 |
| Net loss | $10,287 | $10,646 |
| Basic and diluted loss per share | $0.00, rounded | $0.00, rounded |
| Operating cash flow | $(15,341) | $(5,731) |
- At September 30, 2013, cash and cash equivalents were $2,159, inventory was $181, and total assets were $2,340.
- Total liabilities were $31,829, including $9,329 of accrued expenses, $5,000 of customer advances, and $17,500 of related-party loans.
- Stockholders’ equity was negative $29,489, and accumulated development-stage losses were $16,888.
- Financing activities provided $17,500 during the quarter through loans from the chief executive officer, offsetting operating cash use and producing a $2,159 ending cash balance.
- The related-party loans bear interest at 6% and 4% and were due in September 2014; $35 of interest was accrued during the quarter.
- The company had no bank line of credit or other bank financing arrangement.
Material Changes Versus the Prior Comparable Period
- Revenue increased from zero to $3,802, reflecting limited sales of skin-care products at an average price of approximately $24.99 per 1 ml container.
- Gross profit increased to $3,381, with an 88.9% reported gross margin.
- Consulting and other expense increased to $13,532 from $9,533, primarily because of consulting, audit, accounting, and public-company costs.
- Total operating expenses increased to $13,633 from $9,846, although the net loss improved modestly from $10,646 to $10,287.
- Operating cash outflow increased to $15,341 from $5,731 and was funded primarily by $17,500 of new related-party borrowing.
- Accrued expenses declined from $14,414 at June 30, 2013 to $9,329 at September 30, 2013, while related-party loans increased from zero to $17,500.
- Common shares outstanding increased from 7,500,000 at June 30, 2013 to 10,000,000 at September 30, 2013, although the filing does not clearly explain the timing or consideration for the additional shares in the balance-sheet presentation.
- The product formulas and samples were fully amortized by September 30, 2013.
Outlook, Liquidity, Risks, and Unusual Items
- Management stated that the company requires additional financing to continue operations, develop products commercially, purchase raw materials, complete packaging and labeling, and fund marketing. Estimated commercial development costs could exceed $100,000, with an additional $50,000 to $100,000 needed for production inputs and introductory marketing.
- Management planned to seek equity, preferred-stock, debt, related-party, unrelated-party, or strategic-partner financing, but reported no committed financing source.
- The filing contains a going-concern disclosure. Management reported limited revenue, negative working capital of $29,489, no committed capital source, and insufficient cash to support daily operations without additional financing or profitable operations.
- Management stated that existing resources and financing were sufficient for approximately three to six months and that operating expenses were approximately $3,000 to $4,000 per month.
- The company had one employee, occupied space provided by its chief executive officer at no charge, and had no written lease or employment agreement with the chief executive officer.
- The company reported no pending or threatened litigation, no off-balance-sheet arrangements, and no unregistered equity sales during the quarter.
- The company remained highly dependent on product acceptance, third-party manufacturing, marketing and distribution relationships, and access to additional capital.
- The filing states that the company had no patents or trademarks, exposing its formulas and brand to intellectual-property risks.
- A May 14, 2013 change in control resulted in certain liabilities being forgiven or paid on behalf of the company by the former founder and former chief executive officer. The cumulative statements also report a historical $55,638 gain on debt relief.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2013 and reported no material changes in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Reconcile the filing’s registrant name, B-Maven, Inc., with the requested company name, Iqstel Inc., and verify whether this is the intended filing.
- Confirm the exact share issuance history supporting the reported increase from 7.5 million to 10 million common shares.
- Verify the terms, balances, and maturity dates of the chief executive officer’s related-party loans, including the filing’s statement that $21,000 had been received as of October 28, 2013 versus $17,500 reported on the September 30 balance sheet.
- Assess whether the company obtained financing after the filing date and whether its cash runway was sufficient to avoid a cessation or material reduction of operations.
- Validate the limited product revenue, reported gross margin, customer advance, product acceptance claims, and the absence of established manufacturing and distribution contracts.
- Review the going-concern language, negative working capital, accrued expenses, and potential dilution from future equity financing.