iQSTEL Inc - Quarter Report: 2016 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X .
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 2016
OR
.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________ to __________
Commission file number 333-176376
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PURESNAX INTERNATIONAL, INC. |
(Exact name of registrant as specified in its charter) |
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NEVADA |
| 45-2808620 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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1000 WOODBRIDGE CENTER DRIVE, SUITE #213, WOODBRIDGE, NJ 07095 |
(Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: (732) 566-8264
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N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | .. | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X . |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes . No X .
The number of shares of the registrant’s common stock outstanding as of May 16, 2016 was 100,000,000 shares.
PURESNAX INTERNATIONAL, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
2
PART I. FINANCIAL INFORMATION
Item 1.
Interim Financial Statements (unaudited)
PURESNAX INTERNATIONAL, INC.
Condensed Balance Sheets
(Expressed in US Dollars)
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| March 31, |
| June 30, |
ASSETS |
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CURRENT ASSETS: |
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Cash or cash equivalents | $ | 441 | $ | - |
Inventory |
| 7,924 |
| - |
Total Current Assets |
| 8,365 |
| - |
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TOTAL ASSETS | $ | 8,365 | $ | - |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES: |
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Accounts payable and accrued expenses | $ | 47,387 | $ | 8,143 |
Loans – related party |
| 15,723 |
| 1,800 |
Convertible notes payable, net |
| 9,901 |
| - |
Derivative liability |
| 100,950 |
| - |
TOTAL LIABILITIES |
| 173,961 |
| 9,943.00 |
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STOCKHOLDERS’ DEFICIT: |
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Preferred stock, $0.001 par value; 1,000,000 shares authorized; 1,000,000 shares and none issued and outstanding at March 31, 2016 and June 30, 2015, respectively |
| 1,000 |
| - |
Common stock, $0.001 par value; 500,000,000 shares authorized; 100,000,000 and 400,000,000 shares issued and outstanding at March 31, 2016 and June 30, 2015, respectively |
| 100,000 |
| 400,000 |
Additional paid in capital |
| (30,076) |
| (345,313) |
Accumulated deficit |
| (236,520) |
| (64,630) |
TOTAL STOCKHOLDERS’ DEFICIT |
| (165,596) |
| (9,943) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 8,365 | $ | - |
See notes to the unaudited condensed financial statements.
3
PURESNAX INTERNATIONAL, INC.
Condensed Statements of Operations (unaudited)
(Expressed in US Dollars)
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| For the nine |
| For the nine |
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Revenue | $ | - | $ | - |
Cost of goods sold |
| - |
| - |
Gross margin |
| - |
| - |
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Expenses: |
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Consulting and other expenses |
| 115,352 |
| 22,295 |
Website and hosting |
| 5,079 |
| - |
Auto and truck expenses |
| 13 |
| - |
Total expenses |
| 120,444 |
| 22,295 |
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Other Income/(Expense): |
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Interest expense |
| (7,997) |
| 894 |
Derivative expense |
| (44,514) |
| - |
Change in derivative liability |
| 1,065 |
| - |
Total other income/(expense) |
| (51,446) |
| 894 |
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Net loss before income tax |
| (171,890) |
| (23,189) |
Provision for income tax |
| - |
| 800 |
Net loss | $ | (171,890) | $ | (23,989) |
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Basic and diluted income/(loss) per share | $ | (0.00) | $ | (0.00) |
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Weighted average common shares outstanding - basic and diluted |
| 190,545,455 |
| 400,000,000 |
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| For the three months ended March 31, 2016 |
| For the three months ended March 31, 2015 |
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Revenue | $ | - | $ | - |
Cost of goods sold |
| - |
| - |
Gross margin |
| - |
| - |
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Expenses: |
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Consulting and other expenses |
| 72,614 |
| 6,039 |
Total expenses |
| 72,614 |
| 6,039 |
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Other Income/(Expense): |
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Interest expense |
| 7,997 |
| 298 |
Derivative expense |
| 44,514 |
| - |
Change in derivative liability |
| (1,065) |
| - |
Total other income/(expense) |
| 51,446 |
| 298 |
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Loss before income tax |
| (124,060) |
| (6,337) |
Provision for income tax |
| - |
| - |
Net loss | $ | (124,060) | $ | (6,337) |
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Basic and diluted income/(loss) per share | $ | (0.00) | $ | (0.00) |
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Weighted average common shares outstanding - basic and diluted |
| 100,000,000 |
| 400,000,000 |
See notes to the unaudited condensed financial statements.
4
PURESNAX INTERNATIONAL, INC.
Condensed Statements of Cash Flows (unaudited)
(Expressed in US Dollars)
See notes to the unaudited condensed financial statements.
5
PURESNAX INTERNATIONAL, INC.
Notes to the Condensed Financial Statements
March 31, 2016 (unaudited)
NOTE 1 – NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
PureSnax International, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011. PureSnax International is a wellness brand focused on bringing healthy snacks and foods to consumers. PureSnax offers a wide assortment of sugar free, peanut free, kosher, low fat, gelatin free, low sodium, and Non-GMO Certified products. What’s more, these products are not junk snacks or simply foods, but are functional foods and snacks, meaning they deliver health benefits supported by substantiated claims. Public awareness of these products has been created Across North America through various sponsorship programs such as the Canadian Diabetes Association (CDA), Juvenile Diabetes Research Foundation (JDRF), and the Celiac Society (Gluten Free). PureSnax product categories include popcorn, candy coated popcorn, marshmallow squares (made without gelatin), hemp and hemp related products and protein bars, mints, gum and various condiments, as well as its core product offering, Wow it’s not Sugar!, made from 100% Xylitol, a safe all-natural sweetener. PureSnax products are available online and through select locations and are rolling out through strategic distributor networks across North America. The Company has limited revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. Upon execution of the License Agreement as described in Note 5, the Company plans to change its business direction to focus on the manufacturing, distribution, sales and marketing of the Pure Snax Company, Inc., brand.
These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. For the period from inception on June 24, 2011 through March 31, 2016, the Company has incurred accumulated losses totalling $201,630. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements and Basis of Presentation
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited condensed interim financial statements should be read in conjunction with the financial statements of the Company for the year ended June 30, 2015 and notes thereto contained in our 10-K Annual Report filed on October 14, 2015.
a. Basis of Presentation - The Company’s financial statements are prepared using the accrual method of accounting. The Company elected a June 30, year-end.
b. Use of Estimates and Assumptions - The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to income taxes. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c. Cash Equivalents - For purposes of the balance sheet and statement of cash flows, the Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had no cash equivalents as of March 31, 2016 and June 30, 2015.
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. Financial Instruments - The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities and related party payables. The fair value of the Company’s cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The carrying value of accounts payable and accrued liabilities, and related party payables approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
e. Earnings (Loss) per Share - Basic earnings (loss) per share is calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. As March 31, 2016, the Company has preferred shares outstanding convertible into 120:1 common stock shares.
f. Foreign Currency Translation - The Company’s initial operations will be in the United States however global expansion is anticipated which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated into their U.S. dollar equivalents at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations.
g. Income Taxes - The Company accounts for income taxes using the asset and liability method which provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
h. Recently Issued Accounting Pronouncements - Jumpstart Our Business Startups Act (“JOBS Act”) Transition Accounting: pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company”. This election will permit us to delay the adoption of new or revised accounting standards that will have difference effective dates for public and private companies until such time as those standards apply to private companies. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.
In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 20540), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity's liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity's liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 20530, Presentation of Financial Statements— Liquidation Basis of Accounting. Even when an entity's liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met the conditions which would subject these financial statements for additional disclosure. Management has considered all recent accounting pronouncements issued since the last audit of its financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements and has adopted as of March 31, 2016.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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NOTE 3 – RELATED PARTY TRANSACTIONS
At March 31, 2016, Mr. Patrick Gosselin loaned the Company $11,105, Gosselin Consulting Group, Inc. loaned the Company $4,380 and Kenneth Yonika loaned the Company a total of $238 in order to fund working capital expenses. The amounts owed are unsecured, non-interest bearing, and have no specified repayment terms. The loan to related parties is $15,723 as of March 31, 2016.
On August 6, 2015, the Company entered into a Trademark License Agreement (the “License Agreement”) with PureSnax Company, Inc. (the “Licensor,” or “PSC”), a Canadian incorporated company. The Company’s sole officer and director, Patrick Gosselin, is a shareholder and director of PSC (the “PSC Shareholder”) and holds a 10% equity interest (minority interest). Pursuant to the License Agreement, the Company acquired the exclusive worldwide rights, for a period of 10 years, to various trademarks (as more completely discussed below), which the Company intends to utilize for the manufacture, distribution, sales and marketing of various products within the health foods and snacks industry. As consideration for the exclusive license granted under the License Agreement, the Company shall pay a royalty fee to PSC of ten percent (10%) of all net sales of licensed products. Payment can also be issued in the form of common stock shares with a 20% discount.
The trademark “Wow it’s not sugar!” has been approved in Canada and submitted in the United States. Final approval in the United States is pending issuance of the trademark in Canada as of March 31, 2016.
NOTE 4 – STOCKHOLDERS’ EQUITY
The Company’s authorized capital consists of 500,000,000 shares of common stock with a par value of $0.001 per share and 1,000,000 shares of preferred stock with a par value of $0.001 per share.
On June 1, 2015, the board of directors approved a forward split of the issued and outstanding common shares on the basis of 40 new common shares for each 1 existing common share. Upon effectiveness of the forward split, the issued and outstanding shares of common stock increased from 10,000,000 to 400,000,000. All share and per share amounts have been retroactively adjusted to reflect the forward stock split. On June 11, 2015, the Company’s Articles of Incorporation were amended reflect these changes.
On September 21, 2015, Patrick Gosselin executed an agreement whereby an aggregate of 300,000,000 common stock shares beneficially owned by would be cancelled in exchange for the issuance of 1,000,000 shares of Series A Convertible Preferred stock.
On September 29, 2015 the Company filed an amendment to its certificate of designation whereby its Series A Convertible Preferred Stock was increased to 1,000,000 shares with a par value of $0.001 per share, Senior liquidation preference to all junior shares, Convertible into common shares at a ratio of one Series A Preferred to 120 common shares, Right to vote for each share of common stock into which a convertible share could be converted, No redemption rights, Certain protective provisions, and No pre-emptive rights.
NOTE 5 – INVESTOR RELATIONS
On February 24, 2016, the Company and LiveCall agreed to reset the start date of the agreement to March 1, 2016. As a result, the Company entered into a three month agreement with LiveCall IR, a corporation which has demonstrated capabilities in providing investor relations services to publicly traded companies. The Company is to pay LiveCall IR a fee of $7,500 for the three month period from March 1 to May 31, 2016. The agreement shall automatically extend for a period of one month at a fixed rate of $2,500 per month and each successive one month period thereafter unless terminated by either party upon thirty days written notice to the other party.
NOTE 6 – CONVERTIBLE NOTES PAYABLE
As of March 31, 2016, convertible notes payable consisted of the following:
On February 5, 2016, the Company issued to EMA Financial, LLC, a convertible promissory note in the principal amount of $30,000, in connection with a Securities Purchase Agreement entered into by the parties on February 5, 2016. The note accrues interest at a rate of 10% per annum, with a maturity date of February 6, 2017. The holder of the note may convert any or all of the principal outstanding into shares of the Company’s common stock at a price equal to 50% of the lowest trading price of the common stock during the 20 trading days prior to issuing a notice of conversion to the Company. The note carries an OID of $ 3,500.
8
On February 24, 2016, the Company issued to Typenex Co-Investment, LLC, a convertible promissory note in the principal amount of $32,500, in connection with a Securities Purchase Agreement entered into by the parties on February 24, 2016. The note accrues interest at a rate of 10% per annum, with a maturity date of March 23, 2017. The holder of the note may convert any or all of the principal outstanding into shares of the Company’s common stock at $.50 per share. The note carries an OID of $7,500. In connection with the issuance of the Promissory Note, the Company also issued 59,963 common stock purchase warrants, with a term of three years, at an exercise price of $.27 per share.
On March 1, 2016, the Company issued to Pinz Capital International, LP, a convertible promissory note in the principal amount of $30,556, in connection with a Securities Purchase Agreement entered into by the parties on March 1, 2016. The note accrues interest at a rate of 10% per annum, with a maturity date of March 1, 2017. The holder of the note may convert any or all of the principal outstanding into shares of the Company’s common stock at a price equal to 60% of the lowest trading price of the common stock during the 20 trading days prior to issuing a notice of conversion to the Company. The note carries an OID of $5,556.
NOTE 7 – SUBSEQUENT EVENTS
In April 2016, the Company executed a subscription agreement with Nick Mastoris for the purchase of 44,118 restricted shares of Common Stock for a purchase price of $15,000.
In April 2016, the Company executed a subscription agreement with Gary Kamen for the purchase of 73,530 restricted shares of Common Stock for a purchase price of $25,000.
In April 2016, the Company executed a subscription agreement with Principe Asset Partners LLC for the purchase of 44,118 restricted shares of Common Stock for a purchase price of $15,000.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward looking statements: Statements about our future expectations are "forward-looking statements" and are not guarantees of future performance. When used herein, the words "may," "will," "should," "anticipate," "believe," "appear," "intend," "plan," "expect," "estimate," "approximate," and similar expressions are intended to identify such forward-looking statements. These statements involve risks and uncertainties inherent in our business, including those set forth under the caption "Risk Factors," in this Report, and are subject to change at any time. Our actual results could differ materially from these forward-looking statements. This Form 10-Q does not have any statutory safe harbor for these forward looking statements. We undertake no obligation to update publicly any forward-looking statements.
Management’s Discussion and Analysis should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
Overview – PureSnax International, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on June 24, 2011, at which time it acquired the business plan and client/customer list from our founder, Ms. Anna C. Jones. As of May 20, 2015, we had one employee Mr. Patrick Gosselin, our President, Chief Executive Officer and Chief Financial Officer of the Company. Mr. Gosselin does not currently have a written employment agreement with the Company. On April 30, 2015 the Company experienced a change in control through the sale of the common stock of our majority shareholder to another party. Along with the change in control, Mr. Cenia resigned from each of his positions with the Company and appointed Mr. Gosselin to these roles.
The Company issued 5,000,000 shares of its common stock to our founder at inception in exchange for organizational expenses incurred upon incorporation. Following our formation, we issued an additional 2,500,000 shares of our common stock to our founder, in exchange for product formulas and sample products.
On August 1, 2012 the Company completed an offering pursuant to an effective registration statement filed on Form S-1. The Company issued 2,500,000 shares of its common stock to 17 investors. The investors paid $0.01 per share for a combined investment of $25,000.
We are an early stage company and have limited financial resources. We will continue to rely upon raising capital by selling additional shares of the Company, upon which our shareholders may be further diluted, or by issuing debt as a source of financing. In addition to our completed offering, the Company received short-term financing from various third parties in the form of loans to cover expenses. Our independent registered public accounting firm has included an explanatory paragraph in their report emphasizing the uncertainty of our ability to remain a going concern. We have a significant amount of work that needs to be completed and capital raised in order to compete within the marketplace. To date, we have had limited sales and cannot predict when our products will be sold or distributed through regular retail outlets, wholesale, and/or through our international distribution partners network.
As of March 31, 2016, we had limited assets which consisted of cash and cash equivalents of $441, and inventory of $7,924. In order to fund the development of our business and working capital needs for the next 12 months, we intend to secure additional funding through the sale of common stock, related and non-related party loans, or funding provided by strategic partners. To further implement our plan of operations, we anticipate the costs to develop our products on a commercial scale could very well be in excess of $100,000. We will need at least an additional $50,000 to $100,000 to purchase raw material for commercial production, professional labeling and packaging, and introductory marketing and advertising programs that will educate as well as connect with our targeted customers who seek healthy snacks and food alternatives. If we are not successful in raising additional financing, we will not be able to further our business plan towards commercial production.
Business - By exploiting the trademarks acquired through the License Agreement (the “Exclusive License”) signed August 6th, 2015, we intend to manufacture, distribute, sell and market various products within the health foods and snacks industry. We expect sales to begin during the 1st quarter of 2016.
10
PureSnax International, Inc., is a wellness brand focused on bringing healthy snacks and foods to consumers. PSI offers a wide assortment of sugar free, peanut free, Kosher, low fat, low sodium and Non GMO certified products. Public awareness of these products has been created through sponsorships of programs such as the Canadian Diabetes Association (CDA) and the Juvenile Diabetes Research Foundation (JDRF). With the tough new nutritional standards being rolled out through schools in the United States, we are poised to capitalize on these regulations by offering good for you, functional foods and snacks that meet these new regulatory standards. PSI currently has product placement in venues such as Toronto’s SickKids hospital, catering to children with strict dietary restrictions, which can be replicated in similar venues throughout North America. These are markets where traditional large snack and food companies have difficulty in quickly penetrating due to scalability restrictions. Thus, this allows PureSnax International to capture and establish lasting market share and grow from a boutique to a large company. Product categories include Popcorn, candied popcorn, marshmallow squares (made without Gelatin), hemp and hemp related products, protein bars, mints, gum and various condiments as well as offering Wow it’s Not Sugar! Xylitol, an all-natural sweetener.
Through the Licensing Agreement we will distribute delicious tasting, very healthy snack foods meeting the highest of standards and compliance for the US consumers with plans to evolve into an international audience. With a socially responsible mandate supported by education and driven by integrity and sincerity, PSI will provide people with healthier snack and food choices by utilizing wholesome, natural, high quality ingredients that promote healthier lifestyles. We have chosen to specialize in the development, sourcing, branding and distribution of high quality, healthy food and snack products. It is our vision to brand PureSnax International as one of the trusted names in the healthy food and snack industry.
With major illnesses such as diabetes, obesity, cancer, and heart disease on the rise, people are looking for ways to minimize the risks in developing these diseases. People are starting to read and understand labels looking for healthier choices. We believe that the demand for healthier products is driving a fundamental change in the food and snack markets. This demand will provide enormous opportunities for PureSnax International to position itself in the healthy food and snack industry.
Our goal is to utilize open public forums, education, integrity and honesty to earn the public’s trust and become that trusted brand that provides healthy food and snack products to the growing percentage of the population wanting to make healthier life choices. In other words, what we put on our labels, we mean. We believe in having a position in the marketplace where the market will be rather than where the market is.
We intend to become pioneers in a dynamic and growing segment of the industry where future demand will be and it means addressing the new public awareness of healthier food and snack products. The snack products developed must not only meet healthy product guidelines but also taste good. This is a very unique niche and one that hasn’t been completely tapped into for its greatest potential. PPM150 Nutritional Guidelines that came into effect in Ontario, Canada, was one of the first nutritional standards to be implemented for vending and school products. Similar guidelines in many other provinces and states across Canada and the United States have since been implemented. They call for vending and school products that are low in fat (80% with 3 grams of fat and under or 20% with 5 grams of fat and under) as well as low in sodium and sugar, which is not the primary ingredient. Candy, Chocolate, Soda, junk food such as potato chips and confectionary have been banned. Our recipe for Marshmallow Squares are sugar-free, Gluten-free, contains very little salt, Gelatin Free, kosher, nut free and taste great! To the fact that education is needed, many consumers are not aware that Gelatin is derived from animal bones and parts yet have been eating Gelatin through Jell-o and Marshmallows for years. Knowing that there are healthy products required for this channel and that the trend will be towards healthier products, we have developed and are constantly continuing to work on other recipes for healthier products that meet all standards.
Intellectual Property - The trademark “Wow it’s not sugar!” has been approved in Canada and submitted in the United States. Final approval in the United States is pending issuance of the trademark in Canada. Additionally, the company intends to file and prosecute additional trademark applications as may be deemed necessary for the expansion of our business. Generally, our trademarks remain valid and enforceable so long as we continue to use the marks in commerce and the required registration renewals are filed. We consider our trademarks to be valuable assets in the marketing of our products and seek to protect them from infringement worldwide.
Government Regulation and Industry Standards – Our business operations are subject to several international and domestic laws including labor and employment laws, laws governing advertising and promotions, privacy laws, safety regulations, import/export restrictions, consumer protection regulations that govern product standards and labeling, and several other regulations. We believe that we are currently in material compliance with all such applicable laws.
We believe that the current products portfolio and any potential products will fall under the U.S. Food and Drug Administration (FDA) regulatory umbrella. The FDA is charged with protecting consumers against impure, unsafe, and fraudulently labeled products. FDA, through its Center for Food Safety and Applied Nutrition (CFSAN), regulates foods other than the meat, poultry, and egg products regulated by FSIS. FDA is also responsible for the safety of drugs, medical devices, biologics, animal feed and drugs, cosmetics, and radiation emitting devices. As applicable, the Licensee shall comply with all regulatory and other agencies, including governmental and private, as applicable, in the marketing, distribution, and/or selling of the Products. Licensor shall provide any approvals, as applicable, to Licensee, that would be beneficial in the efforts of the Licensee.
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We are currently not aware of any new legislation or regulation that may or may not apply to current and future products within the brand portfolio. However, in a constantly evolving global business environment we will rely on its management teams experience and advice from legal counsel.
Our e-commerce website and online content are subject to government regulation of the Internet in many areas, including user privacy, telecommunications, data protection, and commerce. The application of these laws and regulations to our business is often unclear and sometimes may conflict. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, advertising, etc. apply to the Internet. Nonetheless, laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent. Due to the increasing popularity and use of the Internet, it is possible that laws and regulations may be adopted covering issues such as user privacy, content, quality of products and much more. Further, the growth and development of the market for e-commerce may prompt calls for more stringent consumer protection laws, which may impose additional burdens on companies conducting business online. Compliance with these regulations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in penalties being imposed on us or orders that we stop the alleged noncompliant activity. We believe that we are currently in material compliance with all such applicable laws.
Employees – As of March 31, 2016, we did not have any full-time or part-time employees. Our sole director and officer works as a part-time consultant and devotes approximately 20 hours per week to our business. We also retain consultants for the design and construction of our planned website. In the next 12 months, we intend to retain marketing and advertising consultants on a commissioned basis to assist with growing the membership of our planned website. If our financial position permits, as the business needs dictates, we may enlist certain individuals on a full or part-time salaried basis to assist with marketing, advertising, administration and data management for our business. The functions of our website will be primarily automated, and we intend to structure our operations to function with as few full-time employees as possible by outsourcing most job functions. We do not expect our staffing requirements to exceed 24 people within the first three years of operations.
Property - We have maintained executive offices at 1000 Woodbridge Center Drive, Suite 213, Woodbridge, NJ 07095. There are no expenses currently associated with this space. We believe that our office space is adequate for our current needs, but growth potential may require a facility due to anticipated addition of personnel. We do not have any policies regarding investments in real estate, securities or other forms of property. We do not own any real property.
Litigation - We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
Critical Accounting Policies – The discussion and analysis of our financial condition and results of operations is based upon the accompanying financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America and are expressed in United States Dollars. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Material Events and Uncertainties - Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in the cosmeceutical and skin care markets. The continuation of our business is dependent upon obtaining further financing, a successful program of product development, marketing and distribution, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. As of March 31, 2016, Mr. Patrick Gosselin loaned the Company $11,105, Gosselin Consulting Group, Inc. loaned the Company $4,380 and Kenneth Yonika loaned the Company a total of $238 in order to fund working capital expenses. The amounts owed are unsecured, non-interest bearing, and have no specified repayment terms. The loan to related parties is $15,723 as of March 31, 2016.
There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we most likely will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
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Off-Balance Sheet Arrangements – We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Financial Condition and Results of Operations
Operations - We incorporated on June 24, 2011 and acquired our product formulas and samples on June 27, 2011. All of our activity through March 31, 2016 involved business development efforts, planning, acquiring of, and developing product formulas, establishing and adding to our E-Scentual product line, completing our registered offering, as well as establishing initial marketing relationships for our products. Upon execution of the License Agreement as described in Note 5, the Company plans to change its business direction to focus on the manufacturing, distribution, sales and marketing of the Pure Snax Company, Inc., brand.
We have limited reserves and need substantial capital to implement our planned business strategies. Given the currently unsettled state of the capital and credit markets, there is no assurance that we will be able to raise the amount of capital that we need to support our working capital requirements or for further investment in current or future operations. If we are unable to raise the necessary capital at the time we require such funding, we may have to materially change our plans, delay the implementation of our business strategy or curtail or abandon our business plan. Our independent registered public accounting firm included an explanatory paragraph in their report for our annual report filed on Form 10-K emphasizing the uncertainty of our ability to remain a going concern.
Other - As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in “Liquidity” below and/or elsewhere in this report. We believe the perception that many people have of a public company makes it more likely they will accept restricted securities as consideration for indebtedness than they would from a private company. We have not performed any studies on this matter. Our conclusion is based solely on our own observations. However, there can be no assurances that we will be successful in getting anyone to accept restricted securities as payment for service or indebtedness. Additionally, the issuance of shares of common stock (and/or preferred stock) will dilute the percentage of ownership of our current stockholders.
Nine month period ended March 31, 2016 compared to the nine month period ended March 31, 2015:
The Company generated no revenues for the nine month period ended March 31, 2016 and 2015. Cost of goods sold for the nine month period ended March 31, 2016 and 2015 was none. Gross margin on sales of product was none for the nine months ended March 31, 2016 and 2015.
Consulting and other expense for the nine month period ended March 31, 2016 was $115,352 compared to $22,295 for the nine month period ended March 31, 2015. For the nine month period ended March 31, 2016, this consisted primarily of consulting expenses of $1,500, audit and accounting expenses of $39,450, legal expenses of $7,864, costs associated with being a publicly reporting company of $24,976, commission and license fee of $34,005 and other business and office expenses of $7,557, compared to the nine month period ended March 31, 2015 where we incurred $22,295, which comprised of consulting expenses of $7,250, audit and accounting expenses of $10,900, costs associated with being a publicly reporting company of $3,853 and other business and office expenses of $292.
For the nine months ended March 31, 2016, and for the nine months ended March 31, 2015 we recognized interest expense of $7,996 and $894, respectively.
For the nine months ended March 31, 2016, and for the nine months ended March 31, 2015 we experienced a loss from operations after taxes of $171,890 and $23,989, respectively. Net loss per share for the nine months ended March 31, 2016 and 2015 was $(0.00) and $(0.00), respectively.
Three month period ended March 31, 2016 compared to the three month period ended March 31, 2015:
The Company generated no revenues for the three month period ended March 31, 2016 and 2015. Cost of goods sold for the three month period ended March 31, 2016 and 2015 was none. Gross margin on sales of product was none for the three months ended March 31, 2016 and 2015.
Consulting and other expense for the three month period ended March 31, 2016 was $72,614 compared to $6,039 for the three month period ended March 31, 2015. For the three month period ended March 31, 2016, this consisted primarily of audit and accounting expenses of $23,000, legal expenses of $364, costs associated with being a publicly reporting company of $10,398, commission and license fee of $34,004 and other business and office expenses of $4,847, compared to the three month period ended March 31, 2015 where we incurred $6,039, which comprised of audit and accounting expenses of $4,900, costs associated with being a publicly reporting company of $1,014 and other business and office expenses of $125.
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For the three months ended March 31, 2016, and for the three months ended March 31, 2015 we recognized interest expense of $0 and $298, respectively.
For the three months ended March 31, 2016, and for the three months ended March 31, 2015 we experienced a loss from operations after taxes of $124,060 and $6,337, respectively. Net loss per share for the three months ended March 31, 2016 and 2015 was $(0.00) and $(0.00), respectively.
Liquidity and Capital Resources
Since executing the license agreement, most of our resources and work have been devoted to planning, implementing systems and controls, completing our registered offering, as well as initiating marketing and sales relationships.
Cash Flows
Operating Activities
Net cash used in operating activities for the nine months ended March 31, 2016 was $89,982 compared to net cash used in operating activities of $23,550 for the nine months ended March 31, 2015.
Investing Activities
Net cash used in investing activities for the nine months ended March 31, 2016 and 2015 was $0.
Financing Activities
Net cash provided by financing activities for the nine months ended March 31, 2016 was $90,423. Cash provided by financing activities for the nine months ended March 31, 2015 was $23,550.
We have no lines of credit or other bank financing arrangements. Generally, we financed operations to date through the proceeds of our registered offering and with loans from independent unrelated parties. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of raw material for inventory production; (ii) expenses associated with product packaging, labeling and associated marketing, (iii) development expenses associated with an early stage business; (iv) research and development costs associated with new product offerings, and (v) management/consulting costs, as well as general and administrative expenses, including those costs of being a publicly reporting company. We intend to finance these expenses with the further issuance of debt and equity securities. Thereafter, we expect that we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in further dilution to our current stockholders. Further, such financial instruments or securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock and/or as debt in the form of loans.
Raising private capital, we believe, will be sought from business associates of our president, and chief executive officer or directly from him, possibly from existing shareholders, or through private investors referred to us by those same business associates or shareholders. To date, we have not received a financing commitment from any funding source and have not authorized any person or entity to seek funding on our behalf. If a market for our shares ever develops, of which there can be no assurance, we may use restricted shares of our common stock to compensate employees/consultants and independent contractors wherever possible. We cannot predict the likelihood or source of raising capital or funds that may be needed to complete the development of our business plan and its stages as outlined above.
We are a public entity, subject to the reporting requirements of the Exchange Act of 1934, and incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate that these costs will approximate $50,000 per year, higher if our business volume and transactional activity increases. These obligations will reduce our ability and resources to expand our business plan and activities. We hope to be able to use our status as a public company to increase our ability to use other noncash means of settling outstanding obligations (i.e. issuance of restricted shares of our common stock) and compensate independent consultants and contractors who provide professional services to us, although there can be no assurances that we will be successful in any of these efforts. We will also reduce compensation levels paid to management (if we are able to attract or retain outside personnel to perform this function) if there is insufficient cash generated from operations to satisfy these costs.
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As of March 31, 2016, we owe a total of $15,723 to related parties and $47,387 to unrelated parties for general business expenses, professional fees and other costs related to being a public company. We have not entered into any formal agreements, written or oral, with any vendors or other providers for payment of services or expenses except for that disclosed above. There are no other significant liabilities recorded at March 31, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Principal Executive Officer and Principal Financial Officer, Mr. Gosselin, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, the Company’s Principal Executive Officer Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our current Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2016 that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
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ITEM 1 - LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A – RISK FACTORS
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None for the period ending March 31, 2016
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
ITEM 4 – (REMOVED AND RESERVED)
ITEM 5 - OTHER INFORMATION
None
ITEM 6 – EXHIBITS
PureSnax International, Inc. includes by reference the following exhibits:
#2 |
| Stock Purchase Agreement between Four Hawks Management Co. and Anna C. Jones, dated April 26, 2013 |
*3.1 |
| Articles of Incorporation |
*3.2 |
| By-Laws |
*10.1 |
| Agreement between B-Maven, Inc., and its former counsel |
*10.2 |
| Agreement regarding Conflict of Interest |
**10.3 |
| Termination Agreement between B-Maven, Inc., and Gary B. Wolff, P.C. |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101 |
| INS XBRL Instance Document |
101 |
| SCH XBRL Taxonomy Extension Schema |
101 |
| CAL XBRL Taxonomy Extension Calculation Linkbase |
101 |
| DEF XBRL Taxonomy Extension Definition Linkbase |
101 |
| LAB XBRL Taxonomy Extension Labels Linkbase |
101 |
| PRE XBRL Taxonomy Extension Presentation Linkbase |
# Filed on Form 10-K for the year ended June 30, 2013, dated October 3, 2013
* Filed with the SEC on August 18, 2011 as part of our Registration Statement on Form S-1 and incorporated herein by reference
** Filed with the SEC on April 6, 2012 as part of our Registration Statement on Form S-1 Pre-effective Amendment #4 and incorporated herein by reference
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 16, 2016
PURESNAX INTERNATIONAL, INC.
(the registrant)
By: /s/ Patrick Gosselin
By: Patrick Gosselin, President, CEO, Principal Executive Officer, Treasurer, Chairman, Principal Financial Officer and Principal Accounting Officer
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