As of September 30, 2016, convertible notes payables had a balance of $36,149 and only one convertible note, Note 2 was converted into common shares of the Companys stock
The company adopted the provision of FASB ASC Topic, Derivatives and Hedging (ASC 815) (previously EITF 07-5, Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entitys Own Stock), as the convertible note agreement contained certain provision that the convertible note failed to pass the fixed for fixed criteria of the ASC 815, the conversion feature of the convertible debt should have to be bifurcated and recorded separately until the conversion date.
Based on ASC 815, the Company determined that the convertible debt contained embedded derivatives and full ratchet provision which the Company valued the embedded derivative using the Black-Scholes method. The following table represent fair value of embedded derivative movement from the date of issuance to September 30, 2016.
On February 5, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $30,000. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $3,500.
The principal is convertible into shares of the Companys common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to fifty percent (50%) of the lowest (20)-day volume weighted average closing bid price for the Companys common stock, as reported in the Stock Market, for the twenty (20- trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price, provided, however, that in no event shall the conversion price per share be less than $.00001. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $45,072, which is recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the one year term.
On February 24, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $32,500. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $7,500.
In connection to the issuance of the Promissory Note, the Company also issued 85,662 common stock purchase warrants, with a term of three years, at an exercise price of $0.271 per share.
The principal is convertible into shares of the Companys common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to fifty cents ($0.50) and the holder of the note may convert any or all of the principal outstanding into shares of the Companys common stock. However, in the event that Market Capitalization Falls below $15,000,000 at any time, then in such event (a) the Lender Conversion Price for all lender conversion occurring after the first date of such occurrence shall equal the lower of the lender conversion price and the market price as of any applicable date of Conversion, and (b) the true-up provision shall apply to all lender conversions that occur after the first date the market capitalization falls below $15,000,000. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $16,773, which is recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the one year term.
On June 7, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $27,500. The note (i) is unsecured, (ii) bears interest at rate of eight (8) percent per annum, and (iii) was issued with an original issue discount of $2,500. The holder of the note may convert any or all of the principal outstanding into shares of the Companys common stock at $.50 per shares.
In connection with the issuance of the Promissory Note, the Company also issued 31,852 common stock purchase warrants, with a term of three years, at an exercise price of $0.69 per share.
The Company determined an initial derivative liability of $17,166, which is recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the one year term.
On March 1, 2016, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $30,556. The note (i) is unsecured, (ii) bears interest at rate of ten (10) percent per annum, and (iii) was issued with an original issue discount of $3,056.
The principal is convertible into shares of the Companys common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to sixty percent (60%) of the lowest (20)-day volume weighted average closing bid price for the Companys common stock, as reported in the Stock Market, for the twenty (20)-trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price, provided. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature.
Due to the "reset" and "dilutive issuance" clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 7.
The Company determined an initial derivative liability of $28,885, which is recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the one year term.
The Convertible note discussed in Note 6 had a reset provision and a dilutive issuance clause that gave rise to a derivative liability. The reset provided for the conversion price to be adjusted downward in the event that the Company issued any securities at a price per shares than the then-current conversion price; provided, however, the holder(s) of the note may convert any or all of the principal outstanding into shares of the Companys common stock at a price equal to 50% and 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 and at $0.5 per shares.
The fair value of the derivative liability was recorded and shown separately under current liabilities. Changes in the fair value derivative liability were recorded in the consolidated statement of operations under other income (expenses).
The company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-base derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instrument at inception and on subsequent valuation dates. The classification of derivative instrument, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The convertible notes were not repaid during the three months ended September 30, 2016
The following table represents the Companys derivative liability activity for the embedded conversion features for the three months ended September 30, 2016 and for the year ended June 2016:
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.
Deferred income taxes arise from the temporary between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should significant change in ownership occur.
For the three months ended September 30, 2016 and 2015 the Company had net operating loss of approximately $41,389 and $26,794 respectively, that may be offset against future taxable income, if any, rateable through 2035. These carry-forwards are subject to review by the Internal Revenue Service.
The deferred tax assets of at each date of $14,486, and $9,378 created by the net operating losses has been offset by a 100% valuation allowance because the likelihood of realization of the tax benefit cannot be determined.
There is no current or deferred tax expense for the three months ended September 30, 2016 and 2015.
The company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in general and administrative expenses.
NOTE 7 SUBSEQUENT EVENTS
On October 13, 2016, Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $20,000 (September 9, 2016) of its
convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of
7,242,979 shares of the companys common stock at a conversion price of $0.002640. The principal remaining after conversion was $100,962.
On October 14, 2016, Pinz Capital International, LP, elected to convert $5,000 of its
convertible promissory note in the principal amount of $30,556
into 2,976,190 shares of the companys common stock at a conversion price of $0.001680. The principal remaining after conversion was $8,056.
On October 17, 2016, EMA Financial, LLC, elected to convert $5,370.40 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $109.60 into 5,480,000 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $11,620.10.
On October 25, 2016, EMA Financial, LLC, elected to convert $4,402.30 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $1,886.70 into 6,289,000 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $7,217.80.
On October 25, 2016, Pinz Capital International, LP, elected to convert $9,656 of its
convertible promissory note in the principal amount of $30,556
into 8,046,488 shares of the companys common stock at a conversion price of $0.0012. The principal remaining after conversion was $0.
On November 2, 2016, Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $15,019.14 (September 20, 2016) of its
convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of
7,834,845 shares of the companys common stock at a conversion price of $0.00170. The principal remaining after conversion was $86,846.84.
On December 9, 2016, Typenex Co-Investment, LLC, elected to convert $18,000 of its
convertible promissory note in the principal amount of $115,000
into 16,981,132 shares of the companys common stock at a conversion price of $0.00106. The principal remaining after conversion was $70,894.42.
On November 14, 2016, EMA Financial, LLC, elected to convert $5,201.70 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $2,229.30 into 7,431,000 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $2,016.10.
On December 6, 2016, $5,000 of a convertible promissory note in the principal amount of $10,000 was converted into 40,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
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PURESNAX INTERNATIONAL, INC.
Notes to the Condensed Financial Statements
September 30, 2016 (unaudited)
On December 14, 2016 the Company filed an amendment to its certificate of designation whereby its Series A Convertible Preferred Stock was increased to 4,250,000 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.
On December 14, 2016 the Company filed an amendment to its certificate of designation whereby its Authorized Common Stock was increased to 1,000,000,000 shares with a par value of $0.001 per share.
On December 21, 2016, EMA Financial, LLC, elected to convert $5,103.00 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $4,617.00 into 9,720,000 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $4,948.15.
On January 17, 2017, EMA Financial, LLC, elected to convert $4,650.10 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $5,569.90 into 10,220,000 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $2,478.38.
On January 20, 2017, Typenex elected to convert $10,601.53 of its
convertible promissory note in the principal amount of $115,000
into 12,620,869 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $60,985.4.
On
February
1, 2017, Typenex elected to fund Tranche #3 of $25,000 of the convertible promissory note in the principal amount of $115,000.
On
February
2, 2017, $5,000 of a convertible promissory note in the principal amount of $10,000 was converted into 40,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
On February 2, 2017 Typenex Co-Investment, LLC, elected to submit a True Up notice from a previous conversion of $18,0000 on (December 9, 2016) of its
convertible promissory note in the principal amount of $115,000. The True Up notice called for an additional conversion of
4,447,439 shares of the companys common stock at a conversion price of $0.00084.
On February 2, 2017, EMA Financial, LLC, elected to convert $3,498.10 of its
convertible promissory note in the principal amount of $30,000
, plus an additional principal on account of conversion of $3,640.88 into 7,138,979 shares of the companys common stock at a conversion price of $0.001. The principal remaining after conversion was $0.
On February 16, 2017, $6,250 of a convertible promissory note in the principal amount of $8,020 was converted into 25,000,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to July 31, 2016.
On January 20, 2017, Typenex elected to convert $19,642.89 of its
convertible promissory note in the principal amount of $115,000
into 23,311,777 shares of the companys common stock at a conversion price of $0.001.
On January 20, 2017, Typenex elected to convert $5,255 of its
convertible promissory note in the principal amount of $115,000
into 21,000,000 shares of the companys common stock at a conversion price of $0.001.
On March 22, 2017, $1,770 of a convertible promissory note in the principal amount of $5,000 was converted into 7,080,000 shares of the company at a conversion rate of $0.00025. The note was issued to Stacey Y. Jenkins, Esq. in consideration for outstanding fees for services rendered to the company prior to March 21, 2016.
On March 8, 2017, the Company has exited their License Agreement with the Canadian Licensor and will no longer represent that brand.
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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.
Managements 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.
As of September 30, 2016, we had limited assets, which consisted of cash and cash equivalents of $4,960, and inventory of $12,187. 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.
Intellectual Property
The trademark Wow its 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. The Company has exited their License Agreement with the Canadian Licensor and will no longer represent that brand.
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
.
We are currently not aware of any new legislation or regulation that may or may not apply to current and future products within our brand portfolio. However, in a constantly evolving global business environment we will rely on its management teams experience and advice from legal counsel.
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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 September 30, 2016, we did not have any full-time or part-time employees. Our two directors and officers work as part-time consultants and devote 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, and 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.
Our team will rely on industry specialists with varied skills and backgrounds who engage in overlapping roles and responsibilities for different segments of our business. In the next five years, we aim to increase the number of direct in-house employees to five people. Further, we intend to allocate a specific area(s) of our business strategy to a specific employee or employees and will focus on developing that employees skills in that area of responsibility. Such areas of responsibility will include sales, website and social media, design and production, marketing, public relations, administration, finance and product development. The expansion of our team will allow for focused development of all areas of our business.
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.
Litigatio
n
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 managements 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.
Basis of Presentation
These financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in United States dollars. Our companys fiscal year end is June 30.
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Use of Estimates
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. Our company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. Our company bases our 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 our company may differ materially and adversely from our companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
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 snack and food industry. 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 September 30, 2016, Mr. Patrick Gosselin loaned the Company $16,550, Gosselin Consulting Group, Inc. loaned the Company $4,380. The amounts owed are unsecured, non-interest bearing, and have no specified repayment terms. The loan to related parties is $20,930 as of September 30, 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.
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. All of our activity through September 30, 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 1, the Company has changed 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.
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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.
Three month period ended September 30, 2016 compared to the three month period ended September 30, 2015:
The Company generated no revenues for the three month period ended September 30, 2016 and 2015. Cost of goods sold for the three month period ended September 30, 2016 and 2015 was none. Gross margin on sales of product was none for the three months ended September 30, 2016 and 2015.
Consulting and other expense for the three month period ended September 30, 2016 was $14,749 compared to $21,781 for the three month period ended September 30, 2015. For the three month period ended September 30, 2016, this consisted primarily of audit and accounting expenses of $6,500, legal expenses of $5,400, and costs associated with being a publicly reporting company of $2,849, compared to the three month period ended September 30, 2015, which comprised of consulting expenses of $1,500, audit and accounting expenses of $9,200, legal expenses of $7,500 and costs associated with being a publicly reporting company of $3,581.
For the three months ended September 30, 2016, and for the three months ended September 30, 2015 we recognized interest expense of $2,283 and $0, respectively.
For the three months ended September 30, 2016, and for the three months ended September 30, 2015 we experienced a loss from operations after taxes of $41,389 and $26,794, respectively. Net loss per share for the three months ended September 30, 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 three months ended September 30, 2016 was $20,694 compared to net cash used in operating activities of $9,531 for the three months ended September 30, 2015.
Investing Activities
Net cash used in investing activities for the three months ended September 30, 2016 and 2015 was $0.
Financing Activities
Net cash provided by financing activities for the three months ended September 30, 2016 was $1,864 compared to net cash provided by financing activities for the three months ended September 30, 2015 was $9,718.
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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.
On September 30, 2016, we owe $51,770 in connection with legal fees, professional services, website development, general business expenses, product development costs incurred and accrued interest. 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. As of September 30, 2016, we owe a total of $20,930 to related parties and $131,009 to third parties for general business expenses, professional fees and other costs related to being a public company. There are no other significant liabilities recorded at September 30, 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 Companys 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 Companys 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.
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Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate control of financial reporting as defined in Rules 13a-15(f) under the Security Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Based on our assessment, we determined that, as of the end of the period covered by this report; our internal control was adequate.
Changes in Internal Controls
There were no changes in the Companys internal controls over financial reporting that occurred during the quarter ended September 30, 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.
PART II: OTHER INFORMATION
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 September 30, 2016
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 (REMOVED AND RESERVED)
ITEM 5 - OTHER INFORMATION
None
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ITEM 6 EXHIBITS
PureSnax International, Inc. includes by reference the following exhibits:
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#2
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Stock Purchase Agreement between Four Hawks Management Co. and Anna C. Jones, dated April 26, 2013
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*3.1
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Articles of Incorporation
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*3.2
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By-Laws
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*10.1
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Agreement between B-Maven, Inc., and its former counsel
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*10.2
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Agreement regarding Conflict of Interest
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**10.3
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Termination Agreement between B-Maven, Inc., and Gary B. Wolff, P.C.
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101
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INS XBRL Instance Document
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101
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SCH XBRL Taxonomy Extension Schema
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101
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CAL XBRL Taxonomy Extension Calculation Linkbase
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101
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DEF XBRL Taxonomy Extension Definition Linkbase
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101
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LAB XBRL Taxonomy Extension Labels Linkbase
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101
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PRE XBRL Taxonomy Extension Presentation Linkbase
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# 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
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: June 7, 2017
PURESNAX INTERNATIONAL, INC.
(the registrant)
By:
/s/ Patrick Gosselin
By: Patrick Gosselin,
President, CEO,
Principal Executive Officer,
Treasurer, Chairman.
Dated: June 7, 2017
PURESNAX INTERNATIONAL, INC.
(the registrant)
By:
/s/ Mark Engler
By: Mark Engler,
CFO, Principal Financial Officer
and Principal Accounting Officer
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