NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 1 – BASIS OF PRESENTATION
The following interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-K as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the period ended December 31, 2012. In the opinion of management, the interim unaudited financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
The statements of operations and cash flows reflect the results of operations and the changes in cash flows of the Company for the three and six month periods ended June 30, 2013. Operating results for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. As of June 30, 2013 and December 31, 2012, the Company had a working capital deficit and has incurred significant losses since inception. Further losses are anticipated raising substantial doubt as to the Company’s ability to continue as a going concern. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company plans to acquire sufficient capital from its investors with which to pursue its business plan. There can be no assurance that the future operations will be significant and profitable, or that the Company will have sufficient resources to meet its objectives. There is no assurance that the Company will be successful in raising additional funds.
NOTE 3 – ORGANIZATION AND NATURE OF BUSINESS
Greenfield Farms Food, Inc. (the "Company") was incorporated under the laws of the State of Nevada on June 2, 2008.
The Company is a consumer and wholesale driven producer of grassfed beef.
The company has USDA-FSIS approval to market and label its product as “Grassfed Beef”. The company has distributed product on a very limited basis to Lowes Foods Stores with outlets in North and South Carolina. We are a newly created company with very limited resources and as a result, our deliveries of grassfed beef in 2012 were also very limited. We are hopeful that
our change in business plan through
a new licensing program announced in the first quarter of 2013 will allow us to expand our business and enhance our market and brand presence. With this program, the Company will phase away from our traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such operations by expanding our brand presence with capable cattle producers and marketers. The Company also believes that the trademark licensing concept will allow for more rapid market penetration with minimal risk and the ability to more easily ascertain assumed returns.
In the first quarter of 2013
we signed our first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it will become non-exclusive. The management of Hill Meadow Foods is headed by former Greenfield Chief Executive Officer, Mr. Larry Moore. We believe this time will allow us to properly develop the parameters of the licensing program as well as explore other business opportunities, including our potential acquisition of Carmelo's Pizzerias announced in the first quarter of 2013.
The Company authorized 100,000 Series A preferred shares and issued 96,623 Series A shares. The Series A shares have immediate voting rights equivalent to 7,000 shares of common stock for each Series A share and may be converted after a minimum one-year hold. This give effective control of the Company to the holders of the Series A preferred shares. The terms called for no conversion or Series A shares coming into the market from these sources until March 28, 2012 at the earliest. As of June 30, 2013 no conversion has taken place.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Actual results could differ from those estimates.
Foreign Currency Translation
The Company's functional currency and reporting currency is the United States dollar.
Financial Instruments
The carrying value of the Company's financial instruments approximates their fair value because of the short maturity of these instruments.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 year end.
Income Taxes
The Company has elected to be taxed as a “C” corporation. Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of June 30, 2013.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $597 during the six month period ended June 30, 2013.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718). To date, the Company has not adopted a stock option plan and has not granted any stock options. As of June 30, 2013, the Company has not issued any stock-based payments to its employees.
Accounting Pronouncements
No accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
NOTE 5 – NOTE PAYABLE
On July 26, 2011, the Company issued a promissory note for $50,000. The note is secured by the Company’s common stock, bears 8% interest, and was due on January 26, 2012. The note is currently in default. Total interest expense on this note was $1,982 for the six months ended June 30, 2013.
NOTE 6 – NOTES PAYABLE – RELATED PARTIES
During the year ended December 31, 2011, several board members and shareholders loaned the company money to help fund operations. The loans outstanding total $31,000 are all secured by the Company’s common stock, bear 8% interest and were due during the year ended December 31, 2011.
In 2012, the Company issued a promissory note for $50,000 to a former officer. The Note is secured by the Company’s stock and bears 8% interest. All other debts have been settled with the former owner. The principal on this note was paid during the quarter ended June 30, 2013.
In September 2012, an officer and shareholder loaned $100 to the Company. The loan is unsecured, bears 8% interest and is due on demand.
Total interest expense on the related party loans was $2,376 for the six months ended June 30, 2013.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
In September and November 2011, the Company borrowed $50,000 and $32,500 respectively, from Asher Enterprises, Inc. The convertible promissory notes accrue interest at the rate of 8% per annum. They were due on September 7, 2012 and November 16, 2012, respectively. These notes were convertible by the holder after 180 days at 45% of the average of the lowest three closing bid prices in the ten trading day period before the conversion.
During the three month period ended March 31, 2013 Asher Enterprises issued notices of conversion to convert the principal balance remaining of $31,200 along with $2,000 in interest payable on the September 2011 note for 47,269,842 shares at a price of $0.0007 per share. The remaining balance of the note after the conversions was $-0-. A $58,354 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
During the six month period ended June 30, 2013 Asher Enterprises issued notices of conversion to convert $32,500 in principal and $2,600 in interest on the November 2011 note for 55,704,075 shares at a price of $0.0006 per share. The remaining balance of the note after the conversions was $-0-. A $58,833 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On February 13, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $27,500 with an interest rate of 8% per annum due on November 13, 2012. The note was convertible by the holder after 180 days at 45% of the average of the lowest three closing bid prices in the ten trading day period before the conversion. The note is currently in default.
During the six month period ended June 30, 2013 Asher Enterprises issued notices of conversion to convert $27,500 in principal and $2,200 in interest on the February 2012 note for 79,798,040 shares at a price of $0.0003 per share. The remaining balance of the note after the conversions was $-0-. A $46,895 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion. This note is currently in default.
During the six month period ended June 30, 2013 Asher Enterprises issued notices of conversion to convert $48,300 in on the June 2012 note for 339,040.404 shares at a price of $0.00013 per share. The remaining balance of the note after the conversions was $35,200. A $174,983 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On August 13, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion.
On January 28, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $53,000 with an interest rate of 8% per annum due on October 30, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. This note was not yet convertible as of June 30, 2013.
On February 12, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $15,500 with an interest rate of 8% per annum due on November 15, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. This note was not yet convertible as of June 30, 2013.
On May 9, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on February 13, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. This note was not yet convertible as of June 30, 2013.
On June 17, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $7,500 with an interest rate of 8% per annum due on March 19, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. This note was not yet convertible as of June 30, 2013.
On August 21, 2012, the Company issued a convertible promissory note in the amount of $1,500. The note is unsecured, due on demand and bears interest at 8% per annum. The note is convertible into shares of common stock at the market price. During the quarter ended March 31, 2013, $935 was repaid on this note and during the six month period ended June 30, 2013 an additional $20,900 was loaned for a total principal balance due of $21,465 at June 30, 2013.
On April 1, 2013, a total of $18,000 in debt payable to a third party was converted to an unsecured demand promissory note with an interest rate of 8% that is convertible to common stock at market. The entire principal balance of this note was outstanding at June 30, 2013.
On February 19, 2013, the Company issued a convertible promissory note to CareBourn Partners in the principal amount of $6,000 with an interest rate of 8% per annum due on December 19, 2013. The note is convertible by the holder at any time at 35% of the average of the three lowest trading prices in the ten trading days before the conversion. On May 3, 2013, the Company issued another convertible promissory note in the principal amount of $15,000 with an interest rate of 8% per annum due on November 3, 2013. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. Both of these notes totaling $21,000 was outstanding at June 30, 2013.
Total interest expense on these notes was $7,833 for the six months ended June 30, 2013.
NOTE 8 – DERIVATIVE LIABILITY
The Company has determined that the conversion features of the Asher and CareBourn Notes represent an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, they are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the notes. Such discount will be accreted from the commencing date of conversion period to the maturity date of the notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet.
The beneficial conversion feature included in notes currently convertible and not in default resulted in initial debt discounts of $41,000 and an initial loss on the valuation of the derivative liabilities of $84,438 based on the initial fair value of the derivative liabilities of $125,438. The fair value of the embedded derivative liabilities were calculated at the conversion commencing dates utilizing the following assumptions:
Note date
|
|
August 13,
2012
|
|
|
February 19,
2013
|
|
|
May 3,
2013
|
|
Note amount
|
|
$
|
20,000
|
|
|
$
|
6,000
|
|
|
$
|
21,000
|
|
Stock price at convertible date
|
|
$
|
0.002
|
|
|
$
|
0.0025
|
|
|
$
|
0.0007
|
|
Expected life (years)
|
|
|
.48
|
|
|
|
.83
|
|
|
|
.5
|
|
Risk free interest rate
|
|
|
.12
|
%
|
|
|
.15
|
%
|
|
|
.08
|
%
|
Volatility
|
|
|
342.62
|
%
|
|
|
312.35
|
%
|
|
|
272.39
|
%
|
Initial derivative value
|
|
$
|
73,036
|
|
|
$
|
18,188
|
|
|
$
|
34,214
|
|
At June 30, 2013, only one Asher note and the CareBourn notes remained convertible and not in default. All convertible notes in default were no longer valued for the derivative liability and a loss on the conversion of stock will be recorded at the time of any future conversions.
The fair value of the embedded derivative liability was calculated at June 30, 2013 utilizing the following assumptions:
Note date
|
|
August 13,
2012
|
|
|
February 19,
2013
|
|
|
May 3,
2013
|
|
Note amount
|
|
$
|
20,000
|
|
|
$
|
6,000
|
|
|
$
|
21,000
|
|
Stock price at convertible date
|
|
$
|
0.0003
|
|
|
$
|
0.0003
|
|
|
$
|
0.0003
|
|
Expected life (years)
|
|
|
.09
|
|
|
|
.47
|
|
|
|
.35
|
|
Risk free interest rate
|
|
|
.06
|
%
|
|
|
.16
|
%
|
|
|
.08
|
%
|
Volatility
|
|
|
521.66
|
%
|
|
|
255.13
|
%
|
|
|
168.91
|
%
|
Derivative value
|
|
$
|
71,037
|
|
|
$
|
15,598
|
|
|
$
|
21,174
|
|
NOTE 9 – COMMON STOCK
The authorized capital of the Company is 950,000,000 common shares with a par value of $0.001 per share of which the Company has issued 521,812,361 shares as of June 30, 2013. The Company has also authorized 50,000,000 shares of preferred stock par value $0.001 and authorized up to 100,000 shares of a Series A Convertible Preferred Stock of which 96,623 were issued and outstanding at June 30, 2013.
NOTE 10 – SUBSEQUENT EVENTS
During the period from July 1, 2013 to August 1, 2013, an additional $8,250 in principal and interest on the Asher notes has been converted into 82,532,467 shares of our common stock at $0.0001 per share.
On July 15, 2013, the board of directors authorized the creation of the Series B Convertible Preferred Stock, which consists of up to 100,000 shares of preferred stock with par value of $0.001 per share and a stated value of $1.00 per share. A total of 44,000 shares of Series B Preferred Stock was issued on the conversion of debt payable by the Company, including $40,000 to the Company's President, Henry Fong. The Series B Convertible Preferred is convertible to common stock at 100% of the stated value divided by 45% of the lowest trading price of the Company's common stock for the 90 trading days immediately preceding the Conversion Date. The Series B Preferred Stock has voting rights on an as if converted basis on the date of any vote to come before the Company's shareholders.
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to June 30, 2013 to the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements.