UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarter ended September 30, 2015

 

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from _______to_______

 

Commission File No. 333-157281

 

GREENFIELD FARMS FOOD, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada

 

26-2909561

(State or other jurisdiction of

 

(IRS Employer

incorporation or organization)

 

Identification No.)

 

319 Clematis Street – Suite 400

West Palm Beach, Florida 33401

(Address of principal executive offices) (Zip code)

 

(561) 514-9042

(Registrant's telephone number including area code)

 

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, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by a check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

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

 

Number of shares of common stock outstanding at November 11, 2015: 548,766,277

 

 


 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

 

 

September 30,
2015

 

December 31,
2014

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$69,246

 

 

 

59,843

 

Credit card receivables

 

 

15,204

 

 

 

3,726

 

Inventory

 

 

29,734

 

 

 

29,734

 

Deferred charges

 

 

4,621

 

 

 

4,063

 

Total Current Assets

 

 

118,805

 

 

 

97,366

 

 

 

 

 

 

 

 

 

 

Property and Equipment

 

 

 

 

 

 

 

 

Equipment, computer hardware and software

 

 

174,865

 

 

 

152,871

 

Accumulated depreciation

 

 

(112,897)

 

 

(94,819)

Property and equipment, net

 

 

61,968

 

 

 

58,052

 

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

 

Security deposits

 

 

4,128

 

 

 

4,128

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$184,901

 

 

$159,546

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$108,684

 

 

$93,883

 

Accrued wages and payroll expenses

 

 

25,941

 

 

 

9,695

 

Accrued interest

 

 

16,741

 

 

 

13,742

 

Accrued interest – related parties

 

 

13,962

 

 

 

12,153

 

Accrued interest – convertible notes payable

 

 

40,061

 

 

 

18,134

 

Derivative liability

 

 

1,003,684

 

 

 

266,162

 

Notes payable

 

 

50,300

 

 

 

50,200

 

Notes payable – related parties

 

 

454,286

 

 

 

321,591

 

Convertible notes payable, net of debt discount

 

 

312,415

 

 

 

221,994

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

2,026,074

 

 

 

1,007,554

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, par value $.001

 

 

 

 

 

 

 

 

50,000,000 shares authorized;

 

 

 

 

 

 

 

 

96,623 series A convertible shares issued and outstanding

 

 

97

 

 

 

97

 

44,000 series B convertible shares issued and outstanding

 

 

44

 

 

 

44

 

1,000 series D shares issue and outstanding

 

 

1

 

 

 

1

 

Common stock, par value $.001

 

 

 

 

 

 

 

 

3,950,000,000 shares authorized;

 

 

 

 

 

 

 

 

318,655,032 and 4,930,736 shares issued and outstanding, respectively

 

 

318,655

 

 

 

4,931

 

Warrants

 

 

507,280

 

 

 

507,280

 

Additional paid-in capital

 

 

766,929

 

 

 

1,007,930

 

Accumulated deficit

 

 

(3,434,179)

 

 

(2,368,291)
 

 

 

 

 

 

 

 

 

Total Stockholders' Deficit

 

 

(1,841,173)

 

 

(848,008)
 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

$184,901

 

 

$159,546

 

 

 The accompanying notes are an intregal part of these consolidated financial statements.

 

 
2
 

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage

 

$426,128

 

 

$418,904

 

 

$1,272,257

 

 

$1,230,366

 

Vending receipts

 

 

2,277

 

 

 

1,580

 

 

 

12,776

 

 

 

3,324

 

Total sales

 

 

428,405

 

 

 

420,484

 

 

 

1,285,033

 

 

 

1,233,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

 

359,278

 

 

 

348,526

 

 

 

1,106,196

 

 

 

1,020,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

69,127

 

 

 

71,958

 

 

 

178,837

 

 

 

212,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone and utilities

 

 

23,018

 

 

 

24,601

 

 

 

72,836

 

 

 

74,087

 

Legal, accounting and professional fees

 

 

15,548

 

 

 

15,247

 

 

 

126,606

 

 

 

105,579

 

Rent

 

 

27,300

 

 

 

11,100

 

 

 

59,900

 

 

 

52,953

 

Advertising

 

 

4,424

 

 

 

6,173

 

 

 

13,597

 

 

 

17,149

 

Repairs and maintenance

 

 

4,193

 

 

 

7,703

 

 

 

17,029

 

 

 

26,417

 

Bank and credit card processing charges

 

 

7,181

 

 

 

7,423

 

 

 

22,428

 

 

 

26,252

 

Wages and taxes

 

 

25,180

 

 

 

23,178

 

 

 

75,821

 

 

 

82,530

 

Depreciation

 

 

6,271

 

 

 

5,262

 

 

 

18,721

 

 

 

16,579

 

Other

 

 

43,194

 

 

 

39,359

 

 

 

99,026

 

 

 

108,838

 

Total Operating Expenses

 

 

156,309

 

 

 

140,046

 

 

 

505,964

 

 

 

510,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss From Operations

 

 

(87,182)

 

 

(68,088)

 

 

(327,127)

 

 

(297,395)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Expenses (Income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

14,671

 

 

 

8,619

 

 

 

39,337

 

 

 

17,866

 

Derivative expense

 

 

11,792

 

 

 

49,542

 

 

 

220,605

 

 

 

242,804

 

Change in derivative liability

 

 

(263,183)

 

 

31,208

 

 

 

349,417

 

 

 

(351,497)

Loss on conversion of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

572,866

 

Amortization expense on discount of debt

 

 

58,058

 

 

 

72,567

 

 

 

129,402

 

 

 

222,157

 

Total Other Expenses (Income)

 

 

(178,662)

 

 

161,936

 

 

 

738,761

 

 

 

704,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Provision for Income Tax

 

 

91,480

 

 

 

(230,024)

 

 

(1,065,888)

 

 

(1,001,591)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$91,480

 

 

$(230,024)

 

$(1,065,888)

 

$(1,001,591)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

118,171,927

 

 

 

1,206,596

 

 

 

124,700,719

 

 

 

2,033,940

 

Net Loss per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$0.00

 

 

$(0.19)

 

$(0.01)

 

$(0.49)
 

 The accompanying notes are an intregal part of these consolidated financial statements.

 

 
3
 

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited)

AS OF SEPTEMBER 30, 2015

 

 
 

 

Preferred stock

 

 

Common stock

 

 

 

 

 

Additional paid-in

 

 

Accumulated

 

 

Total stockholders'

 

 

 

Shares

 

 

Par value

 

 

Shares

 

 

Par value

 

 

Warrants

 

 

capital

 

 

deficit

 

 

deficit

 

Balance at December 31, 2014

 

 

141,623

 

 

 

142

 

 

 

4,930,736

 

 

$4,931

 

 

$507,280

 

 

$1,007,930

 

 

$(2,368,291)

 

$(848,008)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock to convertible noteholders

 

 

-

 

 

 

-

 

 

 

313,723,636

 

 

 

313,723

 

 

 

-

 

 

 

(241,000)

 

 

-

 

 

 

72,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock to round up reverse split

 

 

-

 

 

 

-

 

 

 

660

 

 

 

1

 

 

 

-

 

 

 

(1)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for nine months ended September 30, 2015

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,065,888)

 

 

(1,065,888)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2015

 

 

141,623

 

 

$142

 

 

 

318,655,032

 

 

$318,655

 

 

$507,280

 

 

$766,929

 

 

$(3,434,180)

 

$(1,841,173)
 

 The accompanying notes are an intregal part of these consolidated financial statements.

 

 
4
 

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

 

Nine months ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss for the period

 

$(1,065,889)

 

$(1,001,591)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

18,721

 

 

 

16,579

 

Amortization of deferred financing costs

 

 

9,941

 

 

 

8,882

 

Amortization of discount on debt

 

 

129,402

 

 

 

222,157

 

Change in derivative liability

 

 

349,417

 

 

 

(351,497)

Initial derivative liability expense

 

 

220,605

 

 

 

242,804

 

Loss on conversion of debt

 

 

-

 

 

 

572,866

 

Convertible notes issued for services

 

 

50,000

 

 

 

-

 

Changes in Assets and Liabilities

 

 

 

 

 

 

 

 

Decrease in prepaid expense

 

 

-

 

 

 

1,896

 

Decrease in inventory

 

 

-

 

 

 

14

 

Increase in deferred charges

 

 

(10,500)

 

 

-

 

Decrease (increase) in accounts receivable

 

 

(11,478)

 

 

(1,538)

Increase in security deposits

 

 

-

 

 

 

(275)

Increase (decrease) in accounts payable

 

 

14,802

 

 

 

(6,179)

Increase (decrease) in accrued expenses

 

 

44,622

 

 

 

(7,776)

Net Cash used in Operating Activities

 

 

(250,357)

 

 

(303,658)
 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(22,637)

 

 

(898)

Net Cash Provided by (Used in) Investing Activities

 

 

(22,637)

 

 

(898)
 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable - related parties

 

 

273,900

 

 

 

453,473

 

Proceeds from notes payable

 

 

300

 

 

 

300

 

Proceeds from convertible notes payable

 

 

152,100

 

 

 

200,005

 

Payments of notes payable - related parties

 

 

(141,204)

 

 

(285,685)

Payments of notes payable

 

 

(200)

 

 

-

 

Payments of convertible notes payable

 

 

(2,500)

 

 

-

 

Net Cash Provided by Financing Activities

 

 

282,396

 

 

 

368,093

 

 

 

 

 

 

 

 

 

 

Net Increase in Cash and Cash Equivalents

 

 

9,402

 

 

 

63,537

 

Cash and Cash Equivalents – Beginning

 

 

59,843

 

 

 

5,022

 

Cash and Cash Equivalents End of Period

 

$69,245

 

 

$68,559

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$67

 

 

$1,274

 

Cash paid for income taxes

 

 

-

 

 

$-

 

Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Interest accrued on convertible notes

 

$23,576

 

 

$10,820

 

Debt discount from fair value of embedded derivatives

 

$167,500

 

 

$202,600

 

Common stock issued for convertible notes and accrued interest

 

$72,723

 

 

$801,705

 

 

 The accompanying notes are an intregal part of these consolidated financial statements.

 

 
5
 

 

GREENFIELD FARMS FOOD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

(Unaudited)

 

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, 2014. 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 consolidated financial statements for the three and nine months ended September 30, 2015 include the financial statement of the Company and its operating subsidiary Carmela's Pizzeria.

 

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 nine month periods ended September 30, 2015. Operating results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

 

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 September 30, 2015 and December 31, 2014, 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. ("GRAS" or the "Company") was incorporated under the laws of the State of Nevada on June 2, 2008. In October 2013, the Company entered into an Asset Purchase Agreement with COHP, LLC ("COHP") through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela's Pizzeria ("Carmela's") through a newly formed wholly-owned subsidiary Carmela's Pizzeria CO, Inc. Carmela's Pizzeria presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores.

 

 
6
 

 

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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.

 

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.

 

Fair Value of Financial Instruments

 

The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company's estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

The fair values of cash and cash equivalents, accounts receivable, inventory, deferred charges, accounts payable and accrued expenses, and notes payable approximate their carrying amounts because of the short maturities of these instruments.

 

The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.

 

Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity ("observable inputs") and the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances ("unobservable inputs").

 

Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets ("market approach"). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.

 

The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 
7
 

 

The three hierarchy levels are defined as follows:

 

Level 1 – Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

The Company has determined that its derivative liabilities fall under Level 2. Derivative liabilities were $1,003,684 and $266,162 at September 30, 2015 and December 31, 2014, respectively.

 

Credit risk adjustments are applied to reflect the Company's own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company's own credit risk as observed in the credit default swap market.

 

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 were warrants outstanding convertible into 179,886 shares of common stock at September 30, 2015. Basic and diluted loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.

 

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.

 

 
8
 

 

Advertising Costs

 

The Company's policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $13,597 and $17,149 during the nine month periods ended September 30, 2015 and 2014, respectively.

 

Property and Equipment

 

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the three to five year estimated useful lives of the assets. Depreciation expense totaled $18,721 and $16,579 for the nine month periods ended September 30, 2015 and 2014, respectively.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. During the nine months ended September 30, 2015, the Company did not issue 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 – NOTES PAYABLE

 

The Company has outstanding a promissory note for $50,000 issued in 2011. 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 $2,992 for the nine months ended September 30, 2015. Additional notes in the amount of $300 were outstanding at September 30, 2015 and accrued interest expense of $12 during the nine month period ended September 30, 2015.

 

NOTE 6 – NOTES PAYABLE – RELATED PARTIES

 

Entities controlled by the members have loaned monies to COHP for working capital purposes. The loans are non-interest bearing and have no specific terms of repayment. A related party loan from KB Air is secured by all the assets of the Company. Additional loans have also been made by officers and related parties to the Company for general working capital purposes.

 

The activity for the nine month period ended September 30, 2015 is as follows:

 

 

 

September 30,
2015

 

Beginning balance at December 31, 2014

 

$321,591

 

Advances, net

 

 

132,695

 

Balance, September 30, 2015

 

$454,286

 

 

 
9
 

 

NOTE 7 - CONVERTIBLE NOTES PAYABLE

 

As of December 31, 2013 there was a total of $17,367 due to the Gulfstream 1998 Irrevocable Trust in convertible notes payable that were convertible at 45% of the lowest trading price in the thirty trading days before the conversion creating a derivative liability. During the nine month period ended September 30, 2015, $2,500 of these notes were repaid by the Company. In addition, $13,100 of these notes were sold by the Trust to Codes Capital. As a result of these transactions the balance of these notes was $1,767 as of September 30, 2015

 

On October 29, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $25,000 with an interest rate of 8% per annum due on October 29, 2014 in payment of a $25,000 fee for work performed to complete the acquisition of the assets of Carmela's Pizzeria. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issue date. In the quarter ended December 31, 2014, $12,500 of this note was sold to Beaufort Capital the entire balance of which remains unpaid. In the quarter ended June 30, 2015, $6,250 of this note was sold to MM Visionary Consultants, which converted that entire balance to common stock in the quarter ended September 30, 2015 leaving a balance due to MM Visionary Consultants of $0 as of that date. A $31,388 decrease in derivative liability was recorded as a result of these conversions. During the quarter ended September 30, 2015, the remaining $6,250 of this note was sold to Microcap Equity leaving a remaining balance of $0 as of September 30, 2015 payable to Cresthill Associates. During the quarter ended September 30, 2015, Microcap equity converted $833 of this amount leaving a balance due at that date of $5,417 and a $4,183 decrease in derivative liability was recorded from this conversion.

 

In November 2013, the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $22,500 with an interest rate of 8% per annum due on August 27, 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. In April 2014, this note was sold and assigned to two entities unaffiliated with Asher or the Company including $9,000 sold to CareBourn Capital that remains outstanding as of September 30, 2015.

 

On December 9, 2013, the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $5,000 with an interest rate of 8% per annum due on June 9, 2014. 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. During the quarter ended December 31, 2014, CareBourn sold this note to Booski Consulting, an unaffiliated third party, which converted $2,600 in principal on the note leaving a balance due of $2,400 at December 31, 2014 and September 30, 2015, respectively.

 

In January 2014, the Company issued a total of $10,000 in convertible promissory notes to CareBourn Capital with an interest rate of 8% per annum due in July 2014. These notes are convertible by the holder at any time at 45% of the average of the three lowest trading prices in the ten trading days before the conversion. During the year ended December 31, 2014 the holder converted $5,000 of these notes leaving a balance due of $5,000 at both December 31, 2014 and September 30, 2015, respectively.

 

On February 18, 2014, the Company issued $62,500 in a convertible promissory note to CareBourn Capital with an interest rate of 8% per annum due in August 2014. 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. During the year ended December 31, 2014 the holder converted $4,590 in principal on these notes leaving a balance due of $57,910 at December 31, 2014. An $8,900 decrease in derivative liability was recorded as a result of these conversions. The remaining balance of the note after conversions was $57,910 at December 31, 2014. During the nine month period ended September 30, 2015, a total of $42,967 in principal on these notes was converted to 204,690,420 shares of common stock at a price equaling $.0002 per share. A $194,951 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $14,943 at September 30, 2015.

 

 
10
 

 

On March 3, 2014, the Company issued a convertible promissory note to LG Funding in the principal amount of $35,000 with an interest rate of 8% per annum due on February 25, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. During the year ended December 31, 2014 the holder converted $16,200 in principal leaving a balance due of $18,800 as of December 31, 2014. During the nine month period ended September 30, 2015, a total of $14,725 in principal and $1,643 in interest payable on these notes was converted to 74,453,011 shares of common stock at a price equaling $.0002 per share. A $59,059 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $4,075 at September 30, 2015.

 

On April 7, 2014, the Company issued a convertible promissory note to Adar Bays in the principal amount of $37,000 with an interest rate of 8% per annum due on April 1, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. During the year ended December 31, 2014 the holder converted $12,004 in principal on these notes leaving a balance due of $24,996 as of December 31, 2014. During the nine month period ended September 30, 2015, a total of $4,543 in principal on these notes was converted to 7,772,000 shares of common stock at a price equaling $.0006 per share. A $39,645 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $20,453 at September 30, 2015.

 

On April 17, 2014, the Company issued a convertible promissory note to Beaufort Capital in the principal amount of $25,000 with an interest rate of 10% per annum due on October 17, 2014. The note is convertible by the holder after 180 days at 60% of the lowest closing bid price in the twenty trading days before the conversion. During the year ended December 31, 2014, $10,345 of these notes were converted leaving a balance due of $14,655 as of December 31, 2014 and September 30, 2015, respectively.

 

On July 15, 2014, the Company issued a convertible promissory note to Gregory Galanis in the principal amount of $13,500 with an interest rate of 8% per annum due on April 15, 2015, in exchange for $13,500 in debt owed Mr. Galanis for services rendered to the Company. The note is convertible by the holder after 180 days at 45% of the lowest closing bid price in the ninety trading days before the conversion. The entire balance of this note remained outstanding at December 31, 2014 and September 30, 2015, respectively.

 

On September 1, 2014, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $12,500 with an interest rate of 8% per annum due on July 1, 2015, in exchange for $12,500 in debt owed Cresthill for services rendered to the Company. The note is convertible by the holder after 180 days at 45% of the lowest closing bid price in the thirty trading days before the conversion and the entire amount was outstanding at December 31, 2014. In the quarter ended September 30, 2015, the entire balance of this note was sold to Codes Capital, which converted a total of $1,763 in principal on these notes to 3,561,539 shares of common stock at a price equaling $.0005 per share. A $8,854 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $10,737 at September 30, 2015.

 

On October 9, 2014, the Company issued a convertible promissory note to LG Funding in the principal amount of $26,500 with an interest rate of 8% per annum due on October 9, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at December 31, 2014 and September 30, 2015, respectively.

 

On November 3, 2014, the Company issued a convertible promissory note to Beaufort Capital in the principal amount of $12,500 due on May 3, 2015 with an interest rate of 5% per annum, which accrues only in the event of a default and only from such default date until the note is paid in full. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at December 31, 2014 and September 30, 2015, respectively.

 

On February 9, 2015 the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $73,000 due on December 27, 2015 with an interest rate of 12% per annum. The note is convertible by the holder after 180 days at 40% of the three lowest closing bid prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

 
11
 

 

On April 1, 2015, the Company issued a convertible promissory note to SoFran, LLC in the principal amount of $50,000 due on January 1, 2015 with an interest rate of 12% per annum. This note was issued as part of a consulting contract entered into with SoFran for services to be rendered in connection with the Company's plans to set up a national franchising program. In addition to this note, SoFran was paid $10,000 in April 2015 and is due an additional $5,000. Certain future payments totaling $35,000 may be due to SoFran under the contract upon them reaching certain performance benchmarks. The note is convertible by the holder after 180 days at 40% of the three lowest closing bid prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On April 14, 2015, LG Capital Funding funded a convertible promissory note in the principal amount of $26,500 that was issued on October 9, 2014 and secured at that time by a note payable to the Company with like terms. This note is due on October 9, 2015 with an interest rate of 8% per annum. The note is convertible by the holder at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On May 5, 2015 the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $16,500 due on November 5, 2015 with an interest rate of 8% per annum, in exchange for amounts payable to Cresthill for services rendered. The note is convertible by the holder after 180 days at 45% of the lowest last sales price in the thirty trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On May 27, 2015 the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $10,500 due on February 27, 2016 with an interest rate of 12% per annum. Debt issuance costs of $3,000 were recorded for net proceeds to the Company of $7,500. The note is convertible by the holder after 180 days at 40% of the three lowest closing bid prices in the ninety trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On August 5, 2015 the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $7,500 due on February 5, 2016 with an interest rate of 8% per annum, in exchange for amounts payable to Cresthill for services rendered. The note is convertible by the holder after 180 days at 45% of the lowest last sales price in the thirty trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On July 20, 2015 the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $15,500 due on April 20, 2016 with an interest rate of 12% per annum. Debt issuance costs of $3,000 were recorded for net proceeds to the Company of $12,500. The note is convertible by the holder after 180 days at 40% of the three lowest closing bid prices in the ninety trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2015.

 

On July 31, 2015 the Company issued a convertible promissory note to Gulfstream 1998 Irrevocable Trust in the principal amount of $2,500 due on July 31, 2016 with an interest rate of 8% per annum. 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. The entire balance of this note remained outstanding at September 30, 2015.

 

Total interest expense on these notes was $23,576 for the nine months ended September 30, 2015.

 

 
12
 

 

A summary of convertible notes payable as of September 30, 2015 is as follows:

 

Face Value

 

Balances

12/31/14

 

 

Issuance of new convertible notes

 

 

Amortization of discount on convertible

Notes

 

 

Debenture conversions & payments nine months ended 9/30/15

 

 

Balances

9/30/15

 

Notes outstanding at 12/31/2014

 

$240,128

 

 

 

-

 

 

 

-

 

 

$(73,579)

 

$166,547

 

2015 note issuances

 

 

-

 

 

$202,100

 

 

 

-

 

 

 

-

 

 

 

202,100

 

Note discount

 

$(18,134)

 

 

(167,500)

 

$129,402

 

 

 

-

 

 

 

(56,232)

Total

 

$221,994

 

 

$34,600

 

 

$129,402

 

 

$(16,859)

 

$312,415

 

 

NOTE 8 – DERIVATIVE LIABILITY

 

The Company has determined that the conversion features of certain of its 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 the notes that became convertible during the nine months ended September 30, 2015 resulted in initial note discounts of $167,500 and an initial loss on the valuation of the derivative liabilities of $220,605 based on the initial fair value of the derivative liabilities of $388,105. The fair value of the embedded derivative liabilities for notes not in default were calculated at the conversion commencement dates utilizing the following assumptions:

 

Note convertible date

 

1/1/15

 

 

3/1/15

 

 

3/1/15

 

 

4/14/15

 

 

4/14/15

 

 

8/10/15

 

 

8/25/15

 

Note amount

 

$5,000

 

 

$13,500

 

 

$12,500

 

 

$26,500

 

 

$26,500

 

 

$73,000

 

 

$10,500

 

Stock price at convertible date

 

$.06

 

 

$.03

 

 

$.0046

 

 

$.00065

 

 

$.00065

 

 

$.0003

 

 

$.0002

 

Expected life (years)

 

 

1.0

 

 

 

.25

 

 

 

.25

 

 

 

.52

 

 

 

.52

 

 

 

.38

 

 

 

.51

 

Risk free interest rate

 

 

.13%

 

 

.02%

 

 

.10%

 

 

.11%

 

 

.11%

 

 

.25%

 

 

.20%

Volatility

 

 

201.8%

 

 

211.9%

 

 

375.0%

 

 

382.3%

 

 

382.3%

 

 

236.9%

 

 

387.9%

Initial derivative value

 

$11,639

 

 

$32,526

 

 

$21,608

 

 

$113,520

 

 

$113,520

 

 

$75,285

 

 

 

20,007

 

 

 
13
 

 

At September 30, 2015, the following notes remained convertible and not fully converted. All convertible notes beyond their maturity dates totaling $126,947 in principal payable are valued assuming a six month term for purposes of calculating the derivative liability.The fair value of the embedded derivative liabilities on the outstanding convertible notes was calculated at September 30, 2015 utilizing the following assumptions:

 

Note convertible date

 

1/1/15

 

 

4/14/15

 

 

4/14/15

 

 

8/10/15

 

 

8/25/15

 

 

Matured

 

Note amount

 

$3,000

 

 

$26,500

 

 

$26,500

 

 

$73,000

 

 

$10,500

 

 

$126,947

 

Stock price at convertible date

 

$.0002

 

 

$.0002

 

 

$.0002

 

 

$.0002

 

 

$.0002

 

 

$0.0002

 

Expected life (years)

 

 

.17

 

 

 

.02

 

 

 

.02

 

 

 

.24

 

 

 

.41

 

 

 

.50

 

Risk free interest rate

 

 

.02%

 

 

.01%

 

 

.01%

 

 

.15%

 

 

.11%

 

 

.11%

Volatility

 

 

376.7%

 

 

353.4%

 

 

353.4%

 

 

319.4%

 

 

272.0%

 

 

287.76%

9/30/15 derivative value

 

$11,065

 

 

$79,558

 

 

$79,558

 

 

$308,720

 

 

$45,133

 

 

$479,650

 

 

NOTE 9 – CAPITAL STOCK

 

Common Stock

 

The Company has authorized 3,950,000,000 common shares with a par value of $0.001 per share.

 

Effective February 20, 2015, the Company effected a 1 for 300 reverse split of its common stock whereby the 1,478,720,693 pre-split shares of common stock outstanding became 4,929,120 shares post-split. There was no change in authorized shares of the Company. The number of shares outstanding, share issuance information and per share information for all prior periods presented have been retroactively adjusted to reflect the new capital structure.

 

2015 Common Stock Issuances

 

During the nine months ended September 30, 2015, the Company issued 323,723,636 shares of common stock upon conversion of $72,723 in principal and interest on convertible notes representing a value of $0.00023 per share. In addition, we incurred loss on conversion of certain of the shares totaling $319,310 for a total cost to the Company of $392,033.

 

Preferred Stock

 

The Company has authorized 50,000,000 shares of preferred stock par value $0.001.

 

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 at the same rate. This gives 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 September 30, 2015 no conversion has taken place.

 

 
14
 

 

On July 15, 2013, the board of directors of the Company 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 were issued on the conversion of debt payable by the Company, including $40,000 to the Company's then Chief Financial Officer, 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.

 

Effective September 22, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Series D Preferred Stock to Mr. Ronald Heineman, our Chief Executive Officer, in consideration for services rendered to the Company and continuing to work for the Company without receiving significant payment for services and without the Company having the ability to issue shares of common stock as the Company did not have sufficient authorized but unissued shares of common stock to allow for any such issuances. As a result of the issuance of the Series D Preferred Stock shares, Mr. Heineman obtained voting rights over the Company's outstanding voting stock on September 24, 2014, which provide him the right to vote up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Heineman will exercise majority control in determining the outcome of all corporate transactions or other matters, including the election of Directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Mr. Heineman may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders to remove Mr. Heineman as an officer or Director of the Company due to the Super Majority Voting Rights. In the event Mr. Heineman is no longer acting as Chief Executive Officer of the Corporation, the shares of Series D Preferred Stock shall automatically, without any action on the part of any party, or the Corporation, be deemed cancelled in their entirety.

 

Warrants

 

In connection with the acquisition in 2013 of the assets of Carmela's Pizzeria, COHP, LLC and its assigns received warrants to purchase a total of 179,886 shares of the Company's common stock for a period of five years in the amounts and exercise prices as follows: 59,962 at $3.00; 59,962 at $6.00; and 59,962 at $7.50. These warrants were valued in the year ended December 31, 2013 utilizing the Black-Scholes pricing model for a total fair market value at issuance of $507,280.

 

NOTE 10 - SUBSEQUENT EVENTS

 

During the period from September 30, 2015 to November 11, 2015, the Company has issued 230,111,245 shares of common stock upon the conversion of $9,613 in principal and interest on its convertible notes.

 

In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to September 30, 2015 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 other than those reported above.

 

 
15
 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

Forward Looking Statements

 

We make certain forward-looking statements in this report. Statements that are not historical facts included in this Form 10-Q are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ from projected results. Such statements address activities, events or developments that the Company expects, believes, projects, intends or anticipates will or may occur, including such matters as future capital, debt restructuring, pending legal proceedings, business strategies, expansion and growth of the Company's operations, and cash flow. Factors that could cause actual results to differ materially ("Cautionary Disclosures") are described throughout this Form 10-Q. Cautionary Disclosures include, among others: general economic conditions, the strength and financial resources of the Company's competitors, environmental and governmental regulation, labor relations, availability and cost of employees, material and equipment, regulatory developments and compliance, fluctuations in currency exchange rates and legal proceedings. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions "Risk Factors," "Management's Discussion and Analysis or Plan of Operation," "Description of Business," as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "will," "would," and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by the Cautionary Disclosures. The Company disclaims any obligation to update or revise any forward-looking statement to reflect events or circumstances occurring hereafter or to reflect the occurrence of anticipated or unanticipated events.

 

The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the factors discussed in the section entitled "Risk Factors" and the following:

 

 

·

The effect of political, economic, and market conditions and Geopolitical events;

 

·

Legislative and regulatory changes that affect our business;

 

·

The availability of funds and working capital;

 

·

The actions and initiatives of current and potential competitors;

 

·

Investor sentiment; and

 

·

Our reputation.

 

 
16
 

 

We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this report.

 

Overview

 

With the acquisition of the operation of Carmela's Pizzeria in October 2013, our operations now consist of Carmela's Pizzeria's, which presently has three Dayton, Ohio area locations offering authentic New York style pizza. During the quarter ended September 30, 2015, the Company closed one of its then four locations due to construction right-of-way issues related to city street widening. The Company is currently searching for a suitable location as a replacement. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Carmela's has been noted in Dayton Daily News as one of "The Best Pizzerias" in Dayton.

 

LIQUIDITY AND CAPITAL RESOURCES

 

GENERAL. Overall, we had a net loss of $1,065,888 for the nine months ended September 30, 2015. During the nine month period, we had cash flow used by operations of $250,356, net cash used in investing activities of $22,637, and cash flows provided by financing activities of $282,396. At the end of the nine month period ended September 30, 2015, our cash balance was $69,246.

 

CASH FLOWS FROM OPERATING ACTIVITIES. Net cash flow used in operating activities was $250,356, which included non-cash adjustments to derivative liabilities from convertible notes payable totaling $709,365 related to our convertible notes outstanding. The adjustments to reconcile the net loss to net cash for changes in assets and liabilities for the nine month period ended September 30, 2015 totaled $37,446 with increases in accrued expenses accounting for the largest increase.

 

CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities was $22,637 that included the purchase of property and equipment for the Carmela's restaurants.

 

CASH FLOWS FROM FINANCING ACTIVITIES. For the nine months ended September 30, 2015, cash flows from financing activities was $282,396, which consisted primarily of proceeds from issuance of convertible notes payable of $152,100 and proceeds from notes payable related parties totaling $273,900 that was offset by $141,204 for payments made on notes payable related parties.

 

INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our operations will meet the requirements of our daily operations in the future. As we expect that funds from our operations will be insufficient to meet our operating requirements as a public company and for future expansion, we will need to seek other sources of financing to maintain liquidity. This will most likely include further convertible notes and other security instruments that will incur substantial continued dilution to our current stockholders.

 

EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2015 as we look to secure additional funds to both stabilize and grow our business operations. Our management will review any financing options at their disposal and will judge each potential source of funds on its individual merits. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to or if we can, that the terms of such financing will be favorable or non-dilutive to us or our existing shareholders. We anticipate we will be required to issue additional promissory notes convertible into shares of our common stock at significant discounts to market prices that will result in significant and sustained dilution to our current stockholders.

 

INFLATION. Our management believes that inflation has not had a material effect on our results of operations, and does not expect that it will in the remainder of the fiscal year 2015.

 

OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet arrangements.

 

 
17
 

  

RESULTS OF OPERATIONS.

 

Nine month period ended September 30, 2015 versus September 30, 2014

 

We had a net loss of $1,065,888 for the nine months ended September 30, 2015 as compared to a loss of $1,001,591 for the nine months ended September 30, 2014. Our gross sales in the nine months ended September 30, 2015 were $1,285,033 with cost of goods sold of $1,106,196 for a gross profit of $178,837. This compared to gross sales of $1,233,690, costs of goods sold of $1,020,701 and gross profit of $212,989 for the nine months ended September 30, 2014. Our sales in the 2015 period increased $51,343, or approximately 4% versus 2014 primarily due to the addition of a fourth location in 2015. This will be minimized for the remainder of 2015 and possibly into 2016 with the loss on one location in the September 2015 quarter if that location is not relocated. Cost of goods sold increased by approximately 8% to approximately 86% of sales in 2015 versus 83% of sales in 2014. This increase is primarily the result of increased use of coupon marketing with a buy one get one free offer. The company will continue a more aggressive coupon marketing campaign during the remainder of 2015 through which it believes sales will increase, but will be offset somewhat by the higher discounts.

 

Total operating expenses were $505,963 for the nine months ended September 30, 2015 versus $510,384 for the nine months ended September 30, 2014 resulting in loss from operations of $327,126 and $297,395 in the 2015 and 2014 periods, respectively. The primary factor involved in this increase in operating expenses was increased legal, accounting and professional fees in the 2015 period including the issuance of a $50,000 convertible note related to our ongoing franchising efforts. This trend may not continue as most expenses were lower in the 2015 period at Carmela's and that is expected to continue in the near future given the current operation of three stores versus four.

 

Other Expenses

 

Other expenses were $738,761 for the nine months ended September 30, 2015 as compared to $704,196 for the nine months ended September 30, 2014. This significant change is due to the derivative liabilities related to the Company's convertible notes outstanding. The single largest decrease was to loss on conversion of debt related to conversions of the convertible notes that had matured as the Company accounted for these conversions through "change in derivative liability" in 2015. There were significantly higher conversions in the 2014 period versus the 2015 period resulting in markedly lower expense. The change in derivative liability increased significantly in the 2015 period while there was a significant decrease in 2014. This change is partially due to the change in accounting for converted shares, which are reflected in "change in derivative liability" in 2015. The derivative liability expenses will continue in future periods as the Company continues to issue convertible notes and those notes experience changes in derivative liabilities with changes in the market price of the Company's common stock and those notes are converted at discounts to market causing losses on conversion.

 

 
18
 

 

Three month period ended September 30, 2015 versus September 30, 2014

 

We had net income of $91,481 for the three months ended September 30, 2015 as compared to a loss of $230,024 for the three months ended September 30, 2014. This significant change is solely due to the significant "income' from "change in derivative liability" resulting from conversion of notes in the 2015 period that lowered the derivative liability significantly that was offset only partially by expense for newly convertible notes. Our gross sales in the three months ended September 30, 2015 were $428,405 with cost of goods sold of $359,278 for a gross profit of $69,127. This compared to gross sales of $420,484, costs of goods sold of $348,526 and gross profit of $71,958 for the three months ended September 30, 2014. Our sales in the 2015 period increased $7,921, or approximately 2% versus 2014. Cost of goods sold increased by approximately 3% to approximately 84% of sales in 2015 versus approximately 83% of sales in 2014. This represents minimal change in the 2015 versus the 2014 period. The company will continue a more aggressive coupon marketing campaign during the remainder of 2015 through which it believes sales will increase, but will be offset somewhat by the higher discounts.

 

Total operating expenses were $156,307 for the three months ended September 30, 2015 versus $140,046 for the three months ended September 30, 2014 resulting in loss from operations of $87,180 and $68,088 in the 2015 and 2014 periods, respectively. The primary factor for this increase was higher rent costs in the 2015 period versus the 2014 period with the addition of the fourth location for a majority of the period in 2015 versus only three in 2014. This trend should be offset somewhat moving forward with the closing of one location in the quarter ended September 30, 2015 unless that location is successfully relocated in the near future.

 

Other Expenses

 

Other income was $178,662 for the three months ended September 30, 2015 as compared to other expense of $161,936 for the three months ended September 30, 2014. This significant change is due entirely to the derivative liabilities related to the Company's convertible notes outstanding. The single largest cause was the "income" from conversion of convertible notes in the 2015 period with significantly lower offsetting notes becoming convertible and little change in the fair value of the notes during the period. The derivative liability expenses may continue in future periods as the Company continues to issue convertible notes and those notes experience changes in derivative liabilities with changes in the market price of the Company's common stock and those notes are converted at discounts to market causing losses on conversion.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not Applicable.

 

ITEM 4T. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the "Certifying Officers") are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

 

 
19
 

 

To evaluate the effectiveness of our internal controls over financial reporting, we have adopted the framework prescribed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We believe that this framework will assist in the provision of reasonable assurance of the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations. In adopting the COSO framework, we maintain a control environment, perform risk assessments, carry out control activities, emphasize quality information and effective communication, and perform monitoring. In the maintenance of a control environment, we are committed to integrity and ethical values as well as to competence. We strive to assign authority and responsibility in a manner that supports our internal controls, and we also maintain human resources policies and procedures designed to support our internal controls. Our risk assessments are designed to ensure the achievement of company-wide and process-level objectives as well as to identify and analyze risks while managing change. We believe that all of these components together form a foundation for sound internal control through directed leadership, shared values and a culture that emphasizes accountability for control.

 

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

 

The Certifying Officers have also concluded, based on our evaluation of our controls and procedures that as of September 30, 2015, our internal controls over financial reporting are not effective and provide a reasonable assurance of achieving their objective.

 

Due to the small size and limited financial resources, we have inadequate segregation of duties within accounting functions and results in an overall lack of internal control. As a result, there is little segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of a few individuals. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements under all potential conditions. Therefore, effective internal control over financial reporting provides only reasonable, and not absolute, assurance that a restatement of our financial statements would be prevented or detected.

 

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

 

 
20
 

 

PART II

 

ITEM 1. LEGAL PROCEEDINGS.

 

We are not presently involved in any litigation that is material to our business. We are not aware of any pending or threatened legal proceedings. In addition, none of our officers, directors, promoters or control persons has filed or been involved for the past five years:

 

 

·

in any bankruptcy petition

 

·

in any conviction of a criminal proceeding or involved in a pending criminal proceeding (excluding traffic violations and minor offenses)

 

·

is subject to any order, judgment or decree enjoining, barring suspending or otherwise limiting their involvement in any type of business, securities, or banking activities,

 

·

or has been found to have violated a federal or state securities or commodities law.

 

We may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the three months ended September 30, 2015, the Company issued 287,340,359 shares of common stock upon conversion of $55,547 in principal on convertible notes representing a value of $0.0002 per share. In addition, we incurred loss on conversion of certain of the shares totaling $282,920 for a total cost to the Company of $338,467.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

None

 

ITEM 5. OTHER INFORMATION.

 

None

 

 
21
 

 

ITEM 6. EXHIBITS.

 

Exhibits:

 

31.1

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.2

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

101**

 

XBRL Interactive Data Files

 

Exhibits required to be filed by Item 601:

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
22
 

 

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, there unto duly authorized.

 

Greenfield Farms Food, Inc.

 

Date: November 18, 2015

By:

/s/ Ronald Heineman

 

Ronald Heineman

Principal Executive Officer

 

 

Date: November 18, 2015

By:

/s/ Henry Fong

 

Henry Fong

Principal Accounting Officer

 

 

 

23




EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Ronald Heineman, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Greenfield Farms Food, Inc. (the "registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining internal disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f))for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: November 18, 2015

By:

/s/ Ronald Heineman

 

 

Ronald Heineman

 

 

Principal Executive Officer

 

 



EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Henry Fong, certify that:

 

6.

I have reviewed this Quarterly Report on Form 10-Q of Greenfield Farms Food, Inc. (the "registrant");

7.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

8.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

9.

I am responsible for establishing and maintaining internal disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f))for the registrant and have:

 

(e)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(f)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(g)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(h)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

10.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: November 18, 2015

By:

/s/ Henry Fong

 

 

Henry Fong

 

 

Principal Accounting Officer

 

 



EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Greenfield Farms Food, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Ronald Heineman, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report.

 

 

November 18, 2015

By:

/s/ Ronald Heineman

 

 

Ronald Heineman

 

 

Principal Executive Officer

 

 

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO GREENFIELD FARMS FOOD, INC. AND WILL BE RETAINED BY GREENFIELD FARMS FOOD, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.



EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Greenfield Farms Food, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Henry Fong, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report.

 

 

November 18, 2015

By:

/s/ Henry Fong

 

 

Henry Fong

 

 

Principal Accounting Officer

 

 

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO GREENFIELD FARMS FOOD, INC. AND WILL BE RETAINED BY GREENFIELD FARMS FOOD, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.