Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Construction in process is comprised of the accumulated costs of construction of a Blue Water Bar & Grill™ restaurant in St. Maarten, Dutch West Indies with completion expected in Fall 2016 at a projected completion cost of $1.1 million. Once in service, an estimated life will be established and depreciation will begin.
When property and equipment is retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $-0- and $-0- for the periods ended March 31, 2016 and December 31, 2015, respectively.
As of March 31, 2016, and during the preceding ten years, no director, person nominated to become a director or executive officer, or promoter of the Company has been involved in any legal proceeding that would require disclosure hereunder.
From time to time, the Company may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. However, litigation is subject to inherent uncertainties for which the outcome cannot be predicted. Any adverse result in these or other legal matters could arise and cause harm to the Company’s business. The Company currently is not party to any claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on the Company’s business.
During the three months ended March 31, 2016 and 2015, Blue Water Global Group, Inc. paid $-0- and $3,664, respectively, in expenses on behalf of the Company. Since inception on July 27, 2013, Blue Water Global Group has paid an aggregate of $621,003 in expenses on behalf of the Company. These expenses were included in the financial statements under Additional Paid-In Capital.
On December 15, 2015 we acquired all of the issued and outstanding shares (comprised of 30 common shares with a par value of $100 per share) of Blue Water Bar & Grill, N.V., a St. Maarten, Dutch West Indies limited liability company from Blue Water Global Group, Inc., a related party. These shares were valued at an aggregate of $3,000, or $100 per share, which was paid by Taurus Financial Partners, LLC (“
Taurus
”), a related party. This transaction as a common controlled acquisition.
As of March 31, 2016 and December 31, 2015, the Company had outstanding notes payable to Taurus Financial Partners, LLC (“
Taurus
”) aggregating $106,187 and $102,749, respectively, for expenses paid on behalf of the Company which has been accounted for as a short-term note payable to a related party. During the three months ended March 31, 2016, the Company borrowed $3,438 from Taurus that is aggregated in the short-term note payable to a related party. Also during the three months ended March 31, 2016 and 2015, the Company imputed $2,585 and $2 in interest, respectively. The imputed interest has been recorded in the financial statements as additional paid-in capital.
During the fiscal year ended December 31, 2015, the Company had a note payable to a related party stockholder in the amount of $100. This note was paid in full on December 4, 2015. During the fiscal year ended December 31, 2015 this note accrued $11 in imputed interest that has been recorded in the financial statements as additional paid-in capital.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated March 7, 2016, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“
SEC
”) on March 7, 2016. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. We do not anticipate generating significant revenues until we are able to open our first restaurant, which is presently under construction in St. Maarten, Dutch West Indies. Accordingly, we must raise additional cash from sources other than operations.
To meet our need for cash we are continually exploring new sources of financing, including raising funds through a secondary public offering, a private placement of securities and/or loans. If we are unable to secure additional financing, we will either have to suspend operations until we do raise the cash or cease operations entirely.
The following discussion should be read in conjunction with our financial statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We are an emerging growth business with limited operating history. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.
To become profitable and competitive, we have to successfully open operating restaurant properties throughout the Caribbean region. We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen. Issuances of additional shares will result in dilution to our then existing stockholders. There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
We are continually exploring new sources of financing to meet our need for additional cash, including raising funds through sales of our equity securities and loans. We cannot provide any assurances that our efforts to secure additional financing will be successful. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Further, future equity financing could result in additional and substantial dilution to existing shareholders.
Plan of Operations
Blue Water was incorporated under the laws of the State of Colorado on June 27, 2013 under the name Stream Flow Media, Inc. We amended our Articles of Incorporation on October 14, 2015 to change our name to Blue Water Bar & Grill, Inc. Subsequent to the name change, Blue Water acquired all of the issued and outstanding shares of Blue Water Bar & Grill, N.V., a St. Maarten, Dutch West Indies limited liability company, on December 15, 2015. Presently we are developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand name. The initial flagship location is presently under construction in St. Maarten, Dutch West Indies.
The projected costs and other related expenses are estimates made by our management and our actual costs related to opening our proposed restaurant may differ significantly.
In addition to the foregoing, and unless otherwise noted, all of the cost estimates and forecasts throughout our business plan are mere estimates made by our management. Our actual costs related to opening and operating the proposed restaurants may differ significantly from our estimates, which could have a negative impact on our overall business, cause our business to fail, and result in you losing all of your investment.
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Blue Water Bar & Grill™
The Blue Water Bar & Grill™ restaurant concept is the
Perfectly Caribbean
SM
experience featuring a casual, open air Caribbean themed restaurant designed to offer customers a distinctive and relaxing island dining experience. Central to each restaurant will be a large covered outside patio area where customers can enjoy their drinks and food while overlooking a beautiful water view. The patio area will feature an inviting island styled walk up (and in some cases, swim up) bar and a small stage area for live musical performances by local musicians and dancing. Each restaurant will have an open aired kitchen so customers can see their food being prepared.
Each restaurant will begin serving breakfast at 7am. On weekends the restaurant will promote an American styled breakfast buffet and feature a do-it-yourself Bloody Mary station. Lunch service will commence at 11am and will feature handmade burgers, gourmet sandwiches and salads, and Caribbean jerk styled dishes. Dinner service will start at 5pm and will feature hand-cut aged Certified Angus steaks and prime rib, fresh seafood caught by local fishermen, hand tossed pizzas, and specialty homemade desserts. The restaurant will close at 11pm nightly and the bar will close later at the manager’s discretion.
During weekdays the bar will host a daily happy hour (4pm – 6pm) that will offer reduced priced drinks and appetizer specials. When the sun sets the patio will be outlined by tiki torches, which will promote a fun nighttime island atmosphere while helping ward off unwanted insects such as mosquitoes.
In addition, each restaurant will offer its customers specialty drinks in souvenir glasses, mugs, and shot glasses that come with the drink. These items, along with fun and unique t-shirts and other souvenirs, will be available for retail purchase in a separate souvenir hut that will be approximately 130 square feet in size. These souvenir items will be primarily marketed to the tourist customers. Based on our preliminary discussions with an importer of these types of souvenir items, we estimate selling this merchandise at a 300% - 600% retail markup, depending on the particular item.
St. Maarten Blue Water Bar & Grill™
In February 2015 Blue Water broke ground on its first Blue Water Bar & Grill™ in St. Maarten, Dutch West Indies. The beachfront building site is located in the pristine eco-friendly Indigo Bay development and is the second restaurant approved for beachfront construction. More information about the Indigo Bay development be found through their website at
www.indigo-bay.com
.
The St. Maarten Blue Water Bar & Grill™ is expected to open in Fall 2016, just ahead of the 2016 tourist season.
Key elements to the design and site location include:
·
Blue Water's building site (Lot #L04) measures approximately 1,552 square meters (16,706 square feet) and is located on a picturesque white sand beach.
·
This Blue Water Bar & Grill™ location will feature a large, open-aired tiki roof, swimming pool with swim up bar stools, two fire pits, and beach and pool lounge chairs with full drink and food service.
·
The restaurant's foot print measures approximately 415 square meters (4,467 square feet) and seats up to 203 people:
·
98 under the main tiki roof, 64 under tropical cover, 26 at the bar, and 15 at the swim up bar.
·
Indigo Bay is an eco-friendly commercial and residential development encompassing approximately 150 acres of lush tropical and beachfront land.
·
Indigo Bay is St. Maarten's newest and closest attraction to the Port of St. Maarten and is just a quick ride by water taxi for cruise ship passengers.
·
Approximate GPS coordinates: 18
⁰
01'17.5 North and 63
⁰
04'33 West.
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Below is the floorplan and a side view architectural rendering:
![[BWBG_S1001.JPG]](http://content.edgar-online.com/edgar_conv_img/2016/05/12/0001593470-16-000083_BWBG_S1001.JPG)
![[BWBG_S1002.JPG]](http://content.edgar-online.com/edgar_conv_img/2016/05/12/0001593470-16-000083_BWBG_S1002.JPG)
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Keys for Success
To better achieve our business objectives and successfully compete with other restaurants, we have developed the following focal points and strategies we anticipate implementing in all of our future restaurants:
Create a Fun, Energetic, Destination Drinking and Dining Experience
. We wish to create and promote a fun and socially open atmosphere whereby our customers can, if they choose to do so, openly interact with one another. Topics of discussion and frequent interest will often center around where each other is from, what activities have they done while on the island, and giving and receiving recommendations for future activities while on the island; sometimes the floor and bar staff will participate in these discussions and offer their own words of advice. We intend to accomplish this by utilizing sectional floor and foot traffic planning, whereby the bar area will promote social interaction among customers, a stage area will feature local live entertainment performers to create a lively and festive atmosphere, and more intimate dining tables will be located further in the back to provide separation for those who just wish to dine alone and enjoy the island atmosphere. We believe that if we are successful at achieving this goal, new customers – tourists, “local” ex-patriots and native locals alike – will become repeat, or “regular”, customers and subsequently promote the restaurant by word-of-mouth to their friends and family.
Distinctive Concept
. In each restaurant we wish to create a fun and consistent experience for our customers centered around our full bar service, dining offerings, and daily entertainment. The restaurant’s concept will be carried throughout our customers’ entire visit and will involve all aspects of the experience, including the exterior design of the building, interior layout and decorum, employee greetings and uniforms, specialty drinks and menu items, and fun and creative souvenirs such as interestingly shaped drink glasses and bright and flamboyant t-shirts that can remind the customer of their vacation or make an excellent gift for someone back home.
Comfortable Adult Atmosphere
. Our restaurants will be primarily adult orientated. While children will be welcomed during daytime hours as long as they are accompanied by a responsible adult at all times during their visit, no one under 21 years of age (or the minimum legal drinking age as established by statute) will be allowed into our restaurants after 10pm. We believe that this policy will help maintain a fun and relaxed atmosphere that appeals to adult customers, and will help attract groups such as private parties and business organizations.
High Standard of Customer Service
. Because service is one the key areas restaurants differentiate themselves from one another – and a constant source of either compliments or complaints from customers – we intend to foster a high level of customer service among our employees, ranging from the general manager to the greeters, through intense training (cross training for all manager level employees and a one-week training course, complete with required testing on all food and drink offerings, operational procedures, and computer checkout for all other employees), constant monitoring (from the on-duty manager and surprise visits from “secret shoppers”), and emphasizing consideration of our customers first and foremost in all decisions. From the moment a customer walks into the front door, we want them to experience a high level of guest service provided by a knowledgeable, energetic staff. Bar tenders will be required to be able to free pour simultaneously from multiple liquor bottles and perform “flare” techniques (flipping, tossing, and twirling of liquor bottles) for our customers’ entertainment; greeters and servers will be required to introduce customers to the concept, explain the drink and entree menus and daily specials, and generally set the stage for a fun and memorable experience for them.
Provide Dining Value
. We believe that our restaurants should provide our customers with interesting, high quality, and generously portioned (covering the entire plate) menu items that are aesthetically appealing and result in the customer leaving fully satisfied. Complementing the dining aspect, we intend to offer the customer a unique variety of original drinks, each designed to perpetuate and immerse the customer in the restaurant’s overall concept. It is our goal to generate at least a US$28 average check per guest, inclusive of food and drinks. We estimate that our overall gross sales will be comprised of 65% food and 35% drinks. We anticipate achieving and maintaining a 30% food cost and 18% liquor cost, which relates to our actual cost of the product compared to the gross revenue the product generates. For example, if we sold a fish entree for $20 our actual cost would be $6 and our gross profit would be $14. Prices for entrees will start at around $12 for a hamburger and rise to $42 for a prime rib steak dinner; prices for drinks will start at $3 for beer, $6 for basic well mixed drinks, and $8 for specialty drinks. These price points are competitive with the existing restaurants our management team has scouted in the Simpson Bay area of St. Maarten, Dutch West Indies, where we intend to open our first Blue Water Bar & Grill™ that will cater to the tourist and local ex-patriot alike.
It is important to note that although we aspire to operate at or below the above food and liquor costs, we cannot guarantee that we will ever achieve such food or liquor costs or, if achieved, will be able to maintain them.
19
Operations and Management
Our ability to effectively manage an operation including high volume restaurants (annual gross sales of US$1,000,000 or more) with live entertainment offerings is critical to our overall success. In order to maintain quality and consistency at each of our future restaurants we must carefully train and properly supervise our personnel and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, entertainment productions and equipment, and maintenance of the restaurant facilities. We believe our current management is capable of overseeing our planned growth over the next two years. While staffing levels will vary from restaurant to restaurant depending on actual sales volumes, we anticipate our typical restaurant management staff to be comprised of a general manager, a kitchen manager (who also serves as the head chef) and a bar manager (who also serves as the head bartender); the kitchen manager and bar manager will also act as assistant general managers when the general manager is off-duty and will receive a slightly higher base salary compared to our other chefs and bartenders to compensate for their added responsibilities.
Recruiting
. We will actively recruit and select individuals who share our passion for customer service. Our selection process includes testing and multiple interviews to aid in the selection of new employees, regardless of their prospective position. We will offer a competitive compensation plan to our managers that includes a base salary, bonuses for achieving performance objectives, and possibly incentive stock options once they have worked for us for at least one full year. For example, the general manager in our initial Blue Water Bar & Grill™ restaurant will most likely be offered a base salary of $3,500 a month, plus up to $1,000 a month in additional performance incentives for achieving minimum gross sales and exceeding the minimum targeted food, liquor, and labor costs, as determined by our executive management team. In addition, all employees are entitled to discount meals at any of our future restaurants.
Training
. We believe that proper training is the key to exceptional customer service. Each new management hire will go through an extensive training program, which will include cross-training in all management duties. All non-management new hires will go through a standard training program where they will learn and be tested on all of our food and drink offerings, operational procedures, and our point-of-sale (POS) computer system.
Management Information Systems (MIS)
. All of our future restaurants will be equipped with a variety of integrated management information systems. These systems will include an easy-to-use point-of-sale (POS) computer system which facilitates the movement of customer food and drink orders between the customer areas and kitchen and bar operations, controls cash, handles credit card authorizations, keeps track of sales on a per employee basis for incentive awards purposes, and provides on-site and executive level management with real-time sales and inventory data. Additionally, we intend to implement a centralized accounting system that will include a food cost program and a labor scheduling and tracking program. Physical inventories of food and drink items will be performed on a weekly basis. Further, daily, weekly, and monthly financial information will be provided to executive level management for analysis and comparison to our budget and to comparable restaurants. By closely monitoring each restaurant’s gross sales, cost of sales, labor, and other cost trends we will be better able to control our costs, inventory levels, and identify problems with individual operations, if any, early on.
Secret Shopper
. Because we believe exceptional customer service is paramount to our success, we intend to implement a “secret shopper” program to monitor the quality control at all of our future restaurants. Secret shoppers are independent persons who test the quality of our food, drink, and service as paying customers without the knowledge of the restaurant’s management or employees. Secret shoppers then report their unbiased experiences to our executive level management.
Long-Term Growth Plan (5 Years)
Over the next five years we plan to focus on a disciplined growth strategy of opening one new Blue Water Bar & Grill™ restaurant each year. Aside from the Blue Water Bar & Grill™ currently under development in St. Maarten, Dutch West Indies, we have also identified the following Caribbean islands we intend to eventually open a Blue Water Bar & Grill™ restaurant:
·
Aruba, Dutch West Indies;
·
Nassau, Bahamas;
·
Cozumel, Mexico;
·
Grand Cayman; and
·
Barbados.
We estimate that we will need to raise approximately $4 - $5 million to open all of the above proposed restaurants. This capital will most likely be raised through the sales of additional equity securities, which will have a dilutive effect on existing shareholders.
Sales and Marketing
Our marketing strategy is aimed at attracting new customers through both traditional and creative avenues. We intend to focus on building a reputation among local customers (those living on the island) while directing our marketing efforts toward tourists staying on the island or visiting for the day on a cruise ship. We intend to accomplish this through:
·
Grand opening promotions;
·
Traditional paid advertising (e.g. radio, television, newspaper, etc.);
·
Free media exposure (e.g. hosting charity events, food reviews, etc.); and
·
Working directly with tourism bureau representatives and transportation representatives (taxi association, bus association, day sail and charter businesses, etc.).
When opening a new Blue Water Bar & Grill™ restaurant we intend to host grand opening parties for local leaders, media personalities, hospitality employees such as resort and hotel staff, and tourism bureau representatives (inclusive of cruise ship industry representatives and hotel/resort industry representatives). Our goal with courting these groups is to introduce them to our concept and court them to refer new customers to our restaurants and provide us with free future media exposure.
Afterwards we will sustain awareness through more traditional marketing methods, including radio and television spots, newspaper ads, billboards and road signs, and resort and hotel concierge promotional cards and discount coupons.
If our strategy is successful it will lead to “word of mouth” referrals, which is our ultimate goal. This is accomplished by providing our customers with consistently excellent service and quality food and drinks.
While we do not have a fixed marketing budget, we do anticipate launching each new restaurant with a marketing blitz campaign and tapering it down to less than 5% of the restaurant’s annual gross sales once it is sufficiently established with regular and recurring revenue.
Financing
We estimate that we will need to generate at least $1.0 million in additional financing in order to meet our planned 2016 capital expenditures. Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing.
Without limiting our available options, future financings will most likely be through the sale of additional shares of our common stock. It is possible that we could also offer warrants, options and/or rights in conjunction with any future issuances of our common stock. However, we can give no assurance that financing will be available to us, and if available to us, in amounts or on terms acceptable to us. If we are unable to generate profits or unable to obtain additional funds to meet our working capital needs, we may need to cease or curtail our business operations. Further, there is no assurance that the net proceeds from any successful financing arrangement will be sufficient to cover our projected expenditures over the next 12 months.
Government Regulation
The restaurant industry is subject to many various laws which directly affect our organization and planned operations. Each restaurant we open must comply with various licensing requirements and regulations by a number of governmental authorities, which typically include health, safety and fire authorities in the municipality where our restaurant is located. The development and operation of a successful restaurant depends upon selecting and acquiring a suitable location, which is normally subject to zoning, land use, environmental, traffic, and other regulations. Further, our operations will also be subject to various laws governing such matters as wages, health insurance requirements, working conditions, citizenship and work permit requirements, and mandatory overtime pay, all of which will directly affect our labor costs.
Additionally, because we anticipate a significant portion of our revenue to be generated from the sale of alcoholic beverages, we must comply with any and all regulations governing their sale. Typically this requires the proper licensing at each restaurant location (in many cases it needs to be renewed on an annual basis). Such licenses may be revoked or suspended for cause at any time. These regulations often relate to many aspects of the restaurant, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages. The failure of any of our future restaurants to obtain and retain such a license would limit its ability to generate sufficient revenues to achieve profitability at that particular location, which could subsequently impact our business’s overall revenues and ability to achieve (and if achieved, maintain) profitability.
Compliance with Environmental Laws
We have not incurred and do not anticipate incurring any expenses associated with environmental laws.
Patents and Trademarks
We are presently using the following trademarks and service marks “Blue Water Bar & Grill” and “Perfectly Caribbean”. We have not taken any steps to register either of these marks.
Property and Equipment
Our principal executive office is located at Lake Side Drive #5, Indigo Bay, Cole Bay, St. Maarten, Dutch West Indies, which is a temporary structure comprised of two office containers and a covered work area adjacent to the construction site of the St. Maarten Blue Water Bar & Grill™.
The land where our temporary office is located is currently being provided free of charge while construction is underway. Once the construction is completed, the St. Maarten Blue Water & Grill™ will become subject to a monthly rent of $5,313 and we will move our principal executive office into the permanent structure.
Executive Offices and Telephone Number
Our executive office, US mailing address and main telephone number is currently:
Executive Office
US Mailing Address (Mail Forwarding Service)
Lake Side Drive #5
c/o The Mailbox #5241
Indigo Bay, Cole Bay
P. O. Box 523882
St. Maarten, Dutch West Indies
Miami, FL 33152
Telephone and Other Contact Information
Corporate Internet Websites
Tel:
(949) 264-1475
www.bluewaterbar.com
Fax:
(949) 607-4052
E-Mail:
info@bluewaterbar.com
Jumpstart Our Business Startups Act
In April 2012, the Jumpstart Our Business Startups Act ("
JOBS Act
") was enacted into law. The JOBS Act provides, among other things:
·
Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies;
·
Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934;
·
Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings;
·
Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and
·
Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements.
In general, under the JOBS Act a company is an emerging growth company if its initial public offering ("
IPO
") of common equity securities was effected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of:
(i)
the completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more,
(ii)
the completion of the fiscal year of the fifth anniversary of the company's IPO;
(iii)
the company's issuance of more than $1 billion in nonconvertible debt in the prior three-year period, or
(iv)
the company becoming a "larger accelerated filer" as defined under the Securities Exchange Act of 1934.
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The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact Blue Water are discussed below.
Financial Disclosure
. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:
(i)
audited financial statements required for only two fiscal years;
(ii)
selected financial data required for only the fiscal years that were audited; and
(iii)
executive compensation only needs to be presented in the limited format now required for smaller reporting companies. (A smaller reporting company is one with a public float of less than $75 million as of the last day of its most recently completed second fiscal quarter)
However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. Blue Water is a smaller reporting company. Currently a smaller reporting company is not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.
The JOBS Act also exempts the company's independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board ("
PCAOB
") after the date of the JOBS Act's enactment, except as otherwise required by SEC rule.
The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the company's accounting firm or for a supplemental auditor report about the audit.
Internal Control Attestation
. The JOBS Act also provides an exemption from the requirement of the company's independent registered public accounting firm to file a report on the company's internal control over financial reporting, although management of the company is still required to file its report on the adequacy of the company's internal control over financial reporting.
Section 102(a) of the JOBS Act exempts emerging growth companies from the requirements in §14A(e) of the Securities Exchange Act of 1934 for companies with a class of securities registered under the 1934 Act to hold shareholder votes for executive compensation and golden parachutes.
Other Items of the JOBS Act
. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a contemplated offering either prior to or after the date of filing the respective registration statement. The JOBS Act also permits research reports by a broker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO.
Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Securities Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in its registration statement until the company is ready to conduct a roadshow.
Election to Opt Out of Transition Period
. Section 102(b) (1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.
The JOBS Act provides a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. Blue Water has elected not to opt out of the transition period pursuant to Section 107(b).
Results of Operations
Three Months Ended March 31, 2016 and 2015
Revenues
. We did not generate any revenue during the three months ended March 31, 2016 and 2015.
Operating Expenses
. Our total operating expenses for three months ended March 31, 2016 were $69,747 compared to $45,924 for the three months ended March 31, 2015, which represents an increase of $23,824, or 51.9%. The increase in operating expenses are the result of general cost increases related to our complying with our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.
Loss From Operations
. We generated a loss of ($69,747) from operations during the three months ended March 31, 2016 compared to an operating loss of ($45,924) during the three months ended March 31, 2015, which represents an increase of $23,824, or 51.9%. The increase in loss from operations the result of general cost increases related to our complying with our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.
Other income (expenses)
. During the three months ended March 31, 2016 and 2015 we recorded ($2,585) and ($2), respectively, in other expenses, which was comprised entirely of imputed interest expenses related to a note payable to a related party. The imputed interest was recorded in our financial statements under additional paid-in capital.
Net Loss
. We realized a net loss of ($72,332) during the three months ended March 31, 2016 compared to a net loss of ($45,926) during the three months ended March 31, 2015, which represents an increase of $26,407, or 57.5%. The increase in net loss is the result of general cost increases related to our complying with our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.
Total Stockholders’ Equity
. Our stockholders’ equity was $373,737 as of March 31, 2016.
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Liquidity and Capital Resources
As of March 31, 2016, we had assets totaling $642,522, which was comprised of $991 in cash and $641,531 in construction costs to date for our Blue Water Bar & Grill™ presently under construction in St. Maarten, Dutch West Indies.
As of March 31, 2016, we had total liabilities of ($268,785), which consisted of accounts payable of ($162,598) and a short-term related party payable due to Taurus Financial Partners, LLC for ($106,187). Further, we had no external credit facilities (i.e. bank loans, revolving lines of credit, etc.), but are continuing to explore the possibility of obtaining such a credit facility from a traditional lending institution.
We expect to incur continued losses through the fiscal year ending December 31, 2016, possibly even longer. We estimate that we will need to generate at least $1.0 million in additional financing in order to meet our planned 2016 capital expenditures. Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing.
Without limiting our available options, future financings will most likely be through the sale of additional shares of our common stock. It is possible that we could also offer warrants, options and/or rights in conjunction with any future issuances of our common stock. However, we can give no assurance that financing will be available to us, and if available to us, in amounts or on terms acceptable to us. If we cannot secure adequate financing we may be forced to cease operations and you will lose your entire investment.
Going Concern Consideration
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated March 7, 2016, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“
SEC
”) on March 7, 2016. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.
Off –Balance Sheet Operations
As of March 31, 2016, we had no off-balance sheet activities or operations.
Critical Accounting Policies
Use of Estimates
The accompanying financial statements of Blue Water have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may vary from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, Blue Water considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of March 31, 2016 and December 31, 2015, Blue Water had no cash equivalents.
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
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