UNITED STATES SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-K

 

x	ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended: DECEMBER 31, 2015
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For transition period from to________________

 

Commission File Number 333-157281

 

GREENFIELD FARMS FOOD, INC.

(Name of small business issuer in its charter)

 

NEVADA		26-2909561
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

 

319 Clematis Street – Suite 400, West Palm Beach, Florida 3340  

(Address of principal executive offices)(Zip Code)

 

Issuer's telephone number, including area code: (561) 514-9042

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Securities registered under Section 12(g) of the Exchange Act: None

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ¨ Yes  x No

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days: x Yes  ¨ No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: x

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:

 

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  x No

 

The aggregate market value of the voting common equity held by non-affiliates of the issuer was $3,172,763, based on the last sale price of the issuers common stock ($0.0034 per share) as reported by the OTCPink Markets as of the last business day of the Registrant's most recently completed second fiscal quarter.

 

The Registrant had 933,336,455 shares of common stock outstanding as of June 16, 2016.

 

Documents incorporated by reference: None

 

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

 

The discussion contained in this 10-K under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-K. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-K that are not historical facts.

 

2

 

ITEM 1. BUSINESS

 

DESCRIPTION OF BUSINESS

 

Plan of Operations

 

We were founded in 2008 as Sweet Spot Games, Inc., a Nevada corporation on June 2, 2008. We changed our name to Green Field Farms Food, Inc. ("Greenfield") on March 31, 2011. In October 2013, we entered into an Asset Purchase Agreement (the "Agreement") with COHP, LLC, through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela's Pizzeria 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. Carmela's has been noted in Dayton Daily News as one of "The Best Pizzerias" in Dayton.

 

The Carmela's Pizzeria assets and liabilities were acquired in exchange for 1,000 shares of our newly issued Series C Convertible Preferred Stock ("Series C") that converted on October 31, 2013 into 53,965,942 shares of common stock upon the effective date of a 1 for 100 reverse split. In addition, COHP and its assigns received warrants to purchase a total of 53,965,942 shares of our common stock exercisable 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. The value of these assets was $1,586,599 at December 31, 2013, which represents the fair market value of the common stock and warrants issued in the acquisition at their issuance dates.

 

Prior to the acquisition of Carmela's Pizzeria, we operated as a consumer and wholesale driven producer of grassfed beef. The Company had supplied Lowes Food Stores, a North Carolina based grocer with over 100 locations in North and South Carolina on a very limited basis. Greenfield Farms Grassfed Beef and its collective group of producers represented over 2500 acres in pasture under management and approximately 2000 head of cattle at its peak.

 

The Company will continue to explore other business opportunities in complementary food related business segments much like the acquisition of Carmela's Pizzeria, although no further agreements have been reached.

 

For SEC reporting purposes, Carmela's is treated as the continuing reporting entity that acquired GRAS as a result of the Carmela's acquisition transaction. The quarterly and annual reports filed after the transaction, beginning with this report, have been prepared as if Carmela's (accounting acquirer) were the legal successor to the Company's reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela's for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela's have been retroactively adjusted to reflect the legal capital structure of the Company.

 

In their opinion letter for the fiscal year ended December 31, 2015, our auditors included an explanatory paragraph that disclosed conditions that raise concerns about the Company's ability to continue as a going concern. Please refer to the audited financial statements and accompanying auditors report within this filing.

 

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Our Operations

 

We currently offer two restaurant concepts in our three Company owned restaurant locations including:

 

	·	A full-service dining room menu comprising a Carmela's Pizzeria and including a limited pizza buffet and alcohol and a Sports Grill.
	·	A smaller Carmela's Pizzeria with full menu dining room including limited pizza buffet, delivery and carry-out; as well as a drive-thru in certain locations.

 

In addition, our locations may offer a "Carmela's Treats" walk-up window offering ice cream style dessert treats offered to both diners within the restaurant or patrons looking for dessert only offerings.

 

Each concept is designed to offer quality meals at affordable prices with an emphasis on efficiencies in food ordering, preparation and service. We believe that the overall configuration of each concept results in simplified scalable operations, increased efficiency and improved consistency and quality of our food products. Our restaurants may be configured to adapt to a variety of building shapes and sizes by utilizing the restaurant concept that best fits the individual location. This offers the flexibility necessary for our concepts to be operated at a multitude of locations.

 

In addition to offering New York style pizza for dine-in, carry-out or delivery at select locations, our buffet menu offers a variety of pizza toppings and special combinations of toppings. Stores offering full buffets also offer pasta, salads, comfort foods, and in a family-oriented atmosphere.

 

During 2015, we added a catering division offered through our stores for everything from simple pick up to full services weddings and other occasions. The catering menu presently offers five different price points ranging from $4.50 per person for salad, pasta and breadsticks to $12 per person for a full meal including roast beef with au jus. Customers can also order from a variety of appetizers, salads, entrée's and sides in portions designed for 8, 15 and 25 plus people including Italian classics and other non-Italian items.

 

During 2014, we announced and have been working on creating a franchising concept presently planned to involve three separate business elements including:

 

	·	A full-service dining room menu comprising a Carmela's Pizzeria and including a limited pizza buffet and alcohol and a Sports Grill.
	·	A smaller Carmela's Pizzeria with full menu dining room including limited pizza buffet, delivery and carry-out.
	·	A Carmela's Pizzeria delivery and carry-out model similar to those of the leading pizza delivery chains and drive-thru access in some cases.

 

In addition, the catering division is envisioned as a separate business unit that prospective franchisees may add to build sales and profits. A Carmela's Treats walk-up window concept may also be added providing a separate profit center offering ice cream desserts. While we began working on the initial phase of the national franchising program, the cost and complexity of beginning the franchising concept has caused us to move more slowly on this initiative than initially planned. We intend to continue exploring franchising opportunities as a means to expand the Carmela's business.

 

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Franchising will require development of the Franchise Disclosure Document ("FDD"), the legal document presented to prospective franchise buyers in the presale process. In addition, candidate review and screening for a national franchise director commenced in 2015 but not yet been completed as of the filing of this report. The Company identified a franchising partner to complete the franchise operating system, collateral marketing materials and other supporting legal documentation, however these plans were put on hold pending further review of the costs and actions involved in creating the franchising concept. The Company feels it is important to perfect the Company's business plans and processes in order to establish a viable franchise concept.

 

One of our long-term objectives is to selectively expand through franchising along with adding a small number of Company-owned restaurants by identifying appropriate opportunities. We believe that developing a domestic network of franchise and Company-owned restaurants will play an important strategic role in a predominately franchised operating structure. In addition to generating revenues and earnings, we expect to use domestic Company-owned restaurants as test sites for new products and promotions as well as restaurant operational improvements and as a forum for training new managers and franchisees. We also believe that as the number of franchise and Company-owned restaurants increases, they may add to the economies of scale available for advertising, marketing and other costs for the entire system.

 

Food and Supply Distribution

 

We currently purchase our restaurant supplies from local wholesale food distributors in the Dayton, Ohio area. If we are able to expand through franchising, we will identify a suitable partner for outsourcing our warehousing and distribution services to a reputable and experienced restaurant distribution company. There are many regional and national companies to choose from that we believe will offer significant choice to tailor a program necessary for our specific needs. We may also choose to outsource our product sourcing, purchasing, quality assurance, franchisee order and billing services, and logistics support functions. These decisions will be made as we move forward with development of our franchising program in the future.

 

Advertising

 

We presently advertise locally in the Dayton, Ohio area mainly through direct marketing. As we move to create our franchising concept, we will be required to communicate a common brand message at the regional, local market and restaurant levels, to create and reinforce a strong, consistent marketing message to consumers in order to create successful franchise start-ups and garner sufficient market share. It is typical to require franchisees to participate in, and contribute to, an advertising program as part of their franchising fees. Once again, these decisions will be made as we move forward with development of our franchising program in the future.

 

Government Regulation

 

We are subject to various federal, state and local laws affecting the operation of our restaurants. Each restaurant is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, wage and hour, alcoholic beverage, building and fire agencies in the state or municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or approvals could delay or prevent the opening of a new restaurant or require the temporary or permanent closing of existing restaurants in a particular area.

 

We will be subject to Federal Trade Commission ("FTC") regulation and to various state laws regulating the offer and sale of franchises once our planned franchising program commences. The FTC will require us to furnish to prospective franchisees the FDD containing prescribed information. Substantive state laws that regulate the franchise or franchisee relationship presently exist in a number of states, and bills have been introduced in Congress from time to time that would provide for further federal regulation of the franchisor-franchisee relationship in certain respects. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship.

 

5

 

Competition

 

The restaurant industry, and specifically the pizza restaurant industry, is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater brand recognition and financial and other resources than us. Competitors include a large number of easily recognizable international, national and regional restaurant and pizza chains, as well as local restaurants and pizza operators. Some of our competitors may be better established in the markets where our restaurants are or may eventually be located. Within the pizza segment of the restaurant industry, we believe currently that our primary competitors are national pizza chains. As we move forward with franchising plans, our competition will potentially include regional chains, local restaurants as well as "take and bake" concept offerings. We also compete against the frozen pizza products available to consumers in all manners of retail stores. A change in the pricing or other market strategies of one or more of our competitors could have an adverse impact on our sales and earnings.

 

With respect to the potential sale of franchises, we will compete with many franchisors of restaurants and other business concepts. We believe that the principal competitive factors affecting the sale of franchises are franchise entry costs, product quality, price, value, consumer acceptance, franchisor experience and support, and the quality of the relationship maintained between the franchisor and its franchisees. In general, there is also active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.

 

Employees

 

In addition to our executive officers, as of June 16, 2016 we had twenty-three full-time and sixteen part-time employees at our four Company owned restaurants. None of our employees are currently covered by collective bargaining agreements.

 

ITEM 1A. RISK FACTORS

 

RISKS RELATED TO OUR BUSINESS

 

The purchase of shares of our common stock is very speculative and involves a very high degree of risk. An investment in our stock is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of Inhibiton.

 

OUR AUDITORS HAVE NOTED THERE IS CERTAIN DOUBT ABOUT OUR ABILITY TO OPERATE AS A GOING CONCERN.

 

Management has taken steps to revise the Company's operating and financial requirements. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. However, there can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.

 

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

6

 

WE ARE NOT CURRENTLY PROFITABLE AND MAY NEVER BECOME PROFITABLE.

 

We have a history of significant losses and expect to incur additional losses and negative operating cash flow for the foreseeable future as we move to expand our business with franchising plans for our restaurant operations. As a result, we may never achieve or maintain profitability. Even if we succeed in further developing our franchising plans, we may continue to incur losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and those expenses may not be offset by our revenues in any substantial way. As a result, we will need to generate significant revenues or raise additional capital in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our stock.

 

OUR CURRENT MANAGEMENT CONTROL OUR BUSINESS AFFAIRS IN WHICH CASE YOU WILL HAVE LITTLE OR NO PARTICIPATION IN OUR BUSINESS.

 

Our current management control the company through ownership of our preferred stock. As a result, they have total control over all matters requiring approval by our stockholders without the approval of minority stockholders in some cases. They are also able to elect all of the members of our Board of Directors, which will allow them to control our affairs and management. They are also able to affect all corporate matters requiring stockholder approval by written consent, without the need for a duly noticed and duly-held meeting of stockholders. As a result, they have significant influence and control over all matters requiring approval by our stockholders. Accordingly, you are limited in your ability to affect change in how we conduct our business.

 

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS .

 

We expect to incur significant costs associated with our public company reporting requirements, costs associated with applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. While we have extremely limited experience as a public company, we estimate that these additional costs will total approximately $50,000 per year. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

7

 

RISKS RELATIING TO OUR SECURITIES

 

THERE IS CURRENTLY A VERY LIMITED MARKET FOR OUR COMMON STOCK AND NO ASSURANCE THAT A MORE LIQUID MARKET WILL DEVELOP.

 

There is currently a limited trading market for our shares of Common Stock, under the symbol "GRAS." Any market price for shares of our Common Stock is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our Common Stock. Further, there is no correlation between the present limited market price of our Common Stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our Common Stock should not be considered indicative of the actual value of the Company or our Common Stock.

 

FUTURE ISSUANCES OF OUR COMMON STOCK COULD PUT DOWNWARD SELLING PRESSURE ON OUR SHARES AND ADVERSELY AFFECT THE STOCK PRICE. THERE IS A RISK THAT THIS DOWNWARD PRESSURE MAY MAKE ITIMPOSSIBLE FOR AN INVESTOR TO SELL HIS SHARES AT ANY REASONABLE PRICE.

 

Future issuances of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could put downward selling pressure on our shares, and adversely affect the market price of our common stock. Such sales could be made pursuant to Rule 144 under the Securities Act of 1933, as amended, as shares become eligible for sale under the Rule . This includes shares issued as a result of conversions related to outstanding convertible promissory notes we have outstanding.

 

Because our shares are deemed high risk "penny stocks," you may have difficulty selling them in the secondary trading market. The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as therein defined) less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Additionally, if the equity security is not registered or authorized on a national securities exchange, the equity security also constitutes a "penny stock." As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. These regulations generally require broker-dealers who sell penny stocks to persons other than established customers and accredited investors to deliver a disclosure schedule explaining the penny stock market and the risks associated with that market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. These regulations also impose various sales practice requirements on broker-dealers. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market is limited. As a result, the market liquidity for our common stock is severely and adversely affected. We can provide no assurance that trading in our common stock will not be subject to these or other regulations in the future, which would negatively affect the market for our common stock.

 

IF A STEADY MARKET DEVLEOPS FOR OUR SECURITIES THERE COULD BE SIGNIFICANT VOLATILITY AND THE SECURITIES MAY NOT APPRECIATE IN VALUE.

 

If a more steady market should develop for our securities, of which we have no assurance, the market price is likely to fluctuate significantly. Fluctuations could be rapid and severe and may provide investors little opportunity to react. Factors such as changes in results from our operations, and a variety of other factors, many of which are beyond the control of the Company, could cause the price of our common stock to fluctuate substantially. Also, stock markets in penny stock shares tend to have extreme price and volume volatility. The market prices of shares of many smaller public companies securities are subject to volatility for reasons that frequently unrelated to the actual operating performance, earnings or other recognized measurements of value. This volatility may cause declines including very sudden and sharp declines in the market price of our common stock. We cannot assure investors that the stock price will appreciate in value, that a market will be available to resell your securities or that the shares will retain any value at all.

 

8

 

WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK AND YOU MAY NEVER RECEIVE DIVIDENDS. THERE IS A RISK THAT AN INVESTOR IN OUR COMPANY WILL NEVER SEE A RETURN ON INVESTMENT AND THE STOCK MAY BECOME WORTHLESS.

 

We have never paid dividends on our common stock. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be at the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Future dividends may also be affected by covenants contained in loan or other financing documents, which may be executed by us in the future. Therefore, there can be no assurance that cash dividends of any kind will ever be paid.

 

WE HAVE RAISED CAPITAL THROUGH THE USE OF CONVERTIBLE DEBT INSTRUMENTS THAT CAUSE SUBSTANTIAL DILUTION TO OUR STOCKHOLDERS.

 

Because of the size of our Company and its status as a "penny stock" as well as the current economy and difficulties in companies our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 65% discounts to the market price of our common stock on conversion and in most cases provide for the immediate sale of our securities into the open market. Accordingly, this has caused dilution to our stockholders and will continue to do so in 2015 and the foreseeable future. As of December 31, 2015, we had approximately $352,000 in convertible debt outstanding. This convertible debt balance as well as any additional convertible debt we incur in the future is very likely to cause substantial and sustained dilution to our current stockholders. We have effected two reverse stock splits over the past two years. We may need to effect further reverse splits of our common stock in the future due to significant increases in common shares outstanding as well as the trading market of our common stock to meet loan covenants for our lenders as well as to maintain minimum price levels for the effective trading of our common stock.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

None.

 

ITEM 2. PROPERTIES.

 

The Company maintains office facilities provided by our Chief Financial Officer. During 2014 and 2015, there were no rents or other amounts paid for these facilities although that will not preclude the company from paying reasonable rental rates or reimbursement for use of these facilities in the future.

 

The Company leases its restaurant under certain leases with varied expiration dates. Certain leases provide for the payment of taxes and operating costs, such as insurance and maintenance in addition to the base rental payments.

 

Location		Sq Ft				Lease End
Brookville			2,400			July 2018
New Carlisle			3,700			February 2024
West Manchester			2,000			December 2019

 

Aggregate minimum annual rental payments under the non-cancelable operating leases are as follows:

 

Year ended December 31, 2016		$	57,600
2017			58,350
2018			51,450
2019			43,200
Total		$	210,600

 

9

 

ITEM 3. 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 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.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Trading Market for Common Equity

 

There is currently a limited market for the Company's Common Stock, which is traded over-the-counter and quoted under the trading symbol "GRAS".

 

Future sales of our common stock could put downward selling pressure on our shares, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his shares at any reasonable price.

 

The Company's Common Stock is not listed on any exchange; however, market quotes for the Company's common stock may be obtained from the OTC Markets "Pink" platform ("OTCPink"). The OTCPink is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter ("OTC") securities. The following table sets forth, for the indicated fiscal periods, the high and low sales prices (as reported by the OTCPink) for the Company's common stock. On February 23, 2015, we executed a 1 for 300 reverse split of our common stock. All per share prices have been adjusted to reflect this reverse split.

 

		Price
		High				Low
Fiscal year ended December 31, 2015
Quarter ended December 31, 2015		$	0.0002			$	0.00005
Quarter ended September 30, 2015		$	0.005			$	0.00005
Quarter ended June 30, 2015		$	0.006			$	0.001
Quarter ended March 30, 2015		$	0.04			$	0.001

 

Fiscal year ended December 31, 2014
Quarter ended December 31, 2014		$	0.18			$	0.03
Quarter ended September 30, 2014		$	0.30			$	0.06
Quarter ended June 30, 2014		$	0.84			$	0.24
Quarter ended March 30, 2014		$	1.80			$	0.30

 

Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth above are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.

 

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Holders

 

The number of record holders of our common stock as of June 16, 2016, was 118 according to our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in "street" or "nominee" name at a brokerage firm.

 

Dividends

 

We have never paid a cash dividend on our common stock. The payment of dividends may be made at the discretion of our Board of Directors, and will depend upon, among other things, our operations, capital requirements, and overall financial condition. There are no contractual restrictions on our ability to declare and pay dividends.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of the date of this Report, we have not authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities under any equity compensation plan.

 

Transfer Agent

 

O ur transfer agent is West Coast Stock Transfer, Inc. located at 2010 Hancock Avenue, Suite A, and San Diego, California 92110. Their telephone number is (619) 664-4780.

 

Recent Sales of Unregistered Equity Securities

 

During the three month period from October 1, 2015 to December 31, 2015 we issued 400,959,340 shares of our common stock upon the conversion of $16,963 in principal and interest on our various convertible notes and debentures, or $0.00004 per share prior to any loss on conversions.

 

We offered and sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. We relied on this exemption and rule based on the fact that there were a limited number of investors, all of whom were accredited investors and (i) either alone or through a purchaser representative, had knowledge and experience in financial and business matters such that each was capable of evaluating the risks of the investment, and (ii) we had obtained subscription agreements from such investors indicating that they were purchasing for investment purposes only. The securities were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The disclosure contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company, and is made only as permitted by Rule 135c under the Securities Act.

 

ITEM 6. SELECTED FINANCIAL DATA

 

As the registrant qualifies as a smaller reporting company under Rule 229.10(f) (1) , it is not required to provide this information .

 

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

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.

 

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 Form 10-K.

 

Overview

 

Our operations consist of Carmela's Pizzeria, which 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 and sports grills in select stores. Carmela's has been noted in Dayton Daily News as one of "The Best Pizzerias" in Dayton.

 

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

We had a net loss of $725,227 for the year ended December 31, 2015 as compared to a loss of $1,041,117 for the year ended December 31, 2014. Our gross sales in 2015 were $1,661,591 with cost of goods sold of $1,420,002 for a gross profit of $241,589. This compared to gross revenues of $1,603,488 with cost of goods sold of $1,345,423 for a gross profit of $258,065 for the year ended December 31, 2014. Our sales in the 2015 period increased $58,103, or approximately 4% in 2015 versus 2014. Our sales in the 2014 period increased $414,009, or approximately 35% versus 2013 primarily as a result of the addition of the Brookville location. Cost of goods sold increased by approximately 5%, which was in line with the sales increase.

 

12

 

Total operating expenses were $628,368 for the year ended December 31, 2015 versus $631,900 for the year ended December 31, 2014 resulting in loss from operations of $382,353 and $373,835 in the 2015 and 2014 periods, respectively. Much like the sales increase, these numbers remained fairly consistent from 2015 to 2014 with no significant variations in any one area of expense. There was a slight decrease in wages and taxes with the closing of a location in 2015.

 

Other expenses were $338,448 for the year ended December 31, 2015 as compared to $667,282 for the year ended December 31, 2014. This decrease was due primarily to lower expense for change in derivative liability and amortization of expense on discount of debt with lower costs for loss on conversions of debt and fewer notes becoming convertible in 2015 for lower amortization of the debt discount. The decreased expense from convertible notes and the corresponding derivative liabilities is the primary reason for the decrease in net loss for 2015 versus 2014. As the Company is currently dependent on this type of financing for a portion of its working capital, fluctuations in the amount of convertible debt as well as notes being converted will continue to affect the Company's results of operations, that could include higher expense from these derivative liabilities in future periods.

 

LIQUIDITY AND CAPITAL RESOURCES

 

GENERAL. Overall, the Company had a net loss of $725,227 for the year ended December 31, 2015. During the year ended December 31, 2015, we had cash flow used by operations of $297,918, net cash used in investing activities of $26,543, and cash flows provided by financing activities of $319,041. At December 31, 2015, our cash balance was $54,423.

 

For the year ended December 31, 2014, the Company had a net loss of $1,041,177 with cash flow used by operations of $381,935, net cash used in investing activities of $4,482, and cash flows provided by financing activities of $441,238. At December 31, 2014, our cash balance was $59,843.

 

CASH FLOWS FROM OPERATING ACTIVITIES. Net cash flow used in operating activities was $297,918 which was primarily attributable to our net loss of $725,227, offset by non-cash adjustments to derivative liabilities totaling $294,129. The adjustments to reconcile the net loss to net cash for the period ended December 31, 2013 also included depreciation expense of $24,267 and changes in asset and liabilities of $(54,488). We also issued convertible notes for services totaling $50,000.

 

CASH FLOWS FROM INVESTING ACTIVITIES. For the year ended December 31, 2014, cash flows used in investing activities was $26,543 from equipment purchases and improvements to our restaurant locations.

 

CASH FLOWS FROM FINANCING ACTIVITIES. For the year ended December 31, 2015, cash flows from financing activities were $319,041 which consisted of proceeds from issuance of notes and convertible notes payable totaling $128,400 that was offset by payments on notes payable of $2,700. In addition, we received $354,045 in notes payable from related parties that was offset by payments on related party notes of $160,704, nearly all of which is related to Carmela's. The significant decrease in financing activities is primarily the result of approximately $100,000 less in convertible note issued in the 2015 period versus the 2014 period. The Company anticipates it will continue to issue convertible notes payable to funds its operations during 2016, which will result in continued and significant dilution to the Company's current stockholders.

 

For the year ended December 31, 2014, we had cash used in operating activities of $381,935 including $22,014 in depreciation expense along with a total of $(41,974) from changes in assets and liabilities and $653,142 in non-cash expense relating to derivative liabilities.

 

For the year ended December 31, 2014, cash flows used in investing activities was $4,482 primarily from equipment purchases for our restaurant locations.

 

Cash flows from financing activities provided $441,238 for the year ended December 31, 2014, primarily from proceeds from various notes payable from related parties totaling $520,588, that was offset by repayments on these loans of $299,685, nearly all of which was related to Carmela's. In addition, there was $226,600 in convertible notes issued in 2014 that was partially offset by payments on these notes of $6,465.

 

13

 

EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2016 as we look to secure additional funds to both stabilize and grow our business operations and work on franchising efforts for Carmela's. 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 to us or our existing shareholders. Additionally, we will almost certainly need to rely on debt financing that is convertible into shares of our common stock that will result in continued and significant dilution to our stockholders due to the conversion of that debt at significant discounts to the market price of our common stock.

 

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 fiscal year 2016.

 

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

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. We do not enter into derivatives or other financial instruments for trading or speculative purposes, however we do issue convertible notes that are subject to changes in the market price of our common stock for conversions to equity. Accordingly, as of December 31, 2014, we had $240,000 face value of convertible debentures bearing fixed interest rates of 8%-10%. All of this fixed rate debt is due on demand or within twelve months from issuance. We have limited exposure to market risks related to changes in interest rates. We do not currently invest in equity instruments of public or private companies for business or strategic purposes.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NOTES TO FINANCIAL STATEMENTS

 

The financial statements and related information required to be filed are indexed and begin on page F-1 and are incorporated herein.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

CONTROLS AND PROCEDURES

 

CEO and CFO Certifications

 

Attached to this annual report, as Exhibits 31.1 and 32.1, are certain certifications of the CEO and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a- 14(a)/15d-14(a) Certifications"). This section of the annual report contains the information concerning the Evaluation referred to in the Rule 13a- 14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a- 14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.

 

Evaluation of Disclosure Controls and Procedures

 

A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the "CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO /CFO has concluded that as of December 31, 2015, disclosure controls and procedures, were not effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in the application of SEC rules and forms.

 

14

 

Management's Report on Internal Controls over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company's principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

 

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our CEO/CFO has evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to the extent possible given the limited personnel resources and technological infrastructure in place to perform the evaluation. Based upon our management's discussions with our auditors and other advisors, our CEO/CFO believe that, during the period covered by this report, such internal controls and procedures were not effective as described below.

 

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 no segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of one individual. 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.

 

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

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

15

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

 

(a)(b)(c) Identification of directors and executive officers

 

The following table sets forth the name, age, position and office term of each executive officer and director of the Company.

 

NAME		AGE				POSITION		SINCE
Ronald Heineman		59				Chief Executive Officer, Principal Executive Officer and Director		October 2013
Henry Fong		80				Chief Financial Officer, Principal Executive Officer, Principal Accounting Officer and Director		June 2012

 

Significant employees

 

NAME		AGE				POSITION		SINCE
Darren Dulsky		59				President and Chief Operating Officer of Carmela's Pizzeria		October 2013

 

Family relationships

 

None.

 

Business experience

 

RONALD HEINEMAN

 

Mr. Heineman became the CEO and a director of the Company in January 2013. Mr. Heineman was the managing member and the CEO of COHP, LLC and the CEO of Carmela's since their inception in July 2011. Since October 2010 Mr. Heineman has been Managing Director of Diversified Capital, a Venture Capital that holds majority positions in human resources outsourcing, restaurants, sports franchises and real estate including Wendy's and Frisch's Big Boy franchises. Mr. Heineman is experienced as a CEO, CRO and board member of public companies. In addition he is experienced in M&A and capital markets. Prior to his current Venture initiatives, Mr. Heineman, was employed for 23 years as Vice President of HR & Training with Frisch's Restaurants Inc, a public AMEX company operating Big Boy, Golden Coral, hotels and specialty restaurants including company owned and franchise restaurants in the Midwest. Mr. Heineman was also the CEO and CRO of Generation Entertainment, a publicy traded entertainment company from January 2012 to June 2013. Mr. Heineman has earned bachelors and masters degrees and is an adjunct professor teaching Entrepreneurship and Entrepreneurial Finance at Cedarville University.

 

16

 

HENRY FONG

 

Mr. Fong was president of the Company from June 2012 to October 2013 when he became our CFO; and has been a director of the Company since June 2012. Mr. Fong has been CEO and a director of AlumiFuel Power Corporation, an alternative energy company, since May 2005. Mr. Fong has been a director of FastFunds Financial Corporation, a publicly traded holding company, since June 2004. Mr. Fong has been a Director of SurgLine International, Inc. (f/k/a China Nuvo Solar Energy, Inc.) since March 2002 and was its president from March 2002 through September 1, 2011. SurgLine is a publicly traded company that sources and distributes high quality FDA approved medical and surgical products at discount prices. Mr. Fong was the Chief Executive Officer of Techs Loanstar, Inc. (and its predecessor companies), a publicly traded Company that provides software technology solutions to the healthcare market, from April 2008 to July 2011. Since July 2009 Mr. Fong has been the sole director, President and Chief Financial Officer of PB Capital International, Inc. ("PBIC"), a blank check shell company that filed Form 10 registration statement which went effective in October 2009. Since July 2010 to September 2013, Mr. Fong was President and a director of Green Energy TV, Inc., a privately-held owner of "green" websites, most notably greenenergytv.com . Since December 2008, Mr. Fong has been President and a director of Carbon Capture Corporation, a privately held owner of certain carbon based intellectual property. From 1959 to 1982 Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon. In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream Team."

 

DARREN DULSKY

 

Darren Dulsky, President and Chief Operating Officer of Carmela's, has been in restaurant industry since 1976. Mr. Dulsky worked for Friendly Ice Cream for 15 years as Manager, Training Coordinator and District Manager. He then joined Sbarro, Inc., a publicly traded company, in 1991. Mr. Dulsky held several operations positions during the 13 years prior to being named Sr. VP Operations where he had management oversight for over 130 units covering 17 states. Mr. Dulsky developed the Carmela's concept and opened the first location in 2004. Mr. Dulsky attended Sinclair Community College.

 

Our Bylaws provide that we shall have that number of directors determined by the majority vote of the board of directors. Currently we have two directors. Each director will serve until our next annual shareholder meeting. Directors are elected for one-year terms. Our Board of Directors elects our officers at the regular annual meeting of the Board of Directors following the annual meeting of shareholders. Vacancies may be filled by a majority vote of the remaining directors then in office. Our directors and executive officers are as follows:

 

Audit committee financial expert

Identification of the audit committee

 

We do not have a separately designated standing audit committee. Pursuant to Section 3(a) (58) (B) of the Exchange Act, the entire Board of Directors acts as an audit committee for the purpose of overseeing the accounting and financial reporting processes, and audits of our financial statements. The Commission recently adopted new regulations relating to audit committee composition and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these new requirements, our Board of Directors examined the Commission's definition of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an expert. We have had minimal operations for the past two (2) years. We believe our current director would meet the qualifications of an "audit committee financial expert" were he not an officer of the Company.

 

17

 

Code of Ethics

 

We have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is being designed with the intent to deter wrongdoing, and to promote the following:

 

	·	Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
	·	Full, fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by the small business issuer
	·	Compliance with applicable governmental laws, rules and regulations
	·	The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code
	·	Accountability for adherence to the code

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table and the accompanying notes provide summary information for each of the last three fiscal years concerning cash and non-cash compensation paid or accrued.

 

General

 

We currently have two executive officers, our Chief Executive Officer, Mr. Ronald Heineman, who is also our Principal Executive Officer and Mr. Henry Fong, who is our Chief Financial Officer and also our principal financial officer.

 

Compensation discussion and analysis

 

Our executive compensation is determined by our Board of Directors, and no compensation is currently accruing by our executive officers.

 

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Summary Compensation Table

 

SUMMARY COMPENSATION TABLE (1)

 

Name and principal position (a)		Year (b)		Salary ($) (c)		Bonus ($) (d)		Stock Awards ($) (e)		Nonqualified Deferred Compensation Earnings ($) (h)		All Other Compensation ($) (i)		Total ($) (j)
Ronald Heineman		2015		0		0		0		0		0		0
CEO		2014		0		0		0		0		0		0
Henry Fong		2015		0		0		0		0		0		0
CFO		2014		0		0		0		0		10,000		10,000

 

(1) Unless stated otherwise, the business address for each person named is c/o Greenfield Farms Food, Inc. In 2014, other compensation to Mr. Fong represented management compensation incurred in the first quarter of 2014.

 

We have not entered into any other employment agreements with our employees, Officers or Directors.

 

Stock Option Plan

 

We have not implemented a stock option plan at this time and since inception, have issued no stock options, SARs or other compensation. We may decide, at a later date, and reserve the right to, initiate such a plan as deemed necessary by the Board.

 

Compensation of directors

 

No compensation is paid to the Company's directors for their services as a director of the Company.

   

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS

 

Security ownership of certain beneficial owners.

Security ownership of management.

 

The following table contains certain information as of June 16, 2016 as to the number of shares of Common Stock beneficially owned by (i) each person known by the Company to own beneficially more than 5% of the Company's Common Stock, (ii) each person who is a Director of the Company, (iii) all persons as a group who are Directors and Officers of the Company, and as to the percentage of the outstanding shares held by them on such dates and as adjusted to give effect to this Offering.

 

Name of Beneficial Owner		Number of Shares Beneficially Owned (1)				Preferred Stock (2)				Warrants				Total Shares Beneficially Owned				Percent of Class
Darren Dulsky (4)			82,947				0				85,446				168,393				0.02	%
Ronald Heineman (3)(4) Chief Executive Officer			82,947				1,000				85,446				168,933				0.02	%
Henry Fong (2)(6) Chief Financial Officer			0				70,715								0				0	%
All Executive Officers and Directors as a Group (2 persons) (2)(3)(4)(5)(6)			82,947				71,715				85,446				168,933				0.02	%

_______________

(1) As of June 16, 2016, 2016, 933,336,455 shares of our common stock were outstanding. Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of the record date are deemed outstanding for computing the beneficial ownership percentage of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Except as indicated by footnote, the persons named in the table above have the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 

(2)  In March 2011, the Company authorized the issuance of up to 333 shares of $0.001 par value Series A Convertible Voting Preferred Stock (the "Series A Preferred") of which there were 96,623 shares outstanding as of December 31, 2013. Each share of Series A Preferred is convertible into .23 shares of common stock. If all shares of Series A Preferred were to be converted to shares of common stock as of June 16, 2016, a total of 22,223 shares would be issued to the holders of the Series B Preferred including 16,265 that would be beneficially owned by Mr. Fong through his wife. The Series A Preferred also carries voting rights on an "as if converted" basis.

 

(3)  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, which provide him the right to vote up to 51% of the total voting shares able to vote on any and all shareholder matters.

 

(4)  Includes warrants exercisable until October 2018 at the following exercise prices: 28,482 at $4.50; 28,482 at $0.02; and 28,482 at $0.025.

 

(5)  Includes 82,947 shares held by a trust owned by Mr. Heineman's spouse.

 

(6)  Includes 70,715 shares of Series A Preferred Stock owned by a company controlled by Mr. Fong's spouse.

 

20

 

The directors, executive officers, their affiliates, and related parties own, directly or indirectly, beneficially and in the aggregate, the majority of the voting power of the outstanding capital of the Company. Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital and the dissolution, merger or sale of the Company's assets.

 

Changes in control

 

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, which provide him the right to vote up to 51% of the total voting shares able to vote on any and all shareholder matters; thereby giving him effective control of the Company. We are currently not aware of any other arrangements that could result in a change in control of the Company.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Transactions with Related Persons

 

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.

 

The activity for the years ended December 31, 2015 and 2014 for all loans from officers of the Company and other related parties is as follows:

 

		December 31,
		2015				2014
Beginning balance		$	321,591			$	100,687
Advances, net			193,341				220,904
Notes reclassified to non-related party			(31,000	)			-
		$	483,932			$	321,591

 

Review, approval or ratification of transactions with related persons

 

Our entire board of directors is responsible for the review, approval or ratification of transactions with related persons. The board routinely reviews material related party transactions to ensure such transactions are reasonable, appropriate, and in the best interests of the Corporation. We have no written policies with respect to the review and approval of related party transactions and records of such reviews are contained in the minutes and/or reports of the board of directors as appropriate.

 

Director Independence

 

Our board of directors has two directors and has no standing sub-committees at this time due to the associated expenses and the small size of our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent and have no members of our board considered "independent" under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that our board has chosen to use for the purposes of the determining independence.

 

In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company's independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company's financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company's management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.

 

21

 

We do not currently have a standing compensation committee or non-employee directors. When we have non-employee directors on our board, those non-employee directors consider executive officer compensation, and our entire board participates in the consideration of director compensation. Non-employee board members would oversee would compensation policies, plans and programs. Our non-employee board members would further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.

 

Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Fees Billed For Audit and Non-Audit Services

 

The following table represents the aggregate fees billed for professional audit services rendered to the independent auditor, Silberstein Ungar, PLLC for our audit of the annual financial statements for the year ended December 31, 2013 and for our current auditor KLJ & Associates, LLP for the year ended December 31, 2014. Audit fees and other fees of auditors are listed as follows:

 

Year Ended December 31		2015   (2)				2014   (2)
Audit Fees  (1)		$	27,800			$	27,800
Audit-Related Fees  (3)			-				-
Tax Fees  (4)			-				-
All Other Fees  (5)			-				-
Total Accounting Fees and Services		$	27,800			$	27,800

 

	(1)	Audit Fees . These are fees for professional services for the audit of our annual financial statements, and for services that are normally provided in connection with statutory and regulatory filings or engagements including review of our quarterly financial statements.
	(2)	The amounts shown in 2013 and 2014 relate to (i) the audit of our annual financial statements for the fiscal years ended December 31, 2013 and 2014 and (ii) reviews of our quarterly financial statements. For the year ended December 31, 2014, $2,600 of the audit fees were paid to Silberstein Ungar, PLLC for their review of the Company's first quarter financial statements prior to their resignation as the Company's auditor.
	(3)	Audit-Related Fees . These are fees for the assurance and related services reasonably related to the performance of the audit or the review of our financial statements.
	(4)	Tax Fees . These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
	(5)	All Other Fees . These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.

 

Pre-Approval Policy for Audit and Non-Audit Services

 

We do not have a standing audit committee, and the full Board performs all functions of an audit committee, including the pre-approval of all audit and non-audit services before we engage an accountant. All of the services rendered to us by KLJ & Associates, LLP and Silberstein Ungar, PLLC were pre-approved by our Board of Directors.

 

The new policies and procedures will be detailed as to the particular service, will require that the Board or an audit committee thereof be informed of each service, and will prohibit the delegation of pre-approval responsibilities to management. It is currently anticipated that our new policy will provide (i) for an annual pre-approval, by the Board or audit committee, of all audit, audit-related and non-audit services proposed to be rendered by the independent auditor for the fiscal year, as specifically described in the auditor's engagement letter, and (ii) that additional engagements of the auditor, which were not approved in the annual pre-approval process, and engagements that are anticipated to exceed previously approved thresholds, will be presented on a case-by-case basis, by the President or Controller, for pre-approval by the Board or audit committee, before management engages the auditors for any such purposes. The new policy and procedures may authorize the Board or audit committee to delegate, to one or more of its members, the authority to pre-approve certain permitted services,  provided that  the estimated fee for any such service does not exceed a specified dollar amount (to be determined). All pre-approvals shall be contingent on a finding, by the Board, audit committee, or delegate, as the case may be, that the provision of the proposed services is compatible with the maintenance of the auditor's independence in the conduct of its auditing functions. In no event shall any non-audit related service be approved that would result in the independent auditor no longer being considered independent under the applicable rules and regulations of the Securities and Exchange Commission.

 

22

 

PART IV

 

ITEM 15. EXHIBITS

 

Exhibits

 

Exhibit Number		Description
3.1		Articles of Incorporation (Incorporated by reference from Exhibit No. 3.1 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009)
3.2		Bylaws (Incorporated by reference from Exhibit No. 3.2 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009)
3.3		Certificate of Amendment to Articles of Incorporation (Incorporated by reference from Exhibit No. 3.1 of the Registrant's Current Report on Form 8-K filed on April 5, 2011)
4.1		Certificate of Designation for Series A Preferred Stock (Incorporated by reference from Exhibit No. 4.1 of the Registrant's Current Report on Form 8-K filed on April 5, 2011)
4.2		Certificate of Designation of Series B Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2013 filed on November 14, 2013)
4.3		Certificate of Designation of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed on November 4, 2013)
4.4		Certificate of Designation of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed on October 10, 2014)
10.1		Debt Settlement and Release Agreement with Larry C. Moore and Donna Moore dated July 18, 2012 (Incorporated by reference from Exhibit No. 10.3 of the Registrant's Current Report on Form 8-K filed on April 5, 2011)
10.2		Asset Purchase Agreement (the "Agreement") by and among COHP, LLC, an Ohio limited liability corporation ("COHP"); and Carmela's Pizzeria CO, Inc., a Colorado corporation ("Carmela's CO"), and its parent Greenfield Farms Food, Inc., a Nevada corporation ("Greenfield") dated October 29, 2013 (Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed on November 4, 2013)
14.1		Code of Ethics (Incorporated by reference from Exhibit No. 14.1 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009)
31.1		Certification of Principal Executive Officer Sec. 302 (Filed herewith)
31.2		Certification of Principal Financial Officer Sec. 302 (Filed herewith)
32.1		Certification of Chief Executive Officer Sec. 906 (Filed herewith)
32.1		Certification of Chief Financial Officer Sec. 906 (Filed herewith)
101.INS		XBRL Instance Document (Filed herewith)
101.SCH		XBRL Schema Document (Filed herewith)
101.CAL		XBRL Calculation Linkbase Document (Filed herewith)
101.DEF		XBRL Definition Linkbase Document (Filed herewith)
101.LAB		XBRL Label Linkbase Document (Filed herewith)
101.PRE		XBRL Presentation Linkbase Document (Filed herewith)

 

23

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

		GREENFIELD FARMS FOOD, INC.
		(Registrant)
Dated: July 21, 2016	By:	/s/ Ronald Heineman
		Ronald Heineman
		Chief Executive Officer and Principal Executive Officer
	By:	/s/ Henry Fong
		Henry Fong
		Chief Financial Officer and Principal Financial Officer

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated: July 21, 2016	By:	/s/ Ronald Heineman
		Ronald Heineman
		Director
	By:	/s/ Henry Fong
		Henry Fong
		Director

 

24

 

GREENFIELD FARMS FOOD, INC.  

Index to Consolidated Financial Statements

 

		Page
Report of Independent Registered Public Accounting Firms		F-1
Consolidated Balance Sheets at December 31, 2015 and 2014		F-2
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014		F-3
Consolidated Statement of Shareholders' Deficit as of December 31, 2015 and 2014		F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014		F-5
Notes to Consolidated Financial Statements		F-6 – F-20

 

25

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Greenfield Farms Food, Inc.

 

We have audited the accompanying consolidated balance sheets of Greenfield Farms Food, Inc. as of December 31, 2015 and 2014 and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. Greenfield Farms Food, Inc.'s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Greenfield Farms Food, Inc. as of December 31, 2015 and 2014, the results of their operations, and their cash flows, for the years ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note (12) to the consolidated financial statements, the Company has incurred losses from operations, has negative working capital and is in need of additional capital to grow its operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note (12). The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

/s/ KLJ & Associates, LLP
KLJ & Associates, LLP
Edina, MN
July 20, 2016

 

F-1

 

GREENFIELD FARMS FOOD, INC.
CONSOLIDATED BALANCE SHEETS
		December 31, 2015				December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents		$	54,423				59,843
Credit card receivables			4,459				3,726
Inventory			25,309				29,734
Deferred charges			1,834				4,063
Total Current Assets			86,025				97,366
Property and Equipment
Equipment, computer hardware and software			178,771				152,871
Accumulated depreciation			(118,443	)			(94,819	)
Property and equipment, net			60,328				58,052
Other Assets
Security deposits			4,128				4,128
Total Assets		$	150,481			$	159,546
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current Liabilities
Accounts payable		$	72,869			$	93,883
Accrued wages and payroll expenses			23,444				9,695
Accrued interest			32,342				13,742
Accrued interest – related parties			-				12,153
Accrued interest – convertible notes payable			48,194				18,134
Derivative liability			572,565				266,162
Notes payable			81,300				50,200
Notes payable – related parties			483,932				321,591
Convertible notes payable, net of debt discount			319,384				221,994
Total Liabilities			1,634,030				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; 719,614,372 and 4,930,736 shares issued and outstanding, respectively			719,614				4,931
Warrants			507,280				507,280
Additional paid-in capital			382,933				1,007,930
Accumulated deficit			(3,093,518	)			(2,368,291	)
Total Stockholders' Deficit			(1,483,589	)			(848,008	)
Total Liabilities and Stockholders' Deficit		$	150,481			$	159,546

 

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

  

F-2

  

GREENFIELD FARMS FOOD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
		Year ended
		December 31,
		2015				2014
Sales
Food and beverage		$	1,646,269			$	1,594,058
Vending receipts			15,322				9,430
Total sales			1,661,591				1,603,488
Cost of Goods Sold			1,420,002				1,345,423
Gross Profit			241,589				258,065
Operating Expenses
Telephone and utilities			90,380				96,280
Legal, accounting and professional fees			132,989				124,497
Rent			75,000				73,483
Advertising			13,697				19,386
Repairs and maintenance			26,083				30,677
Bank and credit card processing charges			28,700				31,779
Wages and taxes			97,354				104,035
Depreciation			24,267				22,014
Other			139,898				129,749
Total Operating Expenses			628,368				631,900
Loss From Operations			(386,779	)			(373,835	)
Other Expenses (Income)
Interest expense			54,260				24,689
Derivative expense			419,475				265,015
Change in derivative liability			(362,572	)			(489,590	)
Loss on conversion of debt			-				590,279
Amortization expense on discount of debt			227,285				276,889
Total Other Expenses (Income)			338,448				667,282
Loss Before Provision for Income Tax			(725,227	)			(1,041,117	)
Provision for Income Tax			-				-
Net Income (Loss)		$	(725,227	)		$	(1,041,117	)
Weighted Average Number of Shares Outstanding:
Basic and Diluted			187,544,227				2,330,889
Net Loss per Share:
Basic and Diluted		$	(0.00	)		$	(0.45	)

 

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

 

F-3

 

GREENFIELD FARMS FOOD, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
		Preferred stock								Common stock												Additional paid-in				Accumulated				Total stockholders'
		Shares				Par value				Shares				Par value				Warrants				capital				deficit				deficit
Balance at December 31, 2013 (Restated)			140,623				141				485,776				486				507,280				145,247				(1,327,174	)			(674,020	)
Issuance of common stock to convertible noteholders			-				-				4,444,960				4,445				-				272,405				-				276,850
Beneficial conversion feature recroded for convertible debt			-				-				-				-				-				590,279				-				590,279
Issuance of series D preferred stock			1,000				1				-				-				-				(1	)			-				-
Net loss			-				-				-				-				-				-				(1,041,117	)			(1,041,117	)
Balance at December 31, 2014 (Restated)			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			-				-				714,682,976				714,682				-				(624,996	)			-				89,686
Issuance of common stock to round up reverse split			-				-				660				1				-				(1	)			-				-
Net loss			-				-				-				-				-				-				(725,227	)			(725,227	)
Balance at December 31, 2015			141,623			$	142				719,614,372			$	719,614			$	507,280			$	382,933			$	(3,093,518	)		$	(1,483,549	)

 

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

 

F-4

 

GREENFIELD FARMS FOOD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Year ended
		December 31,
		2015				2014
Cash Flows from Operating Activities
Net loss for the period		$	(725,227	)		$	(1,041,117	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation			24,267				22,014
Amortization of deferred financing costs			9,941				10,549
Amortization of discount on debt			227,285				276,889
Change in derivative liability			(362,572	)			(489,590	)
Initial derivative liability expense			419,475				265,015
Loss on conversion of debt			-				590,279
Convertible notes issued for services			50,000				26,000
Changes in Assets and Liabilities:
Decrease in prepaid expense			-				3,691
Increase in inventory			4,425				(21,248	)
Increase in accounts receivable			(733	)			-
(Increase) decrease in deferred debt charges			(7,713	)			299
Decrease in credit card receivable			-				1,192
Decrease in security deposits			-				1,475
(Decrease) increase in accounts payable			10,486				(18,681	)
Increase (decrease) in accrued expenses			52,448				(8,702	)
Net Cash used in Operating Activities			(297,918	)			(381,935	)
Cash Flows from Investing Activities:
Purchase of property and equipment			(26,543	)			(4,482	)
Net Cash Provided by (Used in) Investing Activities			(26,543	)			(4,482	)
Cash Flows from Financing Activities:
Proceeds from notes payable - related parties			354,045				520,588
Proceeds from notes payable			300				200
Proceeds from convertible notes payable			128,100				226,600
Payments of notes payable - related parties			(160,704	)			(299,685	)
Payments of notes payable			(2,700	)			-
Payments on convertible notes payable			-				(6,465	)
Net Cash Provided by Financing Activities			319,041				441,238
Net Increase in Cash and Cash Equivalents			(5,420	)			54,821
Cash and Cash Equivalents – Beginning			59,843				5,022
Cash and Cash Equivalents End of Period		$	54,423			$	59,843
Supplemental Cash Flow Information:
Cash paid for interest		$	1,851			$	1,851
Cash paid for income taxes			-			$	-
Non-Cash Investing and Financing Activities:
Interest accrued on convertible notes		$	32,258			$	16,002
Debt discount from fair value of embedded derivatives		$	249,500			$	226,600
Common stock issued for covertible notes and accrued interest		$	89,686			$	867,129
Accounts payable cancelled in exchange for convertible notes		$	31,500			$	26,000

 

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

 

F-5

 

NOTE 1 – 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 (the "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. COHP, LLC was formed on May 1, 2011, under the laws of the State of Ohio. 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.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements for the years ended December 31, 2015 and 2014 include the accounts of the Company and Carmela's.

 

For SEC reporting purposes, Carmela's is treated as the continuing reporting entity that acquired GRAS. The reports filed after the transaction have been prepared as if Carmela's (accounting acquirer) were the legal successor to the Company's reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela's for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela's have been retroactively adjusted to reflect the legal capital structure of the Company pursuant to FASB ASC 805-40-45-1.

 

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.

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

 

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 fiscal year end.

 

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, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.

 

The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments.

 

F-6

 

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.

 

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 measured at fair value were $572,565 and $266,162 at December 31, 2015 and 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.

 

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 amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. The Company had no cash equivalents at either December 31, 2015 or 2014.

 

F-7

 

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.

 

Revenue Recognition

 

The Company records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product/service is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products/services.

 

Reclassifications

 

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.

 

Income Taxes

 

The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

 

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. As of December 31, 2015 and 2014, the Company had not issued any stock-based payments to its employees.

 

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. As of December 31, 2015 and 2014 there were warrants outstanding to purchase 179,886 shares of common stock.

 

Derivative Financial Instruments

 

The Company follows ASC 815-40, Derivatives and Hedging, Contracts in Entity's own Equity. The Company's convertible debt has conversion provisions based on a discount of the market price of the Company's common stock.

 

The Company had derivative liabilities resulting from the issuance of convertible debt, which were measured at fair value on a recurring basis using an option pricing model. Consequently, the Company adjusted the fair value of the derivative liabilities at both December 31, 2015 and 2014 and recorded a loss related to the change in the value of the derivative liability of $362,572 and $489,590 in the statement of operations for the years ended December 31, 2015 and 2014, respectively, that were attributable to the change in unrealized gains or losses relating to the derivative liabilities still held at the reporting date for the years ended December 31, 2015 and 2014.

 

F-8

 

Dividends

 

The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.

 

Advertising Costs

 

The Company's policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $13,697 and $19,386 during the years ended December 31, 2015 and 2014, respectively.

 

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.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on our present or future consolidated financial statements.

 

NOTE 3 – INVENTORIES

 

Inventories consist of food and beverages, and are stated at the lower of cost, or market.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment is recorded at cost and consisted of the following at December 31:

 

		2015				2014
Equipment		$	178,771			$	152,871
Less: Accumulated depreciation			(118,443	)			(94,819	)
Property and equipment, net		$	60,328			$	58,052

 

Depreciation expense was $24,267 and $22,014 for the periods ended December 31, 2015 and 2014.

 

NOTE 5 – NOTES PAYABLE

 

In October 2013, COHP assumed a promissory note issued by GRAS for $50,000 as part of the recapitalization. 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 was $4,000 in each of the years ended December 31, 2015 and 2014, respectively. Additional notes in the amount of $300 were issued in the year ended December 31, 2014 with $100 in payments made against those notes with accrued interest expense of $11 during the year ended December 31, 2014. The remaining balance of these notes of $200 with $11 in interest was repaid in the year ended December 31, 2015, while an additional note for $300 was issued and remained unpaid as of December 31, 2015 along with $13 in accrued interest.

 

During the year ended December 31, 2015, $31,000 in notes that had been classified as related party in previous peri ods were reclassified to notes payable as the noteholders were no longer considered parties related to the Company. As a result, the $31,000 in principal and $14,587 in accrued interest is now shown in "notes payable" and "accrued interest" on our balance sheets as of December 31, 2015.

 

F-9

   

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.

 

The activity for the years ended December 31, 2015 and 2014 is as follows:

 

		December 31,
		2015				2014
Beginning balance		$	321,591			$	100,687
Advances, net			193,341				220,904
Notes reclassified to non-related party			(31,000	)			-
		$	483,932			$	321,591

 

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note was convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion. During the quarter ended December 31, 2013 Asher Enterprises issued notices of conversion to convert $20,600 on the June 2012 note for 132,010 shares at a price of $0.15 per share. The remaining balance of the note at December 31, 2013 was $6,350. An $87,148 loss on the conversion of the shares was recorded in 2013 as the note was in default and a derivative liability was no longer recorded at the time of conversions. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the $6,350 remaining balance along with $3,340 in accrued interest on the this note to 92,286 shares at a price of $0.11 per share. The remaining balance of the note after the conversions was $-0-. An $84,610 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On August 12, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note was convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $20,000 balance along with $1,600 in accrued interest on this note to 188,714 shares at a price of $0.10 per share. The remaining balance of the note after the conversions was $-0-. A $123,850 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $53,000 with an interest rate of 8% per annum due on October 30, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $53,000 balance along with $2,120 in accrued interest on this note to 459,333 shares at a price of $0.12 per share. The remaining balance of the note after the conversions was $-0-. A $259,903 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

F-10

 

On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $15,500 with an interest rate of 8% per annum due on November 15, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $15,500 balance along with $620 in accrued interest on this note to 134,333 shares at a price of $0.12 per share. The remaining balance of the note after the conversions was $-0-. A $51,905 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On May 14, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on February 13, 2014. The note was convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $32,500 balance along with $1,300 in accrued interest on this note to 250,370 shares at a price of $0.14 per share. The remaining balance of the note after the conversions was $-0-. A $111,209 decrease in derivative liability was recorded as a result of these conversions.

 

On June 24, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $7,500 with an interest rate of 8% per annum due on March 19, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert the entire $7,500 balance along with $300 in accrued interest on this note to 57,778 shares at a price of $0.14 per share. The remaining balance of the note after the conversions was $-0-. A $27,314 decrease in derivative liability was recorded as a result of these conversions.

 

On September 19, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on June 12, 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. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert $16,600 in principal on this note to 122,963 shares at a price of $0.14 per share. The remaining balance of the note after those conversions was $15,900. In April 2014, the remaining balance of this note was acquired by CareBourn Capital, which converted the entire remaining balance of $15,900 plus $1,378 in interest into 127,984 shares at a price of $0.14 per share. The remaining balance of this note after these conversions was $-0-. A $52,025 decrease in derivative liability was recorded as a result of these conversions.

 

On August 21, 2012, the Company issued a convertible promissory note in the amount of $1,500 to the Gulfstream 1998 Irrevocable Trust. The note was unsecured, due on demand and carried interest at 8% per annum. The note was convertible into shares of common stock at the market price. During the year ended December 31, 2013 an additional $25,900 was loaned and $5,664 was repaid on these notes. In addition, $4,000 of these notes were converted to 4,000 shares of our Series B preferred stock At October 1, 2013 the remaining notes with a balance of $12,736 that was convertible at market price were amended making them convertible at 45% of the lowest trading price in the thirty trading days before the conversion creating a derivative liability. During that same period, 6,604 in principal on these notes were converted to 44,470 shares of common stock at a price of $0.15. A $14,013 decrease in the derivative liability on these notes was recorded for the converted shares.

 

At December 31, 2013, there was $11,133 outstanding on convertible notes issued to the Gulfstream 1998 Irrevocable Trust. These notes are convertible at 45% of the lowest trading price in the thirty trading days before the conversion. During the year ended December 31, 2014 an additional $18,100 was loaned under the same conversion terms but are not convertible until six months following their issuance date. Also during that period a total of $9,166 was repaid on these notes. During the three month period ended March 31, 2014 the Trust issued a notice of conversion to convert $2,700 in principal on these notes to 20,000 shares at a price of $0.14 per share. A $14,013 decrease in derivative liability was recorded as a result of the conversion. The remaining balance of these notes was $17,367 at December 31, 2014 following these transactions. During the year ended December 31, 2015, a total of $2,500 was repaid on these notes and three notes totaling $13,100 were sold by the Trust to Codes Capital leaving a remaining balance on the notes of $1,767 at December 31, 2015.

 

At October 1, 2013, an $18,000 unsecured demand promissory note with an interest rate of 8% convertible to common stock at market was outstanding. In October 2013, the conversion terms of this note were changed making it convertible at 45% of the lowest trading price in the thirty trading days before the conversion, creating a derivative liability. The entire principal balance of this note was outstanding at December 31, 2013. During the three month period ended March 31, 2014 the holder of this note issued notices of conversion to convert the entire $18,000 balance on this note plus $138 in accrued interest to 122,144 shares at a price of $0.14 per share. The remaining balance of the note after the conversions was $-0-. A $61,473 decrease in derivative liability was recorded as a result of these conversions.

 

F-11

 

At October 1, 2013, the Company had an outstanding convertible promissory note to CareBourn Capital in the principal amount of $6,000 with an interest rate of 8% per annum due on December 19, 2013. The note was convertible by the holder at any time at 35% of the average of the three lowest trading prices in the ten trading days before the conversion. During the quarter ended December 31, 2013, CareBourn Capital converted $3,990 on this note for 26,590 shares at a price of $0.15 per share. A $45,495 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions. The remaining balance of the note after the conversions was $2,010 at December 31, 2013. During the quarter ended March 31, 2014, CareBourn Capital converted the $2,010 balance on this note plus $416 in accrued interest to 26,172 shares at a price of $0.15 per share. The remaining balance of the note after the conversions was $-0-. A $22,915 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On October 1, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $9,300 with an interest rate of 8% per annum due on June 1, 2014 upon the conversion of $9,300 in accounts payable to Cresthill. This note was 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 issuance date. During the quarter ended March 31, 2014 this note was assigned to CareBourn Capital, which converted the entire note balance of $9,300 along with $145 in accrued interest into 89,949 shares of common stock at $0.15 per share. The remaining balance of this note was $-0- after this conversion and a loss on the conversion of $39,683 was recorded for the difference in the market value and the conversion price on the date of conversion.

 

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 remained unpaid at both December 31, 2014 and 2015. 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 year ended December 31, 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 and $13,500 sold to Incipix Partners. During the three month period ended September, 2014 Incipix Partners issued a notice of conversion to convert $13,500 in principal and $657 in interest on this note to 209,732 shares at a price of $0.07 per share. A $20,251 decrease in derivative liability was recorded as a result of this conversion. The remaining balance of the note after those conversions was $9,000 payable to CareBourn Capital at both December 31, 2015 and 2014.

 

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 to 173,333 shares of common stock at $0.015 per share. A $5,013 decrease in derivative liability was recorded as a result of this conversion. The remaining balance of the note after those conversions was $2,400 at both December 31, 2015 and 2014.

 

In December 2013, the Company issued two convertible promissory notes to Gulfstream 1998 Trust in the aggregate principal amount of $5,000 with an interest rate of 8% per annum due on demand. These notes were convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion. At December 31, 2013, these notes were fully outstanding. During the year ended December 31, 2014 these note were repaid leaving no balance due at December 31, 2014.

 

F-12

 

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 in principal and $237 in interest on these notes to 158,768 shares at a price of $0.03 per share. An $11,072 decrease in derivative liability was recorded as a result of these conversions. The remaining balance of the note after conversions was $5,000 at both December 31, 2015 and 2014.

 

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 year ended December 31, 2015, a total of $55,306 in principal on these notes was converted to 513,179,160 shares of common stock at a price equaling $.0001 per share. A $186,096 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $2,604 as of December 31, 2015.

 

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 year ended December 31, 2015, the entire $18,800 in remaining principal and $2,192 in accrued interest on these notes was converted to 126,923,611 shares of common stock at a price equaling $.0002 per share. A $62,323 decrease in derivative liability was recorded as a result of these conversions. The principal balance due on this note was $0 at December 31, 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 year ended December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 2015, respectively.

 

F-13

 

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 December 31, 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 December 31, 2015.

 

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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 2015.

 

On November 16, 2015 the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $7,500 due on August 16, 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 December 31, 2015.

 

F-14

 

Total interest expense on these notes was $32,258 and $16,002 for the years ended December 31, 2015 and 2014, respectively.

 

A summary of debentures payable as of December 31, 2015 and 2014 is as follows:

 

Face Value		Balances 12/31/14				Issuance of new convertible notes				Amortization of discount on convertible Notes				Debenture conversions & payments year ended 12/31/15				Balances 12/31/15
Notes outstanding at 12/31/2014		$	240,128				-				-			$	(89,995	)		$	150,133
2015 note issuances			-			$	209,600				-				-				209,600
Note discount		$	(18,134	)			(249,500	)		$	227,285				-				(40,349	)
Total		$	221,994			$	(39,900	)		$	227,285			$	(89,995	)		$	319,384

 

Face Value		Balances 12/31/13				Issuance of new convertible notes				Amortization of discount on convertible Notes				Debenture conversions & payments year ended 12/31/14				Balances 12/31/14
Notes outstanding at 12/31/2013		$	260,294			$	-			$	-			$	(224,627	)		$	35,667
2014 note issuances			-				252,600				-				(48,139	)			204,461
Note discount		$	(55,423	)			(239,600	)			276,889				-				(18,134	)
Total		$	204,871			$	13,000			$	276,889			$	(272,766	)		$	221,994

 

NOTE 8 – DERIVATIVE LIABILITY

 

The Company has determined that the conversion features of certain of its convertible 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.

 

F-15

 

The beneficial conversion feature included in the notes that became convertible during the year ended December 31, 2015 resulted in initial note discounts of $249,500 and an initial loss on the valuation of the derivative liabilities of $419,475 based on the initial fair value of the derivative liabilities of $668,975. 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				10/1/15				10/19/15				11/5/15
Note amount		$	5,000			$	13,500			$	12,500			$	26,500			$	26,500			$	73,000			$	10,500			$	50,000			$	15,500			$	16,500
Stock price at convertible date		$	.06			$	.03			$	.0046			$	.00065			$	.00065			$	.0003			$	.0002			$	.0002			$	.0001			$	.0001
Expected life (years)			1.0				.25				.25				.52				.52				.38				.51				.50				.50				.25
Risk free interest rate			.13	%			.02	%			.10	%			.11	%			.11	%			.25	%			.20	%			.11	%			.20	%			.14	%
Volatility			202	%			212	%			375	%			382	%			382	%			237	%			388	%			291	%			273	%			378	%
Initial derivative value		$	11,639			$	32,526			$	21,608			$	113,520			$	113,520			$	75,285			$	20,007			$	221,223			$	31,043			$	28,604

  

The beneficial conversion feature for notes that became convertible in 2014 resulted in initial debt discounts of $239,600 and an initial loss on the valuation of the derivative liabilities of $504,615 based on the initial fair value of the derivative liabilities of $265,015. 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		1/9/14				1/16/14				2/18/14				3/19/14				4/29/14				6/5/15				7/30/14				8/5/14				8/21/14				9/3/14				10/7/14
Note amount		$	5,000			$	5,000			$	62,500			$	32,500			$	25,000			$	22,500			$	5,000			$	5,100			$	5,000			$	35,000			$	37,000
Stock price convertible date		$	.003			$	.0021			$	.0023			$	.0013			$	.0011			$	.0008			$	.0004			$	.0006			$	.0005			$	.0004			$	.0003
Expected life (years)			.50				.50				.50				.23				.25				.23				.24				.25				.25				.48				.48
Risk free interest rate			.07	%			.07	%			.07	%			.12	%			.02				.12	%			.03	%			.03	%			.03	%			.05	%			.04	%
Volatility			420	%			420	%			402	%			157	%			97	%			106	%			105	%			106	%			105	%			138	%			406	%
Initial derivative value		$	16,621			$	12,122			$	191,384			$	54,688			$	43,040			$	27,907			$	6,218			$	17,571			$	13,530			$	62,323			$	59,211

 

At December 31, 2015, the following notes remained convertible and not fully converted. All convertible notes beyond their maturity dates totaling $236,533 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 December 31, 2015 utilizing the following assumptions:

 

Note convertible date		8/25/15				10/1/15				10/19/15				11/5/15				Matured
Note amount		$	10,500			$	50,000			$	15,500			$	16,500			$	236,533
Stock price at convertible date		$	.0001			$	.0001			$	0.001			$	.0001			$	0.0001
Expected life (years)			.16				.25				.30				.10				.50
Risk free interest rate			.01	%			.26	%			.26	%			.17	%			.55	%
Volatility			267	%			247	%			388	%			31	%			285	%
12/31/15 derivative value		$	17,503			$	86,736			$	28,997			$	20,169			$	419,160

 

At December 31, 2014, the following notes remained convertible and not fully converted or in default. All convertible notes beyond their maturity dates totaling $128,332 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 December 31, 2014 utilizing the following assumptions:

 

Note convertible date		3/3/14				10/7/14				Matured
Note amount		$	18,800			$	24,996			$	128,332
Stock price at convertible date		$	.0001			$	.0001			$	.0001
Expected life (years)			.15				.25				.50
Risk free interest rate			.04	%			.11	%			.11	%
Volatility			236	%			236	%			197	%
12/31/14 derivative value		$	21,832			$	31,528			$	212,802

 

F-16

 

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 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 year ended December 31, 2015, the Company issued 714,682,976 shares of common stock upon conversion of $89,686 in principal and interest on convertible notes representing a value of $0.0001 per share..

 

2014 Common Stock Issuances

 

During the year ended December 31, 2014, the Company issued 4,444,960 shares of common stock upon conversion of $276,850 in principal and interest payable on convertible notes representing a value of $0.06 per share. In addition, we incurred loss on conversion of certain of the shares totaling $590,279 for a total cost to the Company of $867,129.

 

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 December 31, 2015 no conversion has taken place and the shares remain outstanding.

 

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. As of December 31, 2015, all 44,000 shares remain outstanding.

 

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. As of December 31, 2015, all 1,000 shares remain outstanding.

 

F-17

 

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.

 

A summary of the activity of the Company's outstanding warrants at December 31, 2013 and December 31, 2014 is as follows:

 

		Warrants				Weighted-average exercise price				Weighted-average grant date fair value
Outstanding and exercisable at December 31, 2013			179,886			$	5.50			$	2.82
Granted			-				-				-
Expired/Cancelled			-				-				-
Exercised			-				-				-
Outstanding and exercisable at December 31, 2014			179,886			$	5.50			$	2.82
Granted			-				-				-
Expired/Cancelled			-				-				-
Exercised			-				-				-
Outstanding and exercisable at December 31, 2015			179,886			$	5.50			$	2.82

 

The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31, 2014:

 

Exercise price range				Number of warants outstanding				Weighted-average exercise price				Weighted-average remaining life
$	3.00				59,962			$	3.00			2.8 years
$	6.00				59,962				6.00			2.8 years
$	7.50				59,962				7.50			2.8 years
					179,886			$	5.50			2.8 years

 

F-18

 

NOTE 10 – COMMITMENTS

 

The Company leases its restaurant facilities under certain leases with varied expiration dates. Certain leases provide for the payment of taxes and operating costs, such as insurance and maintenance in addition to the base rental payments.

 

Aggregate minimum annual rental payments under the non-cancelable operating leases are as follows:

 

Year ended December 31, 2016		$	57,600
2017			58,350
2018			51,450
2019			43,200
Total		$	210,600

 

Rent expense was $75,000 and $73,483 for the years ended December 31, 2015 and 2014.

 

NOTE 11 – RELATED PARTY TRANSACTIONS

 

As more fully disclosed in Note 5 – Notes Payable Related Parties, certain officers, directors and stockholders have loaned the Company funds from time-to-time. Information regarding these loans can be found in Note 6.

 

NOTE 12 – GOING CONCERN

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not yet realized significant revenues from operations, recognized significant losses in 2015 and 2014, and is in need of working capital in order to grow its operations. This raises substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans from directors, potential private placements of common stock, debt convertible into common stock and by obtaining extended payment terms from certain vendors.

 

F-19

 

NOTE 13 – INCOME TAXES

 

As of December 31, 2015 and 2014 the Company had net operating loss carry-forwards of approximately $1,865,653 and $1,429,039, respectively, which will expire beginning in 2032. This represents the historical net operating loss carry-forwards of the Company for the fiscal years ended December 31, 2015 and 2014. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income. A reconciliation of the benefit for income taxes with amounts determined by applying the statutory federal income rate of (34%) to the loss before income taxes is as follows:

 

		2015				2014
Net Operating Loss		$	(725,227	)		$	(1,041,117	)
Benefit for income taxes computed using the statutory rate of 34%			245,073				353,979
Permanent Differences			(96,624	)			(218,481	)
Change in valuation allowance			(148,449	)			(135,498	)
Provision for income taxes		$	-			$	-

 

Significant components of the Company's deferred tax liabilities and assets at December 31, 2013 and 2012 are as follows:

 

		2015				2014
Total deferred tax assets		$	634,322			$	485,873
Valuation allowance			(634,322	)			(485,873	)
		$	-			$	-

 

NOTE 14 – SUBSEQUENT EVENTS

 

During the period from January 1, 2016 to the filing of this report, a total of 213,722,083 shares of common stock were issued upon the conversion of $10,040 in principal and interest due on certain of the Company's convertible promissory notes representing an average conversion price of $.00005 per share. In addition, the Company issued a new convertible promissory note totaling $33,000 in face value. This note is convertible at 45% of the market price of the Company's common stock, bears interest at 12% per annum, and is due nine months from issuance.

 

In accordance with ASC 855-10 , the Company has analyzed its operations subsequent to December 31, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those disclosed above.

 

 

F-20

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