Depreciation expense was $91,855 and $79,127 for the years ended December 31, 2019 and 2018, respectively.
Amortization expense was $16,079 and $39,490 for the years ended December 31, 2019 and 2018, respectively.
As a result of the reverse acquisition on October 4, 2017, we acquired approximately $0.5 million of liabilities, net of assets, of the former operations of West Coast Ventures Group Corp. (which have been discontinued). During 2017 we issued 3,000,000 shares of our common stock to extinguish $30,000 of indebtedness. We are evaluating the means to relieve the Company of these liabilities.
From time to time the principal stockholder of the Company has loaned funds to the Company on an undocumented basis with no stated interest rate. These loans were made principally to complete the conversion of the Illegal Burger - Arvada (2014), Illegal Burger - Writer Square (2015 and 2016), Illegal Burger Capital Hill (2016) and Illegal Burger CitiSet (2018) locations. This stockholder loan balance was $0 and $206,434 at December 31, 2019 and 2018, respectively.
The following is the Companys assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2019 and 2018, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
Changes in Level 3 assets measured at fair value for the year ended December 31, 2019 were as follows:
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(9) NOTES PAYABLE TO THIRD PARTIES, continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Look
|
|
|
Inception
|
|
Issue
|
|
Maturity
|
|
|
|
Interest
|
|
Conversion
|
|
Back
|
|
December 31 Balance
|
Amount
|
|
Date
|
|
Date
|
|
OID
|
|
Rate
|
|
Price
|
|
Period
|
|
2019
|
|
2018
|
c) Convertible Notes - Variable Conversion Rate, continued
|
|
|
|
|
|
|
|
|
$
108,000
|
|
7/5/19
|
|
6/30/20
|
|
11.11%
|
|
12%
|
|
45%
|
|
20 days
|
|
132,699
|
|
-
|
$
103,000
|
|
7/10/19
|
|
7/10/20
|
|
10%
|
|
8%
|
|
45%
|
|
20 days
|
|
121,862
|
|
-
|
$
75,000
|
|
8/7/19
|
|
5/7/20
|
|
-
|
|
12%
|
|
50%
|
|
10 days
|
|
73,600
|
|
-
|
$
70,000
|
|
8/7/19
|
|
5/7/20
|
|
12%
|
|
12%
|
|
40%
|
|
20 days
|
|
77,172
|
|
-
|
$
90,000
|
|
8/8/19
|
|
8/8/20
|
|
-
|
|
10%
|
|
43%
|
|
20 days
|
|
96,914
|
|
-
|
$
135,000
|
|
8/12/19
|
|
7/10/20
|
|
11%
|
|
8%
|
|
45%
|
|
20 days
|
|
160,160
|
|
-
|
$
53,000
|
|
10/31/19
|
|
8/15/20
|
|
-
|
|
12%
|
|
45%
|
|
20 days
|
|
53,709
|
|
-
|
$
18,235
|
|
12/13/19
|
|
12/13/20
|
|
9%
|
|
10%
|
|
35%
|
|
25 days
|
|
18,394
|
|
-
|
Subtotal Convertible Notes - Variable Conversion Rate
|
|
|
|
|
|
1,238,468
|
|
342,787
|
Less unamortized discounts
|
|
|
|
|
|
|
|
|
|
(553,646)
|
|
(113,610)
|
Net Convertible Notes - Variable Conversion Rate
|
|
|
|
|
|
$
684,822
|
|
$
229,177
|
d) Convertible Notes - Fixed Conversion Rate
|
|
|
|
|
|
|
|
|
|
|
$
87,522
|
|
7/3/18
|
|
12/31/20
|
|
-
|
|
12%
|
|
$
0.0035
|
|
-
|
|
22,039
|
|
82,791
|
$
54,445
|
|
7/10/18
|
|
12/31/21
|
|
-
|
|
8%
|
|
$
0.0035
|
|
-
|
|
59,406
|
|
54,445
|
$
33,504
|
|
8/10/18
|
|
12/31/21
|
|
-
|
|
12%
|
|
$
0.0035
|
|
-
|
|
37,551
|
|
33,504
|
$
80,044
|
|
8/7/19
|
|
12/31/21
|
|
-
|
|
12%
|
|
$
0.0035
|
|
-
|
|
37,866
|
|
83,807
|
$
100,000
|
|
4/10/19
|
|
4/10/20
|
|
-
|
|
20%
|
|
$
.05
|
|
-
|
|
114,630
|
|
-
|
Subtotal Convertible Notes - Fixed Conversion Rate
|
|
|
|
|
|
271,492
|
|
254,547
|
Less unamortized discounts
|
|
|
|
|
|
|
|
|
|
(76,465)
|
|
(199,848)
|
Net Convertible Notes - Variable Conversion Rate
|
|
|
|
|
|
$
195,027
|
|
$
54,699
|
e) Note of Wholly Owned Subsidiary
|
|
|
|
|
|
|
|
|
$
375,000
|
|
3/5/15
|
|
12/5/15
|
|
-
|
|
18%
|
|
-
|
|
-
|
|
$
438,220
|
|
$
438,220
|
F-13
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(9) NOTES PAYABLE TO THIRD PARTIES, continued
a) Future Receivables Sale Agreements
The Company, through Nixon Restaurant Group, Inc., J&F Restaurants, LLC, Illegal Burger, LLC, Illegal Burger Writer Square, LLC, Illegal Burger Capitol Hill, LLC and Illegal Burger CitiSet, LLC entered into several agreements at various times to obtain advances against future restaurant credit/debit card sales. The agreements provide for funding of various percentages of future qualified credit/debit merchant card receivables. Proceeds received from sales of future receivables during 2019 and 2018 totaled $415,000 and $140,000, respectively. At December 31, 2019 and 2018, the total payable balances inclusive of interest under the factoring agreements were $450,258 and $154,770, respectively.
b) One Year Notes
In February 2016, the Company entered into a one year note for $88,000 with a third party. The loan balance was $0 and $24,985 at December 31, 2019 and 2018, respectively.
In April 2019, the Company entered into a one year note for $100,000 with a third party. This note carries a 20% interest rate and is collateralized by a second mortgage on the founder and CEOs residence. The loan balance, including interest, was $114,630 at December 31, 2019.
c) Convertible Notes - Variable Conversion
In the fourth quarter 2019, the Company entered into two convertible notes in exchange for $73,000 in cash with a principal amount of $73,000. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $73,000 with a related debt discount of $73,000.
In the third quarter 2019, the Company entered into six convertible notes in exchange for $567,000 in cash with a principal amount of $609,400. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $960,354 with a related debt discount of $609,400, and an immediate loss of $281,945.
In the third quarter 2019, the Company paid off three convertible notes in cash in the amount of $472,093.
In the second quarter 2019, the Company entered into nine convertible notes in exchange for $591,000 in cash with a principal amount of $669,000. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $891,345 with a related debt discount of $602,580, and an immediate loss of $291,355.
In the second quarter 2019, the Company paid off three convertible notes in cash in the amount of $504,812.
In the first quarter 2019, the Company entered into five convertible notes in exchange for $424,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $467,348 with a related debt discount of $432,166, and an immediate loss of $35,182.
In the first quarter 2019, the Company paid off two convertible notes in cash in the amount of $101,181.
In the fourth quarter 2018, the Company entered into two convertible notes in exchange for $238,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $189,380, with a related debt discount of $138,000, and an immediate loss of $51,380. These notes were settled in 2019.
F-14
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(9) NOTES PAYABLE TO THIRD PARTIES, continued
c) Convertible Notes - Variable Conversion, continued
In the third quarter 2018, the Company entered into two convertible notes in exchange for $68,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $151,769, with a related debt discount of $68,000, and an immediate loss of $83,763. These notes were settled in 2019.
In the first quarter 2018, the Company entered into three convertible notes in exchange for $280,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $306,000, with a related debt discount of $306,000. These notes were settled in 2018, and which included a penalty of $40,528.
d) Convertible Notes - Fixed Conversion
In the third quarter 2019, the Company entered into one convertible note in exchange for $108,000 in cash with a note amount of $120,000. Based on the conversion terms the beneficial conversion rights embedded in this convertible note was recorded as a debt discount in the amount of $28,800.
In the second quarter 2019, the Company entered into one convertible note in exchange for $100,000 in cash. This note matures in one year and carry a 20% interest rates. The note converts into shares of the Companys common stock at a price of $0.04 per share of Common Stock from October 10, 2019 to maturity. At maturity it is convertible at $0.05 per share as long as Companys Volume Weighted Average Price, (VWAP) for the ten trading days prior to the conversion notice is greater than $0.07 per share. If the VWAP is below $0.07, then the conversion formula is $0.05xVWAP/$0.07. Based on the conversion terms the beneficial conversion rights embedded in this convertible note was recorded as a debt discount in the amount of $56,250 and is being amortized over the life of the loan.
During the third quarter of 2018, two parties related to each other purchased, through assignment, three of the variable conversion price convertible notes then outstanding. These parties immediately amended the notes into four notes to replace the variable conversion rate with a fixed conversion rate of $0.0035 per share of the Companys common stock. The maturity dates of the three notes were extended to December 31, 2020 and 2021. During 2019, $82,831 of these notes were converted into 23,665,964 shares of common stock. The aggregate remaining balance outstanding of these note at December 31, 2019 is $156,862.
During the fourth quarter of 2018, one of the parties that purchased one of the variable conversion price convertible notes assigned $50,000 of their note to a third party for $50,000 in cash. This new party immediately amended the assigned note portion to a fixed conversion rate of $0.01 per share of the Companys common stock. The maturity date of this note was extended to December 31, 2021. During the second and third quarters of 2019 this note was converted into 5,000,000 shares of common stock, and the balance of this note is $0 at December 31, 2019.
In the fourth quarter 2018, the Company entered into a convertible note in exchange for $100,000 in cash. This note matures in two years and carries a 10% Original Issue Discount (OID). The note converts into shares of the Companys common stock at a price of $0.05 per share. In the second quarter 2019, this note was paid in full in cash. The balance of this note is $0 at December 31, 2019.
e) Third Party Note Payable with Subsidiary
In March 2015, the Company entered into an agreement with a third party lender, who extended a $3,000,000 Senior Secured Note. Under the terms of this agreement a first draw was entered into in the amount of $375,000 as a Revolving Note. The lender retained $59,713 of this draw as fees. Under the terms of this Note, the Company was required to replace their credit card/debit card merchant processing to the lender. The lender retained 100% of the credit card/debit card transactions, and forwarded four wire transfers to the Company over a six week period. The credit card/debit card transactions for this six week period amounted
F-15
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(9) NOTES PAYABLE TO THIRD PARTIES, continued
e) Third Party Note Payable with Subsidiary, continued
to $84,534. The lender remitted $42,379 of this amount to the Company. Of the $42,155 retained by the lender, $14,861 was applied as principal reduction, $7,088 was applied to interest expense and the remaining $20,206 was charged as fees. The Senior Secured Note also called for the payment of a $75,000 investment banking fee.
In May 2015, when it was determined that this repayment structure was not practical for a restaurant operation, the lender agreed to restructure the Revolving Note into a Replacement Promissory Note. This Replacement Promissory Note carries interest at a stated rate of 18% with a maturity of June 1, 2016. The lender charged the Company a $25,000 penalty to convert the Revolving Note into a Replacement Promissory Note. The Replacement Promissory Note called for interest only payments in June, July and August 2015. Starting in September the terms called for the payment of interest, principal starting at $33,649 increasing monthly to $38,474 in June 2016, as the interest on the then outstanding balance fell. In addition the Replacement Promissory Note called for the payment of a $106,000 Redemption Premium as part of the total monthly payment of $49,651. As a direct result of delays in opening the new Writer Square location, the lender agreed to interest only payments via ACH draft every Monday. In June 2015, the Company paid $1,080 per week, which was increased to $1,200 per week for July 1 through October 15, 2015. It was then increased to $1,500 per week from October 16, 2015 through the third week of March 2016, when it was increased to $2,000 per week.
At both December 31, 2019 and 2018 the principal balance of the loan was $322,220. The Company also accrued the $25,000 conversion penalty, the $75,000 investment banking fee and the $106,000 redemption premiums as accrued interest because the Replacement Promissory Note allows for prepayment but all these fees are due upon prepayment. In October 2018, the lender filed a claim demanding repayment of all amounts outstanding in the amount of $565,267. (See Note 16a)
f) Third Party Notes Payable
Certain third parties have advanced funds to WCVC to fund its ongoing operations. These advances have been formalized into demand notes payable, which, at September 30, 2017, amount to $54,039 and carry a 5% interest rate. WCVC has a $250,000 note payable which is due in April 2018 and carries a 5% interest rate. These liabilities have been incorporated into liabilities from discontinued operations.
(10) OPERATING LEASES
a) Adoption of ASC Topic 842, Leases
On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. The Companys leases consist of operating leases that relate to real estate rental agreements. All of the value of the Companys lease portfolio relates to real estate lease agreements that were entered into starting in May 2014.
b) Practical Expedients and Elections
The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected the short-term lease recognition exemption for all leases that qualify.
c) Discount Rate Applied to Property Operating Lease
To determine the present value of the minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount
F-16
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(10) OPERATING LEASES, continued
d) Discount Rate Applied to Property Operating Lease, continued
equal to the lease payments in a similar economic environment (the incremental borrowing rate or IBR). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the interest rate average for its latest borrowings.
e) Right of Use Assets
Right of use assets are included in the consolidated Balance Sheet as follows:
f) Non-current assets
Right of use assets, net of amortization - $1,489,737.
g) Total operating lease cost
Individual components of the total lease cost incurred by the Company is as follows:
|
|
|
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
Operating lease expense
|
$594,664
|
|
$462,075
|
Minimum rental payments under operating leases are recognized on a straight line basis over the term of the lease.
h) Maturity of operating leases
The amount of future minimum lease payments under operating leases at December 31, 2019 are as follows:
|
|
|
Operating Lease
|
Undiscounted future minimum lease payments:
|
|
2020
|
$
432,312
|
2021
|
307,419
|
2022
|
241,002
|
2023
|
252,891
|
2024
|
256,264
|
Thereafter
|
540,491
|
Total
|
2,030,379
|
Amount representing imputed interest
|
(492,035)
|
Total operating lease liability
|
$
1,538,343
|
Current portion of operating lease liability
|
$
295,214
|
Operating lease liability, non-current
|
$
1,243,129
|
F-17
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(11) LIABILITY TO ISSUE COMMON STOCK
During the fourth quarter 2018 and second quarter 2019 the Company entered into four (4) Securities Purchase Agreements, (SPAs), with three parties, two of whom are related to each other. All four of these SPAs have language prohibiting the holder to own more than 4.99% of the issued and outstanding shares of the Company at any time.
In connection with these SPAs the Company was entitled to receive $906,500 in cash for the issuance of common stock, issuable at per share prices ranging between $0.0035 and $0.06 per share subject to downward adjustment based on volume weighted average price as defined at the date of issuance notice. The Company received $249,000 in 2018 and $310,000 in 2019 under these SPAs. The Company has not received the final September 2019 tranche of $347,500 as required under one of the SPAs. Contractually, under the SPAs, the Company is required to issue 88,619,381 shares. 1,537,246 shares were issued in the third quarter 2019, under one of these SPAs. (See Note 16a)
(12) STOCKHOLDERS DEFICIT
At December 31, 2019 and 2018, the Company had 10,000,000,000 and 250,000,000 shares of par value $0.001 common stock authorized and 918,470,359 and 33,906,532 issued and outstanding, respectively. At December 31, 2019 and 2018, the Company has 10,000,000 shares of par value $0.001 preferred stock authorized and 500,000 issued and outstanding.
On February 18, 2020, the Company (through an affirmative vote of the Companys Board of Directors and the holders of a majority of the shares of the Company entitled to vote) adopted a plan to effect a reverse stock split in the ratio of 1:1,000. This reverse spit will be instituted upon approval by the Financial Industry Regulatory Agency, (FINRA).
Common Stock
In the fourth quarter 2019, the Company issued 2,500,000 shares of common stock as an inducement for the extension of convertible debt, valued at $157,500. The Company issued 3,997,266 shares of common stock valued at $286,044 to settle $13,990 of convertible debt pursuant to the modification of terms to fixed conversion rate. The Company issued 798,519,055 shares of common stock valued at $1,200,597 to settle $445,367 of convertible debt. The Company issued 36,348,494 shares of common stock in exchange for $41,053 in cash.
In the third quarter 2019, the Company issued 100,000 of common stock as an inducement fee for the extension of a convertible note, valued at $5,460. The Company issued 10,838,698 shares of common stock valued at $322,344 to settle $46,894 of convertible debt, pursuant to the modification of terms to fixed conversion rate. The Company issued 1,500,000 shares of common stock valued at $77,250 to settle $25,500 of convertible debt. The Company issued 1,537,246 shares of common stock valued at $57,647 for $32,282 of a Securities Purchase Agreement (SPA) funded in October 2018. The Company issued 6,404,057 shares of common stock in exchange for $120,423 in cash.
In the second quarter 2019, the Company issued 1,933,333 shares of common stock as an inducement for the extension of convertible debt, valued at $94,730. The Company issued 3,900,000 shares of common stock valued at $316,500 to settle $39,000 of convertible debt pursuant to the modification of terms to fixed conversion rate. The Company issued 3,333,333 shares of common stock in exchange for services valued at $239,333. The Company issued 5,000,000 shares of common stock in exchange for $50,000 in cash and $279,990 in fixed assets. The Company issued 386,589 shares of common stock in exchange for one-half of the first year rent on the Companys corporate office, valued at $26,520. The Company issued 1,247,449 shares of common stock in exchange for $67,124 in cash.
In the first quarter 2019, the Company issued 1,713,307 shares of common stock as a commitment fee for its equity line of credit, valued at $90,000. The Company issued 5,305,000 shares of common stock valued at $300,885 to settle $18,568 of convertible debt pursuant to the modification of terms to fixed conversion rate.
In the first quarter 2018 the Company issued 100,000 shares of common stock in exchange for services valued at $22,600. The Company issued 340,000 shares of common stock valued at $85,000 as a debt inducement. The Company issued 1,155,829 shares of common stock valued at $216,140 to settle $16,528 of convertible debt and 50,898 shares of common stock valued at $9,518 upon the cash-less exercise of a warrant.
In the second quarter 2018 the Company issued 650,000 shares of common stock in exchange for services valued at $59,000. The Company issued 3,349,783 shares of common stock valued at $266,729 to settle $94,226 of convertible debt. The CEO of
F-18
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(12) STOCKHOLDERS DEFICIT, continued
the Company and his spouse contributed 22,000,000 shares of common stock valued at $3,140,000 back to the Company which cancelled the shares, pursuant to a request from OTC Markets as part of the approval to list the common stock on the OTCQB.
In the third quarter 2018 the Company issued 750,000 shares of common stock in exchange for services valued at $18,750. The Company issued 764,205 shares of common stock valued at $19,769 to settle $7,102 of convertible debt and recorded a loss of $12,767. The Company issued 5,111,000 shares of common stock in exchange for $27,220 in cash. The Company repurchased and retired 1,546,727 shares of common stock for $34,000 in cash under a settlement agreement with a convertible note holder.
In the fourth quarter 2018 the Company issued 10,000,000 shares to the Companys principal officer to settle $100,000 of accrued compensation. The Company issued 4,625,000 shares of common stock valued at $289,375 to settle $16,187 of convertible debt and recorded a loss of $273,188.
Preferred stock
The rights and privileges of the Series A preferred stock are solely as a super voting stock, whereby each one share of Series A holds votes amounting to the equivalent of 100,000 shares of common stock. Therefore, the 500,000 shares of Series A issued and outstanding hold an aggregate votes equal to 500,000,000 common shares. The Series A shares have no dividend rights, no liquidation preferences, are not transferable and can be redeemed by the holder for $5,000 in cash from the Company for the entire 500,000 share block at the holders option.
(13) INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the tax effects of differences between the financial statements and tax basis of assets and liabilities. A valuation allowance is established to reduce the deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.
The components of income tax provision (benefit) related to continuing operations are as follows at December 31:
|
|
|
|
|
2019
|
|
2018
|
Current
|
$
-
|
|
$
-
|
Deferred
|
$
-
|
|
$
-
|
Total tax provisions
|
$
-
|
|
$
-
|
The following is a reconciliation of the effective income tax rate with the statutory income tax rate at December 31:
|
|
|
|
|
2019
|
|
2018
|
U.S. Federal statutory income tax rate
|
(21)%
|
|
(21)%
|
State income tax, net of federal benefit
|
(1.6)%
|
|
(1.6)%
|
Other temporary differences, net
|
-
|
|
-
|
Valuation allowance
|
22.6%
|
|
22.6%
|
|
0.0%
|
|
0.0%
|
F-19
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(13) INCOME TAXES, continued
The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at
December 31:
|
|
|
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
Net operating loss carry forwards
|
$
1,480,457
|
|
$
886,073
|
Deferred compensation
|
222,783
|
|
131,416
|
Stock based compensation
|
167,356
|
|
56,302
|
Other
|
13,666
|
|
10,531
|
Total
|
1,884,262
|
|
1,084,322
|
Deferred tax liabilities:
|
-
|
|
-
|
Less: valuation allowance
|
(1,884,262)
|
|
(1,084,322)
|
Net deferred tax assets
|
$
-
|
|
$
-
|
The change in valuation allowance was $799,940 and $259,746 for the years ended December 31, 2019 and 2018, respectively. We have recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which temporary differences become deductible.
In accordance with the provisions of ASC 740: Income Taxes, we record a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2019 and 2018, we have no liabilities for uncertain tax positions. We continually evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
(14) COMMITMENTS AND CONTINGENCIES
a) Real Property Leases
The Company leases seven (7) restaurant spaces and its corporate office from unrelated parties. Rent expense paid was $594,664 and $462,075 for the years ended December 31, 2019 and 2018.
F-20
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(14) COMMITMENTS AND CONTINGENCIES, continued
a) Real Property Leases, continued
Future minimum lease payments under these real property lease agreements are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ending December 31,
|
|
ESSE
|
|
IBE
|
|
IBA
|
|
IBWS
|
|
IBCH
|
|
IBCS
|
|
IPL
|
2020
|
|
$
-
|
|
$
-
|
|
$
77,038
|
|
$
102,643
|
|
$
69,501
|
|
$
65,400
|
|
$
64,690
|
2021
|
|
$
-
|
|
$
-
|
|
$
25,931
|
|
$
102,643
|
|
$
23,394
|
|
$
67,200
|
|
$
66,151
|
2022
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
104,354
|
|
$
-
|
|
$
69,000
|
|
$
67,648
|
2023
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
112,908
|
|
$
-
|
|
$
70,800
|
|
$
69,183
|
2024
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
112,908
|
|
$
-
|
|
$
72,600
|
|
$
70,756
|
Thereafter
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
94,090
|
|
$
-
|
|
$
281,400
|
|
$
165,001
|
Total minimum lease payments
|
|
$
-
|
|
$
-
|
|
$
102,969
|
|
$
629,546
|
|
$
92,895
|
|
$
626,400
|
|
$
503,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WCVC
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
53,040
|
|
$
432,312
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
$
22,100
|
|
$
307,419
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
$
-
|
|
$
241,002
|
|
|
|
|
|
|
|
|
|
|
2023
|
|
$
-
|
|
$
252,891
|
|
|
|
|
|
|
|
|
|
|
2024
|
|
$
-
|
|
$
256,264
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
$
-
|
|
$
540,491
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
75,140
|
|
$
2,030,379
|
|
|
|
|
|
|
|
|
|
|
ESSE: El Senor Sol - Evergreen; IBE: Illegal Burger - Evergreen; IBA: Illegal Burger - Arvada; IBWS - Illegal Burger - Writer Square; IBCH - Illegal Burger - Capital Hill; IBCS - Illegal Burger - CitiSet; IPL - Illegal Pizza - Lauderhill; WCVC - corporate office. The Companys leases for the Evergreen locations expired on August 31, 2019, and are currently operating on a month to month basis.
b) Other
The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to those actions will not materially affect the Companys financial position or results of operations.
F-21
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(14) COMMITMENTS AND CONTINGENCIES, continued
c) Litigation
On October 8, 2018, the creditor holding the First Amended Senior Secured Note from Illegal Burger, LLC filed suit in Broward County, Florida. The creditor is demanding $565,267, including interest, plus attorneys fees and costs. The Company expects to either negotiate a settlement agreement or to vigorously defend this action.
(15) CONCENTRATIONS OF CREDIT RISK
a) Cash
The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balance in excess of FDIC insured limits at December 31, 2019 and 2018.
(16) SUBSEQUENT EVENTS
a) Litigation and threatened litigation
The two related party holders of four fixed rate convertible notes and two of the SPAs for the purchase of common shares has threatened litigation relating to these securities, based on a claim that the Company does not have sufficient shares reserved for issuance under these notes and SPAs as required. The Company claims that these holders have defaulted under the SPA that required a $347,500 tranche to be invested in September 2019, and that the failure to provide these funds directly caused the circumstances causing the claimed shortfall in reserved shares.
In May 2020 the U.S. Securities and Exchange Commission, (SEC), filed a civil action alleging fraud against the creditor in Note 13c above. The SEC also appointed a court supervised receiver of this creditor, who has stayed all current litigation involving this creditor. The Company expects to reach a settlement with this receiver when they lift the stay.
b) Deficiency in Stockholders Equity
In the first quarter 2020, the Company issued 2,035,049,580 shares of common stock valued at $491,505 to settle $114,658 of convertible debt. In addition, the Company issued 56,000,000 shares of common stock in exchange for $39,200 in cash.
In the second quarter 2020, the Company issued 100,000,000 shares of common stock valued at $10,000 to settle $6,000 of convertible debt.
c) COVID-19 pandemic
The short term impact of COVID-19 are the result of government directives, first from the City of Denver, CO, and subsequently from the States of Colorado and Florida requiring only pick-up and delivery orders of food and beverages. Under these directives we were required to close our dining areas in all our restaurants. This has caused a fall-off in business, which has been somewhat offset by an increase in pick-up and delivery orders. We have been able to keep our restaurants open for pick-up and delivery orders. This in turn has allowed us to continue to employ our staff at the restaurants. We intend to continue to pay our employees through this crisis in the hopes that once the crisis has passed and we will be allowed to return to more normal operations we can do so quickly by bringing our existing staff back in without having to train a large number of new staff. Our Denver area locations were allowed to resume 50% of dining facilities beginning on May 29.
The Company has had to develop and implement new policies and procedures for use in all of it restaurants to foster continued customer confidence when they purchase food from us during this crisis. The Company has had to develop and implement procedures for drive through pick up orders as none of our restaurants are equipped with drive through windows. We have expended considerable time and effort developing multiple means to get the information out to the buying public that all our restaurants are open for pick-up and delivery orders.
F-22
WEST COAST VENTURES GROUP CORP.
Notes to Consolidated Financial Statements
(16) SUBSEQUENT EVENTS, continued
c) COVID-19 pandemic, continued
The Company temporarily closed our El Senor Sol - Evergreen, CO location because it was not receiving sufficient take out/delivery orders to make sense remaining open. The Company elected to re-brand this location during this time. The Company had been seeking to complete a re-branding in a way that would cause the least financial harm. The pandemic provided a perfect opportunity. The locations new brand is Kalaka Mexican Kitchen.
d) US Small Business Administration Paycheck Protection Program (PPP)
In April 2020, the Company received a loan of $298,700 under the SBAs PPP. Depending upon the final determination of the requirements for forgiveness under this program, the Company expects its PPP loan to be substantially to totally forgiven. Any amount not forgiven becomes a two year loan at 1% interest.
e) US Small Business Administration Economic Injury Disaster Loans (EIDL)
In May 2020, the Company, through one of its operating LLC subsidiaries, received a SBA EIDL in the amount of $21,900. In June 2020, the Company, through five of its operating LLC subsidiaries received five SBA EIDL in the total amount of $747,500 and six EIDL Grants totaling $36,000. The EIDL are 30 year loans carrying a 3.25% interest rate with the first payment due in June 2021. The Grants do not get repaid.
f) Notes Payable to Third Parties
During the state imposed pandemic requirement to reduce operations, the lenders of the Future Receivable Sales Agreements agreed to lower the payments due to them. Also the party holding the remaining One Year Note and one of the Fixed Rate Convertible Notes agreed to a 90 day extension to the maturity and a subsequent 90 day extension upon payment of the initial one year interest in the amount of $40,000. Several holders of Variable Rate Convertible Notes have also agreed to 90 day extensions to the maturity of their notes. The Company has requested extensions on the balance of the Variable Rate Convertible Notes, but has not received a response from the lenders.
F-23