The accompanying notes are an integral part of the consolidated financial statements
The accompanying notes are an integral part of the consolidated financial statements
The accompanying notes are an integral part of the consolidated financial statements
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(1) NATURE OF OPERATIONS
Global Boatworks Holdings, Inc., (the Company, Global Boatworks), was formed on May 11, 2015, under the laws of the State of Florida. At formation the Company acquired 100% of the membership interests of Global Boatworks, LLC, (LLC) which was formed on June 16, 2014, under the laws of the State of Florida. The Companys business activities to date have primarily consisted of the formation and implementation of a business plan for building luxury floating vessels on a barge bottom, the rental activities relating to the existing vessel, Miss Leah, and the construction of the new vessel, Luxuria I.
The accompanying consolidated financial statements include the activities of Global Boatworks Holdings, Inc. and Global Boatworks, LLC, its wholly owned subsidiary.
(2) PRINCIPLES OF CONSOLIDATION, USE OF ESTIMATES AND GOING CONCERN
a) Principles of Consolidation
The Companys consolidated financial statements include the financial statements of Global Boatworks Holdings, Inc. and its wholly owned subsidiary Global Boatworks, LLC. All intercompany balances and transactions have been eliminated.
b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying consolidated financial statements involved the valuation of construction in progress, depreciable life of the floating vessel, valuation of long lived assets, valuation of derivatives, valuation of common and preferred stock issued as compensation and valuation allowance on deferred income tax assets.
c) Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a working capital deficit, accumulated deficit and stockholders deficit of $1,527,467; $4,647,540 and $1,003,459, respectively, at December 31, 2017. In addition the Company had a net loss of $3,042,629 and used cash of $382,583 in operating activities in 2017. In addition the Company defaulted on two notes in fiscal 2017 and two of its notes subsequent to the year ended December 31, 2017. These matters raise substantial doubt about the Companys ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company is expected to have increasing costs and expenses as a result of becoming a publicly held company and constructing new vessels without immediate increases in revenues as they continue to implement their plan of operations. The ability of the Company to continue as a going concern is dependent upon increasing operations, developing sales and obtaining additional capital and financing. The Company is seeking to raise sufficient equity capital to enable it to pay off existing debt. It is also attempting to sell the Luxuria I. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Cash and cash equivalents
The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no financial instruments that qualified as cash equivalents at December 31, 2017 or 2016.
F-6
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Construction in progress
Costs to construct vessels are capitalized during the construction phase. Upon completion of a vessel the Company will either sell the vessel or place it in service as a rental property. If the vessel is to be leased, the construction costs are transferred to property and equipment and depreciated over its useful life.
c) Property and equipment
All property and equipment are recorded at cost and depreciated over their estimated useful lives, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
d) Impairment of long-lived assets
A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.
e)
Financial instruments and Fair value measurements
ASC 825-10 Financial Instruments, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Companys current financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.
FASB ASC 820 Fair Value Measurement clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
F-7
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e)
Financial instruments and Fair value measurements
(continued)
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following reflects the Companys assets and liabilities that are measured at fair value on a recurring and nonrecurring basis at December 31, 2017 and 2016, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
|
|
| |
|
2017
|
|
2016
|
Level 3 - Embedded Derivative Liability
|
$
|
369,570
|
|
$
|
780,685
|
Changes in Level 3 assets measured at fair value for the year ended December 31, 2017 were as follows:
|
| |
Balance, December 31, 2015
|
$
|
-
|
Initial valuation recorded as debt discount
|
|
682,596
|
Change in fair value
|
|
98,089
|
Balance, December 31, 2016
|
|
780,685
|
Portion of initial valuation recorded as debt discount
|
|
151,751
|
Amortization to gain on extinguishment upon conversion or repayment
|
|
(329,623)
|
Initial and change in fair value
|
|
(233,243)
|
Balance, December 31, 2017
|
$
|
369,570
|
f) Revenue recognition
Rental Revenue
Revenue is recognized when earned, generally starting when the rental customer takes temporary possession of the floating vessel and through their contracted stay. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the marina dockage fees and fees charged by the web site Homeaway, where the floating vessel is advertised for rent.
Sale Revenue
Revenue is recognized when earned, generally at closing of the sale of a vessel. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the capitalized cost of constructing a vessel.
g)
Stock compensation for services rendered
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the shorter of period the employee or director is required to perform the services in exchange for the award or the vesting period. The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC 505-50, for share-based payments to non-employees, compensation expense is determined at the
A
measurement date. The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
F-8
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h)
Income Taxes
The LLC and the predecessor company, (Financial Innovators), are pass through entities for income tax purposes, therefore there is no income tax provision or liability for these entities through the Companys incorporation date of May 11, 2015. As a result of the reorganization the Company became a taxable entity on May 11, 2015. Upon becoming a taxable entity, the Company began to use the asset and liability method of ASC 740 to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.
The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.
The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
As of December 31, 2017, the tax years 2017, 2016, 2015 and 2014 for the LLC and 2017, 2016 and 2015 for the corporation remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.
i) Convertible Notes With Fixed Rate Conversion Features
The Company may issue convertible notes, which are convertible into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company measures the fair value of the note at the time of issuance at the fixed monetary value of the payable and records any premium as interest expense on the issuance date.
j) Debt issue costs
The Company accounts for debt issuance cost paid to lenders, or third parties as debt discounts which are amortized over the life of the underlying debt instrument.
F-9
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k) Net income (loss) per share
Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. There were 783,190,707 and 16,511,370 common stock equivalents for the years ended December 31, 2017 or 2016, respectively.
l) Derivatives
The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivatives are removed from the balance sheet. The shares issued upon conversion of the note are recorded at their fair value with gain or loss recognition as applicable.
Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.
m)
Recent accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time based on when control of goods and services transfer to a customer. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and entities are permitted to apply either prospectively or retrospectively; early adoption is permitted. This is not expected to have a material impact on our results of operations, cash flows or financial condition.
F-10
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m)
Recent accounting pronouncements
(continued)
In February 2016, the FASB issued ASU 2016-02, Leases which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the Companys consolidated financial statements.
In December 2016, FASB issued Accounting Standards Update (ASU), 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this Update affect the guidance in Update 2014-09, which is not yet effective. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.
In May 2017, FASB issued Accounting Standards Update (ASU), 2017-09 - Compensation - Stock Compensation: Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used)
1. of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.
The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.
2. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.
3. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this Update.
Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.
F-11
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(4) CONSTRUCTION IN PROGRESS
Construction in progress represents the capitalized construction of its Luxuria floating vessel(s) being constructed for sale. At December 31, 2016, the Company capitalized $431,501. At June 30, 2017, the Luxuria I was completed and $677,180 was transferred to fixed assets as it is held for rental and/or sale.
(5) PROPERTY AND EQUIPMENT
Property and Equipment held for sale consists of the following at December 31, 2017 and 2016:
|
|
|
|
| |
|
|
2017
|
|
|
2016
|
Miss Leah floating vessel
|
$
|
-
|
|
$
|
-
|
Luxuria I floating vessel
|
|
677,180
|
|
|
-
|
Less: accumulated depreciation
|
|
(33,859)
|
|
|
-
|
Total P&E held for sale
|
$
|
643,321
|
|
$
|
0
|
On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah was based at a marina in Boston harbor. It was rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessors rental business. Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Companys books at its original cost basis of $0 based on its fully depreciated value at the transfer date. As the Miss Leah has been recorded on the books of the Company at a value of $0, there is no depreciation recorded. On September 14, 2017, the Company sold the Miss Leah and recorded sales proceeds of $222,187, net of estimated sales tax due of $14,813.
On June 30, 2017, the Company transferred the Luxuria I, a two-story luxury floating living vessel in the South Florida architectural style, built on a barge platform, from construction in progress to fixed assets as it is complete. The Company has the Luxuria I available for either vacation rental or outright sale. As long as it is available for vacation rental the Company will record depreciation over a 20 year period.
Property and Equipment consists of the following at and December 31, 2017 and 2016:
|
|
|
|
| |
|
|
2017
|
|
|
2016
|
Architectural plans
|
$
|
12,766
|
|
$
|
12,766
|
Furniture and equipment
|
|
6,296
|
|
|
-
|
Less: accumulated amortization and depreciation
|
|
(4,154)
|
|
|
(1,368)
|
Total P&E
|
$
|
14,908
|
|
$
|
11,398
|
The Company capitalized the costs of developing the architectural plans for the Luxuria model floating vessel and has begun amortizing the costs over their estimated useful life of seven years, beginning April 1, 2016. Amortization expense for the years ended December 31, 2017 and 2016, was $1,824 and $1,368, respectively.
F-12
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(6) RENTAL PROPERTY AND RELATED NOTE PAYABLE
On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah is based at a marina in Boston harbor. It is rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessors rental business.
The terms of this acquisition are for a payable to the related party Predecessor in the amount of $100,000, carrying interest at 2% per annum from the effective date of the transfer date of September 25, 2014 with all principal and interest due on the maturity date of June 20, 2022, which was memorialized in the form of a promissory note in June 2015, effective September 25, 2014. Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Companys books at its original cost basis of $0 based on its fully depreciated value at the transfer date. Accordingly, the Company charged additional paid-in capital in 2014 as a distribution for $100,000. Outstanding principal and interest totaled $106,455 and $104,482 at December 31, 2017 and 2016, respectively.
(7) SHORT TERM LOANS AND SHORT-TERM CONVERTIBLE NOTES
a) Short term notes
Short term debt including accrued interest was, as follows, at December 31:
|
|
| |
|
2017
|
|
2016
|
Note 1
|
$
40,000
|
|
$
100,000
|
Note 2
|
345,050
|
|
-
|
Note 3
|
-
|
|
-
|
Note 4
|
-
|
|
-
|
Note 5
|
52,217
|
|
-
|
Less: unamortized debt discounts
|
(8,607)
|
|
-
|
Total short term notes, net
|
$
428,660
|
|
$
100,000
|
NOTE 1: On July 9, 2015, the company entered into a loan agreement in the amount of $151,700 with a shareholder. The company issued 250,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $25,000, or $0.10 per share (based on the recent private placement sales) was recorded as a discount and is being amortized at a rate of $2,083 per month over the life of the loan. The note bears interest at the rate of 10%. Prepaid interest in the amount of $15,000 and a loan fee of $1,700 were deducted from the proceeds of the loan. These were amortized each month at the rate of $1,250 and $142 over the life of the loan, respectively. We were obligated to pay the principal and interest due on July 9, 2016. The loan was secured by the Miss Leah, our company owned vessel. The Company paid $6,000 in interest to the holder during the third quarter 2016.
F-13
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT-TERM CONVERTIBLE NOTES (continued)
a) Short term notes
(continued)
The note holder sold $51,700 of this note to a third party in August 2016, and the Company modified the new $51,700 note to add a conversion feature at a conversion rate of 60% of the trading price of the Companys common stock. This note is considered stock settled debt and accordingly the Company recorded a premium on the debt of $34,467 as a charge to interest expense on the modification date. This third party converted $51,700 of this in exchange for 1,574,740 shares in fiscal 2016, and the premium was reclassified to additional paid in capital.
The $100,000 remaining balance of the original note was renegotiated into a new note on December 5, 2016 which matured on July 15, 2017. This new note carries interest at a rate of 16.8% which was payable in cash monthly. The Company paid $14,443 in interest during the year ended December 31, 2017. This new note required the Company to issue 100,000 shares which were valued at $6,000 which was recorded as a discount to be amortized over the remaining life of the note. The remaining note balance and unamortized discount balance at December 31, 2017, is $40,000 (see following assignments) and $0. The $40,000 balance of Note 1 matured on July 15, 2017, and is in default. The Company and the lender are negotiating the terms of an extension.
NOTE 2: On January 5, 2017, pursuant to a securities purchase agreement and a secured promissory note for $830,000 available in five tranches, the Company drew $170,000 and received $150,000 in cash net of $15,000 OID and $5,000 legal fees under this nine month secured promissory note. This note is secured by all the assets of the Company, inclusive of the Luxuria I and the Luxuria II, the member interests of its wholly owned LLC and personally guaranteed by Robert Rowe, CEO of the Company. The lenders security interests are subordinate by law to the security interests of the August 11, 2016 lender. This note is structured in multiple parts, first the initial $170,000 as drawn and a subsequent $660,000 which can be drawn at the Companys option. This note does not carry a stated interest rate, (except it is 22% in event of default as defined in the promissory note), but carries an Original Issue Discount (OID) that totals $75,000 and is pro-rata on each tranche drawn. The OID will be amortized over the remaining life of the note from the date drawn. In addition, the Company is required to pay $5,000 of the lenders legal fees which was applied to the first tranche drawn. which will also be recorded as debt discount and will be amortized over the nine month life of the note. The Company received the second tranche of $110,000 and received $100,000 in cash net of $10,000 OID under this note in March 2017. The Company received the third tranche of $55,000 and received $50,000 in cash net of $5,000 OID under this note in November 2017. On November 16, 2017, the lender agreed to extend the note for a three month period and an extension fee of $10,050 was added to the principal balance of note. At December 31, 2017, the balance of this note and the unamortized discount is $345,050 and $1,181, respectively. (see Note 15)
This note requires a partial prepayment if and when the Company sells the Luxuria I and Luxuria II, upon the receipt of which the lender has agreed to release the security interest in the vessels. This prepayment is 10% of the profits on the Luxuria I and 33% of the profits on the Luxuria II. If the Company rents/leases either the Luxuria I or II, then the prepayment is 20% of the gross rental revenue. The balance owed for rental revenue at December 31, 2017 is $712 and is included in the note balance.
NOTES 3 AND 4: On April 19, 2017, the Company entered into an eight month financing of the $14,500 Luxuria I annual insurance premium. On June 15, 2017, the Company entered into a six month financing of the $3,211 Miss Leah 10 month insurance premium. The Luxuria portion was paid in full at December 31, 2017, and the Miss Leah was sold in September 2017.
F-14
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
a) Short term notes
(continued)
NOTE 5: On July 17, 2017, the company entered into a loan agreement in the amount of $50,000 with a shareholder. The company issued 1,000,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $15,000, or $0.015 per share based on the quoted market price which was recorded as a debt discount and is being amortized at a rate of $1,250 per month over the life of the loan. The note bears interest at the rate of 12%, payable monthly. The unamortized balance of the discount is $7,426 at December 31, 2017. Total unpaid principal and interest is $52,217 at December 31, 2017.
b) Short term convertible notes
Short term convertible debt including accrued interest was as follows at December 31, 2017:
| |
Convertible note 1
|
$
-
|
Convertible note 2
|
417,368
|
Convertible note 3
|
16,069
|
Convertible note 4
|
10,760
|
Convertible note 5
|
10,760
|
Convertible note 6 - related party
|
16,498
|
Convertible note 7
|
47,004
|
Convertible note 8
|
30,493
|
Convertible note 9
|
44,046
|
Less: unamortized debt discounts
|
(80,739)
|
Less: related party note, net
|
(10,297)
|
Total convertible notes, net
|
$
501,962
|
NOTES 1 AND 2: On August 11, 2016, pursuant to a securities purchase agreement and a secured convertible promissory note for $610,000, the Company drew $305,000 and received $227,500 in cash under this six month secured convertible promissory note. This note is secured by all the assets of the Company, inclusive of the Miss Leah and the Luxuria 1, and the member interests of its wholly owned LLC. This note is structured in two parts, first the initial $305,000 as drawn and a subsequent $305,000 which can be drawn at the Companys option in amount/s determined by the Company. This note does not carry a stated interest rate, but carries an Original Issue Discount (OID) that totals $100,000 and is proportional to the total amount borrowed. An OID of $50,000 was recorded as a discount to the note for the initial draw and were amortized over the six month life of the note. In addition, the Company is required to pay $10,000 of the lenders legal fees (pro rata to the draws) and $22,500 of brokerage commission which was withheld from the initial $305,000 draw, both of which were also recorded as debt discounts and were amortized over the six month life of the note. Also, the Company was required to issue 100,000 shares of restricted common stock which was valued at $0.10 per share based on recent stock sales and recorded as a discount to the note and is being amortized over the six month life of the note. This note requires a $200,000 partial prepayment if and when the Company sells the Miss Leah. The note is personally guaranteed by the Companys CEO, Robert Rowe. In event of default the note carries an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.
F-15
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
b) Short term convertible notes
(continued)
On October 5, 2016, the Company drew an additional $122,000 and received $92,000 in cash under this six month secured convertible promissory note. An OID of $20,000 was recorded as a discount to the note for the second draw and was amortized over the remaining life of the note. On November 3, 2016, the Company drew an additional $183,000 and received $150,000 in cash under this six month secured convertible promissory note. An OID of $30,000 and legal costs of $3,000 were recorded as discounts to the note for the third draw and was amortized over the remaining life of the note.
The total note is convertible into common stock upon an event of default as follows:
Lender has the right at any time following an Event of Default, at its election, to convert (each instance of conversion is referred to herein as a Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the
A
Conversion Amount) divided by the Conversion Price (as defined below).
Subject to the adjustments set forth herein, the conversion price (the
A
Conversion Price) for each Conversion shall be equal to 60% (the Conversion Factor) multiplied by the lowest Closing Bid Price in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, if at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date (other than an Event of Default for failure to pay the Conversion Eligible Outstanding Balance on the Maturity Date), the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time the Conversion Shares are not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 60% to 55% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(a), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default.
Due to the variable conversion terms and certain default provisions, the embedded conversion option has been bifurcated and recorded as a derivative liability at an initial fair value of $378,624 with $217,500 recorded as a debt discount and $161,124 as a derivative expense. The October 5, 2016 draw resulted in an initial fair value of $113,616 with $92,000 recorded as a debt discount and $21,616 as a derivative expense. The November 3, 2016 draw resulted in an initial fair value of $190,356 with $150,000 recorded as a debt discount and $40,356 as a derivative expense. The valuation method utilized during 2016 was the Black-Scholes model with the following range of assumptions: Expected life in years 0.50 to 0.10; the conversion price range of $0.21 to $0.036; Bond equivalent yield rate between 0.29% and 0.63%. The valuation method utilized during 2017 was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 of $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%.
F-16
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
b) Short term convertible notes
(continued)
On February 4, 2017, the maturity date was extended to May 11, 2017. Under the terms of this extension, the Company agreed to pay an additional $18,300 in interest at maturity. The Company recorded this interest as a debt discount and is amortizing it to maturity. At December 31, 2017, the unamortized balance is $0.
On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of this note. These shares were valued at $0.073 per share, or $73,000, based on the quoted trading price, and after relieving the related derivative value a gain of $3,463 was recorded. (See Note 11)
In May 2017, the lender bifurcated the original note, which had a then remaining balance of $598,300, into two new notes, Note 1 with a principal balance of $200,000 and Note 2 with a principal balance of $416,249, which included a maturity extension fee of $17,949. Note 1 is collateralized with the Miss Leah and Note 2 with all Companys assets including the Luxuria I. At December 31, 2017, the unamortized balance of the extension fee is $0.
Note 1 requires a mandatory partial prepayment of up to $200,000 if and when the Company sells the Miss Leah, upon the receipt of which the lender has agreed to release the security interest in the vessel. Note 2 contains no such provision. All other provisions of the original note are carried over to these two new notes. The maturity date of theses two notes was August 11, 2017. On August 11, 2017, the lender agreed to negotiate three month extensions for both notes which was completed August 14, 2017, and combined extension fee of $17,619 was added to the principal balance of the notes.
On July 18, 2017, the Company issued 2,307,692 shares of common stock upon conversion $18,000 of Note 1. On August 10, 2017, the Company issued 3,800,000 shares of common stock upon conversion $10,944 of Note 1. The bifurcated convertible Notes 1 and 2 in the remaining balances of $182,000 and $416,249 matured on August 11, 2017. On November 11, 2017, the lender agreed to extend Note 2 for an additional three month period and an extension fee of $12,595 was added to the principal balance of note 2. (see Note 15)
On September 14, the Company paid off the balance of Note 1 in the amount of $176,986 from the proceeds of the sale of the Miss Leah.
On October 13, 2017, the Company issued 6,190,000 shares of common stock upon conversion of Note 2 principal in the amount of $8,914. On December 27, 2017, the Company issued 25,000,000 shares of common stock upon conversion of Note 2 principal in the amount of $15,000. At December 31, 2017 the balance was $417,368 and the unamortized discount was $5,750.
NOTE 3: On April 15, 2017, the Company entered into a six month 10% convertible promissory note in the amount of $15,000. In event of default the note carries an interest rate of 18%.
The total note is convertible into common stock as follows:
F-17
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
b) Short term convertible notes
(continued)
Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the Conversion Amount) divided by the Conversion Price (as defined below). Subject to the adjustments set forth herein, the conversion price (the Conversion Price) for each Conversion shall be equal to 60% (the Conversion Factor) multiplied by the lowest Closing Bid Price in the fifteen (15) Trading Days immediately preceding the applicable Conversion.
Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $13,472 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at April 15, 2017, $0.025 with the conversion price of $0.015; Bond equivalent yield rate 0.92%. At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. The principal and interest balance was $16,069 and the unamortized discount balance was $0 at December 31, 2017.The note is in default as of December 31, 2017.
NOTES 4, 5 AND 6: On May 17, 2017, as discussed in section a) above, the $100,000 note holder sold $60,000 of this note to three third parties, one of whom subsequently became a related party, and the Company modified the new $20,000 notes to add a conversion feature at a conversion rate of $0.002 per share, with a maturity date of May 16, 2018. This was treated as a debt extinguishment and a beneficial conversion feature was recorded at issuance of $20,000 per note and will be amortized over the life of the notes. These third parties converted an aggregate of $13,500 of these notes in exchange for 6,750,000 shares in June 2017. (see note 11) On July 26, 2017, two of these third parties converted an aggregate of $11,000 of these notes in exchange for 5,500,000 shares. (see note 11) In September 2017, the Company modified the conversion rate of these notes to $0.0005 per share, which was treated as debt extinguishment whereby the then remaining balance of the discount was amortized as interest expense and new discounts totaling $35,500 were recorded which are being amortized over the remaining life of the notes. At December 31, 2017, the total principal and interest was $38,019 and the unamortized discounts were $14,200.
NOTE 7: On June 8, 2017, pursuant to a securities purchase agreement and a one year convertible promissory note for $63,000 the Company received $60,000. In addition, the Company is required to pay $2,500 of the lenders legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.
The total note is convertible into common stock as follows:
Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the Conversion Amount) divided by the Conversion Price (as defined below).
F-18
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
b) Short term convertible notes
(continued)
Subject to the adjustments set forth herein, the conversion price (the
A
Conversion Price) for each Conversion shall be equal to 61% (the
A
Conversion Factor) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.
Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $54,651 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at June 15, 2017, $0.017 with the conversion price of $0.0104; Bond equivalent yield rate 1.11%.
On December 15, 2017, the Company issued 10,126,582 shares of common stock upon conversion of $8,000 of Note 7. On December 20, 2017, the Company issued 16,438,356 shares of common stock upon conversion of $12,000 of Note 7.
At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.46; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. Total principal and interest outstanding at December 31, 2017 was $47,004. The unamortized discount at December 31, 2017 was $17,760.
NOTE 8: On August 31, 2017, the Company entered into a six month 10% convertible promissory note in the amount of $30,000. In event of default the note carries an interest rate of 18%.
The total note is convertible into common stock as follows:
Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a
A
Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the
A
Conversion Amount) divided by the Conversion Price (as defined below).
Subject to the adjustments set forth herein, the conversion price (the
A
Conversion Price) for each Conversion shall be equal to 60% (the
A
Conversion Factor) multiplied by the lowest Closing Bid Price in the fifteen (15) Trading Days immediately preceding the applicable Conversion. Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $24,210 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at August 31, 2017, $0.0028 with the conversion price of $0.0018; Bond equivalent yield rate 1.08%. At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. The principal and interest balance was $30,493 and the unamortized balance was $8,159 at December 31, 2017.
F-19
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)
b) Short term convertible notes
(continued)
NOTE 9: On October 18, 2017, pursuant to a securities purchase agreement and a one year convertible promissory note for $43,000 the Company received $40,000, net of $2,500 of the lenders legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.
The total note is convertible into common stock as follows:
Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a
A
Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the
A
Conversion Amount) divided by the Conversion Price (as defined below).
Subject to the adjustments set forth herein, the conversion price (the Conversion Price) for each Conversion shall be equal to 61% (the
A
Conversion Factor) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.
Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $41,119 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 1.00; Stock price at October 18, 2017, $0.0028 with the conversion price of $0.0014; Bond equivalent yield rate 0.99%.
At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.46; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.0005; Bond equivalent yield rate 1.28%. The principal and interest was $44,046 and the unamortized discounts at December 31, 2017 totaled $34,871.
(8) SHORT TERM LOAN - RELATED PARTY
On May 4, 2017, the Company borrowed $20,000 from the Companys CEO under an informal agreement. This loan carries an interest rate of 8.98% and has a 36 month term. At December 31, 2017, this note balance is $16,046.
As a result of the September 5, 2017, conversion of accrued liability due to a former third party consultant for 192,000,000 shares of common stock this third party consultant became a related party. Convertible Note 6 discussed in Note 7b) is owed to this party. The total amount owed net of discount was $10,297 at December 31, 2017. This party is also the recipient of the shares discussed in Note 9a)
(9) LONG TERM DEBT
In April 2017 the Company entered into a six year loan in the amount of $35,000 to purchase the Suzuki outboard engines for the Luxuria I. This loan carries an interest rate of 6.49% with monthly payments. At December 31, 2017 the balance of this loan was $31,896, of which $5,130 is due within one year.
F-20
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(10) COMMITMENTS AND CONTINGENCIES
a) Stockholders deficit
The Company had the obligation to issue 1,000,000 shares of common stock on July 1, 2017, which has not been issued, and has the obligation to issue another 1,000,000 shares on January 1, 2018, under a new three year consulting agreement entered into on December 9, 2016. These shares will be valued at the market price for shares at the date they are earned. The Company also has the obligation to issue 1,000,000 shares under a six month consulting agreement entered into in November 2017.
b) Leases
The Company occupies dockage space for the Luxuria I pursuant to an annual lease with Bahia Mar Marina Bay, LLC dated May 1, 2017. We pay monthly rent of approximately $4,600. We occupy approximately four hundred (400) square feet of office space without charge at the residence of our Chief Executive Officer, President, Treasurer and Director, and our Secretary.
c) Material Contracts and Agreements
On November 1, 2016, as amended in September 2017, the Company entered into a three year employment agreement with its CEO, Robert Rowe. This agreement calls for him to be paid $20,000 per month in cash and for the Company to issue him 10,000,000 shares of restricted common stock. These shares were issued and valued at the market price on the grant date, $0.0577 per share, for a total of $577,700, which was recorded as prepaid officer compensation and will be amortized over the one year vesting period. The agreement allows him to elect to convert any accrued compensation due him for common stock at a 40% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as compensation expense. On September 5, 2017, upon conversion the Company recognized a $515,000 conversion loss.
On December 9, 2016, we entered into an agreement (the Agreement) with Oceanside Equities, Inc., (Oceanside), a Florida corporation that provides consulting services. Oceanside agreed to provide us with services from December 9, 2016 until December 8, 2019, in exchange for a one time fee of $20,000 in cash; $16,000 per month accrued and payable in either cash or shares of restricted common stock at the Companys election and three million one hundred thousand (3,100,000) shares of our restricted common stock, to be issued 1,100,000 on January 1, 2017, 1,000,000 issued on July 1, 2017 and 1,000,000 issued on January 1, 2018. We will value these shares at the market price on the date they are earned which will be recognized over the term of the contract at the rate of 172,222 shares per month. The agreement allows Oceanside to elect to convert any accrued compensation due him for common stock at a 50% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as consulting fee expense. On September 5, 2017, upon conversion the Company recognized a $480,000 conversion loss.
On May 19, 2017, as amended in September 2017, the Company entered into a two year consulting agreement with a related party, Ron Rowe II. This agreement calls for him to be paid $8,000 per month in cash and for the Company to issue him 5,000,000 shares of restricted common stock. These shares were issued and valued at the market price on the grant date, $0.029 per share, for a total of $145,000, which was recorded as an immediate consulting expense as it was for past services. The agreement allows the consultant to elect to convert any accrued compensation due him for common stock at a 40% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as compensation expense. On September 5, 2017, upon conversion the Company recognized a $120,000 conversion loss.
F-21
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017 and 2016
(10) COMMITMENTS AND CONTINGENCIES (continued)
d) Investment Banking Agreement
In February 2016 the Company entered into a two year investment banking agreement to raise capital. Pursuant to this agreement the Company is obligated to pay a cash success fee between 6% and 10%, depending on the amount raised as well as issue common stock in the amount of 4% of the amount raised. This agreement has been terminated in March 2017.
e) Common Stock Subscription Agreement
In the last quarter of 2014, as memorialized in May 2015, the Company received a stock subscription agreement from a now former officer and director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, such as labor and materials for the construction of the barge bottom, or $0.167 per share. Through June 30, 2016 this former officer and director has paid $55,000 and received 330,000 shares, respectively. In August 2016, the Company issued 425,000 shares of our restricted common stock to this former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000, based on a negotiated agreement.
f) Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations, except as discussed in NOTE 15 SUBSEQUENT EVENTS for Notes 7 and 10.
This party discussed in e) above has not accepted the stock certificate and recently informed the Company that they want to renegotiate since the market price of the common stock has fallen below the negotiated signed contractual price per share.
(11) STOCKHOLDERS DEFICIT
At December 31, 2017 and 2016, the Company has 5,000,000,000 shares of par value $0.0001 common stock authorized and 732,952,883 and 21,333,629 shares issued and outstanding, respectively. At December 31, 2017 and 2016, the Company has 10,000,000 shares of par value $0.0001 preferred stock authorized and 1,000,000 and 1,000,000 Redeemable Series A preferred shares issued and outstanding, respectively.
Effective February 16, 2016, we entered into an agreement (the Agreement) with StockVest, Inc., a Florida corporation that provides investor relations and public relations services. The agreement was amended on March 1, 2016. As amended StockVest agreed to provide us with services from March 12, 2016 until June 12, 2016, in exchange for $500 and one hundred fifty thousand (150,000) shares of our restricted common stock. We valued these shares at the price of $.10 per share, based on the most recent sale of common stock by the Company, or an aggregate of $15,000 upon issuance, which was recognized over the life of the contract.
In June 2016, the Company issued 250,000 shares of our restricted common stock to a related party consultant and principal stockholder in exchange for $25,000 of cash.
In the June 2016 the Company issued 500,000 shares of the Companys common stock to a related party consultant and principal stockholder in exchange for one year of prepaid services, valued at $50,000, or $0.10 per share based on the recent private placement, to be amortized at the rate of $4,167 per month. This was the second issuance as was required under this two year consulting agreement. (See above)
F-22
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017 and 2016
(11) STOCKHOLDERS DEFICIT (continued)
In June 2016 the Company issued 1,000,000 shares of redeemable Series A preferred stock to the Companys founder and CEO. The Company recorded these shares at their redemption value of $1,000 which approximates fair value. The only rights and privileges of these shares is super voting rights, 1,000 votes for each preferred share and the right to redeem the shares for $1,000.
In August 2016 the Company issued 100,000 shares of our restricted common stock as a loan fee recorded as a discount valued at the price of $10,000 or $0.10 per share based on recent stock sales on a new short-term loan, which is being amortized over the life of the loan (See note 7b).
In August 2016, the Company issued 200,000 shares of our restricted common stock to a related party consultant and principal stockholder in exchange for $20,000 of cash.
In August 2016, the Company issued 425,000 shares of our restricted common stock to a former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000. (See note 9)
In August 2016, the Company issued 600,000 shares of restricted common stock in exchange for $36,000 of cash.
In September 2016, the Company issued 42,000 shares of our common stock upon conversion of $4,032 of debt. (See note 12) Related premium of $2,688 was reclassified to additional paid in capital.
In October and November 2016, the Company issued 1,532,740 shares of our common stock upon conversion of $47,668 of debt. (See note 12) Related premium of $31,779 was reclassified to additional paid in capital.
In October 2016, the Company issued 600,000 shares of restricted common stock in exchange for $36,000 of cash.
In November 2016, the Company issued 10,000,000 shares of restricted common stock to the CEO for future services valued at $577,700, or $0.0577 per share, the trading price of the shares on the grant date. The $577,700 was recorded as prepaid officer compensation and is being amortized over the one year vesting period.
In December 2016, the Company issued 41,667 shares of restricted common stock in exchange for $2,500 of cash.
In December 2016, the Company recorded the issuance of 172,222 shares of our restricted common stock to be issued on January 1, 2017, as these shares were earned in 2016. They were valued at $13,778.
On January 1, 2017, the Company issued 927,778 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $62,834.
On January 12, 2017, the Company issued 100,000 shares of common stock pursuant to the replacement $100,000 promissory note. These shares were valued at $0.06 per share, or $6,000, which was recorded as a debt discount and is being amortized over the remaining life of the loan.
On January 18, 2017, the Company issued 200,000 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $16,000.
On January 23, 2017, the Company issued 250,000 shares of common stock under a consulting agreement. These shares were valued at $0.14 per share, or $33,750.
F-23
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(11) STOCKHOLDERS DEFICIT (continued)
On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of the outstanding convertible debt. These shares were valued at $0.073 per share, or $73,000 based on the quoted trading price, and after relieving the related derivative value, a gain of $3,463 was recorded. (See Note 7b)
On May 4, 2017, the Company issued 75,000 shares of common stock under a consulting agreement. These shares were valued at $0.035 per share, or $2,625.
On May 19, 2017, the Company issued 5,000,000 and 5,000,000 shares of common stock to the Companys two officers in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000 and $145,000.
On May 19, 2017, the Company issued 5,000,000 shares of common stock to the nephew of the Companys CEO in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000.
On May 25, 2017, the Company issued 4,800,000 shares of common stock to settle $48,000 of expenses accrued under a consulting agreement. These shares were valued at $0.013 per share, or $62,400. Accordingly, the Company recorded $14,400 as a loss on accrued expenses settlement.
On June 17, 2017, the Company issued 2,250,000; 2,250,000 and 2,250,000 shares of common stock to three parties to settle an aggregate $13,500 of debt of Convertible Notes 4, 5 and 6. These shares were valued at $0.002 per share, or $4,500; $4,500 and $4,500. (See Note 7b)
On July 17, 2017 the Company issued 1,000,000 shares as a loan fee to a third party. These shares were valued at the quoted market price of $0.015 per share, or $15,000.
On July 18, 2017, the Company issued 2,307,692 shares of common stock upon conversion of $18,000 of outstanding convertible debt.
On July 18, 2017, the Company issued 5,500,000 shares of common stock upon conversion of $11,000 of outstanding convertible debt. (See Note 7)
On August 18, 2017, the Company issued 3,800,000 shares of common stock upon conversion $10,944 of outstanding convertible debt. (See Note 7)
On September 5, 2017, the Company issued 446,000,000 shares of common stock upon conversion of $223,000 of accrued liabilities to three related parties and recognized a loss of $1,115,000, charging officer compensation $515,000 and related party professional fees $600,000, valuing the shares at the quoted market price was $0.003 on that date. (See Note 7b)
On October 13, 2017, the Company issued 6,190,000 shares to convert $8,914 of convertible Note 2 (see Note 7b).
On December 15, 2017, the Company issued 10,126,582 shares to convert $8,000 of convertible Note 7 (see Note 7b).
On December 18, 2017, the Company issued 166,153,846 shares to convert $108,000 of accrued expenses and recorded a loss on conversion of $141,231.
F-24
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2017
and 2016
(11) STOCKHOLDERS DEFICIT (continued)
On December 20, 2017, the Company issued 16,438,356 shares to convert $12,000 of convertible Note 7 (see Note 7b).
On December 27, 2017, the Company issued 25,000,000 shares to convert $15,000 of convertible Note 2 (see Note 7b).
In November the Company became obligated to issue 1,000,000 shares of common stock in exchange for services under a consulting contract. The Company recorded these shares based on the quoted market price of $0.0024, or $2,400 and is amortizing this amount over the term of the contract with $1,600 recognized in 2017.
Valuation of shares issued for services and settlements were based upon the quoted market price on the requisite measurement date.
(12) RELATED PARTIES
a) Rental property
On September 25, 2014, the Company acquired the Miss Leah, a luxury floating vessel built on a barge platform from the Predecessor which is owned by the founders brother. As part of this acquisition transaction the Company issued a promissory note in June 2015 to the Predecessor in the amount of $100,000, carrying an interest rate of 2% effective September 25, 2014, with a maturity date of June 20, 2022. The Company recorded the payable in September 2014 which was formalized with this promissory note in June 2015. At December 31, 2017 and 2016, the Company had accrued interest of $6,455 and $4,482, respectively.
b) Related party payable
In the last quarter 2014, the Predecessor continued to receive some of the revenue from and to pay some of the expenses related to the rental of the Miss Leah. The Company has established a payable to the Predecessor of $3,888 for the net differential resultant therefrom and recorded the related revenue and expenses in the Companys records.
c) Common stock subscription agreement
In the last quarter 2014 as memorialized in May 2015, the Company received a stock subscription agreement from a now former director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, or $0.167 per share. In 2014 and 2015 this now former director contributed $5,000 and $50,000 and received 30,000 and 300,000 shares, respectively. In 2016 he constructed the barge bottom for the Luxuria I and received 425,000 shares valued at $70,000.
d) Cash expenses incurred to related parties during each the years ended December 31, presented is as follows:
|
|
| |
|
2017
|
|
2016
|
Commissions - daughter of founder
|
$
2,383
|
|
$
2,640
|
Construction management - brother of founder
|
$
28,500
|
|
$
-
|
Construction management - nephew of founder
|
$
24,000
|
|
$
-
|
Professional fees - significant stockholder
|
$
-
|
|
$
55,335
|
F-25
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2016
and 2015
(12) RELATED PARTIES (continued)
e) Common stock issued to related party
On May 19, 2017, the Company issued 5,000,000 shares of common stock to the nephew of the Companys CEO in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000. These shares were issued under a one year consulting agreement dated in May 2017, which pays the nephew $8,000 per month.
(13) - INCOME TAXES
There was no Federal or State Income Tax expense for the years ended December 31, 2017 and 2016 due to the Companys net loss.
The Company's effective income tax expense (benefit) differs from the
A
expected tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes) as follows:
|
|
| |
|
2017
|
|
2016
|
Tax (benefit) on net loss before income tax
|
$
(1,034,495)
|
|
$
(435,704)
|
Change in federal tax rates
|
191,291
|
|
-
|
Effect of state taxes (net of federal benefit)
|
(110,447)
|
|
(46,518)
|
Stock compensation
|
879,051
|
|
56,810
|
Debt premiums
|
142,085
|
|
12,970
|
Derivatives
|
(87,769)
|
|
120,862
|
Change in valuation allowance
|
20,284
|
|
291,580
|
Income tax provision
|
$
-
|
|
$
-
|
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.
The components of net deferred tax assets and liabilities that have been presented in the Company's financial statements are as follows at December 31,:
|
|
| |
Deferred income tax assets:
|
2017
|
|
2016
|
Net operating loss carryforward
|
$
394,649
|
|
$
374,365
|
Accrued wages
|
-
|
|
-
|
Total deferred tax assets
|
394,649
|
|
374,365
|
Valuation allowance
|
(394,649)
|
|
(374,365)
|
Net deferred taxes
|
$
-
|
|
$
-
|
The Company records a valuation allowance to reduce deferred tax assets, based on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the need for a valuation allowance, an assessment of all available evidence both positive and negative was required. The Company recorded a valuation allowance of $394,649 and $374,365 in 2017 and 2016, respectively.
F-26
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2016
and 2015
(13) - INCOME TAXES (continued)
At December 31, 2017, the Company has a net operating loss carryforward of $1,557,109 available to offset future net income expiring through 2037. The utilization of the net operating loss carryforward is dependent on the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.
In accordance with the provisions of ASC 740: Income Taxes, the Company records 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, 2016, the Company has no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (Act). The Act makes significant modifications to the provisions of the Internal Revenue Code, including but not limited to, a corporate tax rate decrease to 21% effective as of January 1, 2018. The Companys net deferred tax assets and liabilities have been revalued at the newly enacted U.S. Corporate rate in the year of enactment. The adjustment related to the revaluation of the deferred tax asset and liability balances is a net charge of approximately $191,000. This expense is fully offset by a change in valuation allowance. Accordingly, there is no impact on income tax expense as of December 31, 2017.
As of December 31, 2017, the tax years 2017, 2016, 2015 and 2014 for the LLC and 2017, 2016 and 2015 for the corporation remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.
(14) CONCENTRATIONS OF RISK
The Company has only one revenue producing asset at December 31, 2017, the Luxuria I floating vessel, and that asset is located in Bahia Mar Marina, Ft. Lauderdale, FL. The rental season at this location is generally year round. The Company primarily utilizes two booking agents to schedule bookings from customers and collect the revenue. If required the Company believes it could obtain bookings through an alternative provider.
The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balances in excess of FDIC insured limits at December 31, 2017 and 2016, respectively.
(15) SUBSEQUENT EVENTS
a) Short Term Debt
The note in the remaining balance of $345,050 matured on January 11, 2018. On January 17, 2018, the lender agreed to extend this note for an additional three month period for an extension fee of $10,351. On April 4, 2018, the lender agreed to extend this note for an additional three month period for an extension fee of $11,712.
On February 9, 2018, $35,000 was extended to the Company as a draw on this note.
b) Short Term Convertible Notes
NOTE 2: On February 14, 2018, the lender agreed to extend the maturity of the August 4, 2016 Note from February 11, 2018 to May 11, 2018, in exchange for additional interest of $11,076 due at maturity.
F-27
Global Boatworks Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2016
and 2015
(15) SUBSEQUENT EVENTS (continued)
b) Short Term Convertible Notes
(continued)
During the first quarter of 2018, the lender converted $121,995 of this note for a total of 709,666,667 shares of common stock in 9 separate conversions.
NOTE 7: During the first quarter of 2018, the lender converted $45,880 of this note for a total of 138,874,454 shares of common stock in 6 separate conversions.
NOTE 10: On March 19, 2018, pursuant to a securities purchase agreement and a nine month convertible promissory note for $16,500 the Company received $16,000. In addition, the Company is required to pay $500 of the lenders legal fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.
The total note is convertible into common stock as follows:
Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a Conversion) all or any part of the Conversion Eligible Outstanding Balance into shares (Conversion Shares) of fully paid and non-assessable common stock, $0.0001 par value per share (Common Stock), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the Conversion Amount) divided by the Conversion Price (as defined below).
Subject to the adjustments set forth herein, the conversion price (the Conversion Price) for each Conversion shall be equal to 61% (the Conversion Factor) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.
Due to the variable conversion terms and certain default provisions, the embedded conversion option will be recorded as a derivative liability.
DEFAULT NOTICE FOR NOTES 7 AND 10: On April 17, 2018, due to the failure to timely file the Annual Report on Form 10-K, the lender automatically issued a default notice for these notes. This default notice requires the Company to pay $89,250 plus all accrued interest. This amount includes a default penalty of $29,750 for the two notes combined, or 50% of the then outstanding principal balances of $59,500 combined.
c) Officer advances
The CEO of the Company has loaned $10,900 to the Company as an undocumented non-interest bearing short term loan.
F-28