The accompanying unaudited notes are an integral part of the unaudited condensed consolidated financial statements
The accompanying unaudited notes are an integral part of the unaudited condensed consolidated financial statements
The accompanying unaudited notes are an integral part of the unaudited condensed consolidated financial statements
The accompanying unaudited notes are an integral part of the unaudited condensed consolidated financial statements
Notes to Condensed Consolidated Financial Statements
(Information as to the three months ended March 31, 2020 is unaudited)
(1) NATURE OF OPERATIONS
Global Boatworks Holdings, Inc., (the Company or Successor or Global), 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 vessels, the sale of the Miss Leah, the construction of a new vessel, the Luxuria I and the rental activities of and marketing for sale and the sale of the Luxuria I.
The accompanying consolidated financial statements include the activities of Global Boatworks Holdings, Inc. and Global Boatworks, LLC, its wholly owned subsidiary.
(2) BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN
a) Basis of Presentation and 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.
The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America) (GAAP) as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S Securities and Exchange Commission ("SEC") for interim financial information. The consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods shown. The results of operations for the periods presented are not necessarily indicative of the results expected for any future period. The information included in these consolidated financial statements should be read in conjunction with Managements Discussion and Analysis and Results of Operations contained elsewhere in this report and the audited consolidated financial statements and accompanying notes filed in Form 10-K filed on June 22, 2020 with the U.S. Securities and Exchange Commission.
b) Use of Estimates
The preparation of the condensed consolidated 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 condensed 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 unaudited consolidated financial statements involved the valuation of construction in progress, depreciable life of the luxury floating vessel, valuation of long lived assets, valuation of derivatives, the valuation of common and preferred stock issued as compensation, and valuation allowance on the deferred income tax asset.
F-6
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(2) BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN, continued
c) Going Concern
The accompanying unaudited condensed consolidated 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 deficit in stockholders equity of approximately $1.8 million; $6.1 million and $1.9 million at March 31, 2020. The Company used cash in operating activities of $5,280 for the three months ended March 31, 2020. In addition, the Company is in default of four of its notes payable. These matters raise substantial doubt about the Companys ability to continue as a going concern for a period of twelve months from the issuance of this report. The Company is expected to have ongoing expenses as a result of being a publicly held company and constructing new vessels without immediate increases in revenues as the Company continues to implement its 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 build the second new style luxury floating vessels. The Company is seeking to raise sufficient equity capital to enable it to pay off its existing debt. The condensed 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. The Company had no financial instruments that qualified as cash equivalents at March 31, 2020.
b) 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. Vessels constructed and then held for sale or rent are classified as Property and Equipment held for sale and depreciated until sold.
c) 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.
F-7
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) 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.
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 is the Companys assets and liabilities measured at fair value on a recurring and nonrecurring basis at March 31, 2020 (unaudited) and December 31, 2019, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
|
|
| |
|
March 31, 2020
(unaudited)
|
|
December 31, 2019
|
Level 3 - Embedded Derivative Liability
|
$
|
22,397
|
|
$
|
38,361
|
Changes in Level 3 assets measured at fair value for the quarter ended March 31, 2019 (unaudited) were as follows:
|
| |
Balance, December 31, 2018
|
$
|
38,361
|
Change in fair value
|
|
(15,964)
|
Balance, March 31, 2019 (unaudited)
|
$
|
22,397
|
F-8
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e) 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 606. Cost of Revenue includes the marina dockage fees and fees charged by the web sites Homeaway and Air BnB, 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 606. Cost of Revenue includes the depreciated capitalized cost of constructing a vessel, including any sales costs such as sales commissions.
f) 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.
The Company adopted ASU 2018-07 on January 1, 2019 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on January 1, 2019.
The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model.
g) Income Taxes
The Company uses 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 condensed consolidated 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 March 31, 2020 tax years 2017 for the LLC and 2016, 2017 and 2018 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.
F-9
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h) 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.
i) 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.
j) Net 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.
k) 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 derivative are removed from the balance sheet, The shares issued upon conversion of the note are recorded at their fair value and a gain or loss on extinguishment is recognized, 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.
l) Leases
The Company adopted Accounting Standard Updates (ASU) No. 2016-02: Lease (Topic 842) as of January 1, 2019 using the effective date method. As a part of our policy, we have chosen to exclude leases with a lease term of one year or less. Accordingly, we have no leases over one year and thus the adoption of this standard did not have any effect on the accompanying consolidated financial statements.
m) Recent accounting pronouncements
Certain FASB Accounting ASUs that are not effective until after March 31, 2020 are not expected to have a significant effect on the Companys consolidated financial position or results of operations.
F-10
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(4) PROPERTY AND EQUIPMENT
Property and Equipment consists of the following:
|
|
|
|
| |
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
(unaudited)
|
|
|
|
Architectural plans
|
$
|
12,766
|
|
$
|
12,766
|
Less: accumulated amortization
|
|
(7,295)
|
|
|
(6,839)
|
Total P&E
|
$
|
5,471
|
|
$
|
5,927
|
The Company capitalized the costs of developing the architectural plans for the Luxuria model floating vessel and is amortizing the costs over their estimated useful life of seven years, beginning April 1, 2016. Amortization expense for the three months ended March 31, 2020 and 2019, was $456 and $456, respectively.
(5) 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 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.
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 as a distribution for $100,000. Outstanding principal and interest totaled $108,920 at March 31, 2019 (unaudited).
(6) ACCRUED EXPENSES
The major components of accrued expenses are:
|
|
| |
|
March 31, 2020
|
|
December 31, 2019
|
|
(unaudited)
|
|
|
Accrued officer pay
|
$ 402,035
|
|
$ 342,035
|
Accrued professional fees - related party
|
128,405
|
|
128,405
|
Accrued professional fees - third party
|
384,000
|
|
384,000
|
Other
|
67,200
|
|
67,200
|
Total accrued expenses
|
$ 982,584
|
|
$ 921,640
|
F-11
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES
a) Short term notes
Short term debt including accrued interest was, as follows:
|
|
| |
|
March 31, 2020
|
|
December 31, 2019
|
|
(unaudited)
|
|
|
Note 1
|
$
-
|
|
$
-
|
Note 3
|
111,000
|
|
106,500
|
Note 5
|
10,000
|
|
10,000
|
Note 6
|
80,000
|
|
80,000
|
Note 7
|
77,500
|
|
77,500
|
Less: unamortized debt discounts
|
-
|
|
-
|
Total short term notes, net
|
$
278,500
|
|
$
274,000
|
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 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $25,000, or $100 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.
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 1,575 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 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. In an amendment dated December 7, 2018, as stated below this note balance was combined with Note 3.
NOTE 3: 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 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $15,000, or $15 per share based on the quoted market price which was recorded as a debt discount and was 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 at maturity of July 17, 2018. The $40,000 balance of Note 1 matured on July 15, 2017. On December 7, 2018, notes 1 and 3 were combined into Note 3. The unamortized balance of the discount is $0 at March 31, 2019. Total unpaid principal and interest is $111,500 at March 31, 2020, which includes $21,500 in accrued interest.
F-12
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
a) Short term notes, continued
NOTE 5: On March 4, 2019, a third party individual loaned the Company $10,000 on an undocumented basis with no stated interest or maturity Terms.
NOTE 6: On March 25, 2019, a third party stockholder loaned the Company $105,000. This note is collateralized with the 1,000 shares of super voting preferred stock held by the Companys CEO. The note required a principal reduction of $50,000 on or before May 20, 2019 with the balance of $55,000 plus $10,000 in interest due on or before October 25, 2019. The Company paid $25,000 of this note at the closing of the sale of the Luxuria I. The balance at December 31, 2019 was $80,000. The note maturity has been amended to be due on demand.
NOTE 7: In November 2019, the stockholder holding Note 6 agreed to loan the Company $5,000 and on December 5, 2019, loaned the Company $72,500 on an undocumented basis carrying no interest. The balance at December 31, 2019 is $77,500.
b) Short term convertible notes
Short term convertible debt including accrued interest was, as follows:
|
| |
|
March 31, 2020
|
December 31, 2019
|
|
(unaudited)
|
|
Convertible note 3
|
$ 19,471
|
$ 19,093
|
Convertible note 4
|
13,011
|
12,761
|
Convertible note 5
|
13,011
|
12,761
|
Convertible note 8
|
37,664
|
36,925
|
Less: unamortized debt discounts
|
-
|
-
|
Total convertible notes, net
|
$ 83,157
|
$ 81,540
|
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:
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.
F-13
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
b) Short term convertible notes, continued
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, $25 with the conversion price of $15; Bond equivalent yield rate 0.92%. At March 31, 2019, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.00001; Stock price at March 31, 2020 $0.1333 with the conversion price of $0.102; Bond equivalent yield rate 2.43%. The principal and interest balance was $19,471 and the unamortized discount balance was $0 at March 31, 2020.The note is currently in default.
NOTES 4 AND 5: 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 $0.50 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 was amortized over the life of the notes. These third parties converted an aggregate of $13,500 of these notes in exchange for 6,750 shares in June 2017. On July 26, 2017, two of these third parties converted an aggregate of $11,000 of these notes in exchange for 5,500 shares. In September 2017, the Company modified the conversion rate of these notes to $0.50 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 March 31, 2020, the total principal and interest under these notes was $26,022 and the unamortized discounts were $0.
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 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 80% (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 $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, $2.80 with the conversion price of $1.80; Bond equivalent yield rate 1.08%. At March 31, 2020, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.00001; Stock price at March 31, 2020 $0.1333 with the conversion price of $0.10; Bond equivalent yield rate 2.43%. The principal and interest balance was $37,664 at March 31, 2020.
(8) SHORT TERM LOANS - RELATED PARTY
During the first quarter 2020, the CEO advanced $6,899 to the Company, and was repaid $1,525, under an undocumented advance which carries no interest and has no stated maturity. At March 31, 2020, this advance balance is $16,027
F-14
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(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 March 31, 2020, the balance of this loan was $19,861, of which $5,946 is due within one year.
(10) COMMITMENTS AND CONTINGENCIES
a) Deficiency in Stockholders Equity
At March 31, 2020, the Company had the obligation to issue 1,000 shares of common stock on July 1, 2017 and 1,000 shares on January 1, 2018, under a three year consulting agreement entered into on December 9, 2016. These shares were valued at the market price for shares at the date they are earned.
At March 31, 2020, the Company had the obligation to issue 1,000 shares of common stock on May 22, 2018 under a three month consulting agreement entered into on that date. These shares were valued at the market price for shares at the date they were earned.
At March 31, 2020, the Company had the obligation to issue 6,000 shares of common stock on April 6, 2018 under a consulting agreement entered into in April 2017. These shares were valued at the market price for shares at the date they were earned.
The $5,050 value of these 8,000 shares has been classified within accrued liabilities at March 31, 2020 and December 31, 2019.
b) Leases
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) 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 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 $167 per share. Through June 30, 2016 this former officer and director has paid $55,000 and received 330 shares, respectively. In August 2016, the Company issued 425 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.
d) 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 March 31, 2020, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
This former officer discussed in c) above has not accepted the stock certificate and has informed the Company that he wants to renegotiate the stock purchase price since the market price of the common stock has fallen below the signed contractual price per share. In addition, this former officer unlawfully placed a lien against the Luxuria I in April 2019, resulting in the Company being compelled to pay him $50,000 to release the lien concurrently with the sale of the Luxuria I. The Company is exploring its options to seek restitution.
(11) DEFICIENCY IN STOCKHOLDERS EQUITY
At March 31, 2020 and December 31, 2019, the Company has 5,000,000,000 shares of par value $0.0001 common stock authorized and 2,901,311 issued and outstanding. At March 31, 2020 and December 31, 2019, the Company has 10,000,000 shares of par value $0.0001 preferred stock authorized and 1,000,000 Redeemable Series A preferred shares issued and outstanding,
F-15
Global Boatworks Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(11) DEFICIENCY IN STOCKHOLDERS EQUITY, continued
On January 15, 2019, the Company issued 238,000 shares of common stock upon conversion of Note 2 principal in the amount of $729. On March 1, 2019, the Company issued 260,000 shares of common stock upon conversion of Note 2 principal in the amount of $936. At March 31, 2020, the balance of this note is $0.
(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 March 31, 2020 and December 31, 2019, the Company had accrued interest of $10,893 and $10,400, 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 for the net differential of $3,888.
(13) CONCENTRATIONS OF RISK
The Company has no revenue producing asset at March 31, 2020 and December 31, 2019.
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 March 31, 2020 and December 31, 2019, respectively.
(14) SUBSEQUENT EVENTS
a) US Small Business Administration Economic Injury Disaster Loan (SBA EIDL)
In May 2020, the Company, through its wholly owned subsidiary, received an SBA EIDL in the amount of $96,700. This is a 30 year loan, carrying a 3.25% interest rate, with the first payment due in May 2021.
b) COVID-19 pandemic
The Companys management is unable to predict the full impact of COVID-19 on the Company.
The corona virus pandemic and subsequent State of Florida ordered shut down had a significant effect upon the Companys operations. The Companys access to capital was severely curtailed to totally eliminated, during the pandemic. The Company had also entered into a letter of intent for a custom design and build floating vessel. The Company will not know for some time if this letter of intent can be converted into a contract or not. The Company is continuing to negotiate with several other parties for custom design and build floating vessel opportunities, but as yet does not know what the ultimate consequences of the pandemic will be upon its business model.
The Luxuria series of floating homes is constructed in marine facilities and appeals to those that seek a lifestyle that incorporates being on the water. The Companys product is more expensive than a traditional home built on land. Because of COVID-19 and the uncertainty surrounding economic conditions moving forward the Company cannot predict the willingness of buyers to absorb the additional cost of a luxury floating home as compared to a traditional home. Additionally, the Companys management cannot predict the availability of marine construction facilities or personnel during this time due to Broward County, Florida Administrator's Emergency Order 20-03 limiting which businesses may stay open. The Companys primary facility where the Luxuria I was constructed is located in Broward County, Florida.
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