Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(1)
NATURE OF OPERATIONS
Global
Boatworks Holdings, Inc., (the Company, 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 Company’s 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 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. The Company completed a 1 for 1,000 reverse split of the common stock in December 2018, and
all share and per share data in the accompanying consolidated financial statements and footnotes for all periods presented have
been retroactively adjusted for this reverse stock split.
(2)
BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN
a)
Basis of Presentation and Principles of Consolidation
The
Company’s 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
(“GAAP”) in the United States of America (“U.S.”) 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 Management’s 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 April 16, 2019 with the U.S. Securities
and Exchange Commission.
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 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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(2)
BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN, continued
c)
Going Concern
The
accompanying unaudited 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 stockholder’s deficit of $2,322,065; $6,059,183 and $1,883,167
(unaudited) at March 31, 2019. The Company had a net loss of $105,718 and used cash of $90,017 in operating activities in the
three months ended March 31, 2019 (unaudited). In addition, the Company is in default of six of its notes payable. These matters
raise substantial doubt about the Company’s 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 Luxuria
I was sold on April 24, 2019, (See Note 14b). The 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, 2019.
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 in it 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. Vessels constructed and then held for sale or rent are classified
as Property and Equipment held for sale and depreciated until sold.
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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Company’s 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 Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at March
31, 2019 (unaudited) and December 31, 2018, 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, 2019
|
|
|
December
31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Level 3 - Derivative
Liability
|
|
$
|
254,845
|
|
|
$
|
349,107
|
|
Changes
in Level 3 assets measured at fair value for the quarter ended March 31, 2019 (unaudited) were as follows:
Balance, December 31, 2018
|
|
$
|
349,107
|
|
Amortization to gain on extinguishment
upon conversion or repayment
|
|
|
(1,665
|
)
|
Gain on c
hange
in fair value of derivative liability
|
|
|
(92,597
|
)
|
Balance, March
31, 2019 (unaudited)
|
|
$
|
254,845
|
|
f)
Revenue recognition
The
Company adopted ASC 606 Revenues from Contracts with Customers on January 1, 2018. There was no cumulative effect adjustment
upon this adoption.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f)
Revenue recognition
(continued)
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.
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.
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.
h)
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 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, 2019 tax years 2015, 2016 and 2017 for the LLC and 2015, 2016 and 2017 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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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 59,584,413 common stock equivalents at March 31, 2019
(unaudited).
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 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.
In July 2017, the FASB issued
Accounting Standards Update No. 2017-11
Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives
and Hedging (Topic 815) (“ASU 2017-11”)
, which changes the classification analysis of certain equity-linked financial
instruments (or embedded features) with down round features. When determining whether certain financial instruments should be
classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing
whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing disclosure requirements
for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)
no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.
For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings per share (EPS)
in accordance with ASC Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated
as a dividend and as a reduction of income available to common shareholders in basic EPS. For the Company, ASU 2017-11 is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted
Part 1 “accounting for certain financial instruments with down round features” effective January 1, 2019. There
was no cumulative effect adjustment upon this adoption.
m)
Leases
In
February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: Lease (Topic 842)
whereby lessees need to recognize almost all leases on their balance sheet as a right of use asset and a corresponding lease
liability. The Company adopted this standard 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.
n)
Recent accounting pronouncements
Certain
FASB Accounting Standard Updates (ASU) that are not effective until after March 31, 2019 are not expected to have a significant
effect on the Company’s consolidated financial position or results of operations.
0) Reclassifications
Certain reclassifications have
been made on prior period balances to conform to the current year presentation. Regarding the December 31, 2018 balance sheet,
$18,048 was reclassified from Short-term convertible notes related party to Short-term convertible notes as the lender is no longer
a related party. Additionally, regarding the December 31, 2018 balance sheet, $511,023 was moved from Accounts payable and Accrued
liabilities to a separate account titled Accrued liabilities. These reclassifications had no impact on net loss, shareholders’
deficit or cash flows as previously reported.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(4)
PROPERTY AND EQUIPMENT
Property
and Equipment held for sale consists of the following:
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Luxuria I floating vessel
|
|
$
|
677,180
|
|
|
$
|
677,180
|
|
Less: accumulated
depreciation
|
|
|
(118,506
|
)
|
|
|
(101,577
|
)
|
Total
P&E held for sale
|
|
$
|
558,674
|
|
|
$
|
575,603
|
|
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. Depreciation expense for the three months ended March 31, 2019 was $16,929.
Property
and Equipment, other consists of the following:
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Architectural plans
|
|
$
|
12,766
|
|
|
$
|
12,766
|
|
Furniture and equipment
|
|
|
6,296
|
|
|
|
6,296
|
|
Less: accumulated
amortization and depreciation
|
|
|
(9,057
|
)
|
|
|
(8,076
|
)
|
Total
P&E
|
|
$
|
10,005
|
|
|
$
|
10,986
|
|
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, 2019 and 2018, was $456 and $456, respectively.
For
property and equipment- other, depreciation expense for the three months ended March 31, 2019 and 2018 was $525 and $525, respectively.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(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 Predecessor’s rental business.
The
terms of this acquisition were 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 Company’s 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 in 2014. Outstanding principal and interest
totaled $108,920 at March 31, 2019 (unaudited).
(6)
ACCRUED EXPENSES
The
major components of accrued expenses are:
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
Accrued officer pay
|
|
$
|
221,685
|
|
|
$
|
178,485
|
|
Accrued professional fees - related
party
|
|
|
121,905
|
|
|
|
97,905
|
|
Accrued professional fees - third party
|
|
|
256,000
|
|
|
|
208,000
|
|
Other
|
|
|
25,688
|
|
|
|
26,633
|
|
Total
accrued expenses
|
|
$
|
625,278
|
|
|
$
|
511,023
|
|
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES
a)
Short term notes
Short
term debt including accrued interest was, as follows:
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Note 1
|
|
$
|
-
|
|
|
$
|
-
|
|
Note 2
|
|
|
632,782
|
|
|
|
632,782
|
|
Note 3
|
|
|
94,500
|
|
|
|
90,000
|
|
Note 4
|
|
|
531
|
|
|
|
531
|
|
Note 5
|
|
|
10,000
|
|
|
|
-
|
|
Note 6
|
|
|
105,000
|
|
|
|
-
|
|
Less: unamortized
debt discounts
|
|
|
-
|
|
|
|
-
|
|
Total short term
notes, net
|
|
$
|
842,813
|
|
|
$
|
723,313
|
|
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 Company’s 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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
a)
Short term notes,
(continued)
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 lender’s
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 Company’s 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 lender’s
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. 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. On April 6, 2018, $33,000 was extended to the Company
as a draw on this note, including $3,000 OID. The note in the remaining balance of $416,550 matured on April 6, 2018. On April
6, 2018, the lender agreed to extend this note for an additional three month period for an extension fee of $11,712. On May 18,
2018, $33,000 was extended to the Company as a draw on this note, including $3,000 OID. At June 30, 2018, the balance of this
note and the unamortized discount was $474,723 and $1,337, respectively. On July 6, 2018, the lender agreed to extend this note
for an additional three month period for an extension fee of $14,613.
On
July 3, 2018, August 2, 2018 and September 14, 2018 $27,500, $27,500 and $27,500 was extended to the Company as a draw on this
note, including $2,500, $2,500 and $2,500 OID. On July 6, 2018, the lender agreed to extend this note for an additional three
month period for an extension fee of $14,613. On October 19, 2018, and November 21, 2018 $27,500 and $27,500 was extended to the
Company as a draw on this note, including $2,500 and $2,500 OID. On October 6, 2018, the lender agreed to extend this note for
an additional one month period for an extension fee of $5,667. At March 31, 2019, the balance of this note and the unamortized
discount is $629,394 and $0, respectively.
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 March 31, 2019 is $3,388 and is included in the note balance.
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 $94,500 at March 31, 2019, which includes $4,500 in accrued
interest.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
a)
Short term notes,
(continued)
NOTE
4: On April 18, 2018, the Company entered into an eight month financing of the $14,450 Luxuria I annual insurance premium. The
balance at March 31, 2019 was $531.
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 Company’s CEO. $50,000 of this note is payable on or before May 20, 2019 with
the balance of $55,000 plus $10,000 in interest due on or before October 25, 2019. 500 shares of the super voting preferred stock
will be released as collateral at each payment.
b)
Short term convertible notes
Short
term convertible debt including accrued interest was, as follows:
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
Convertible note 1
|
|
$
|
-
|
|
|
$
|
-
|
|
Convertible note 2
|
|
|
313,393
|
|
|
|
315,056
|
|
Convertible note 3
|
|
|
17,959
|
|
|
|
17,581
|
|
Convertible note 4
|
|
|
12,011
|
|
|
|
11,761
|
|
Convertible note 5
|
|
|
12,011
|
|
|
|
11,761
|
|
Convertible note 6
|
|
|
18,435
|
|
|
|
18,048
|
|
Convertible note 7
|
|
|
34,706
|
|
|
|
33,966
|
|
Convertible note 8
|
|
|
-
|
|
|
|
18,220
|
|
Less: unamortized
debt discounts
|
|
|
-
|
|
|
|
-
|
|
Total convertible
notes, net
|
|
$
|
408,515
|
|
|
$
|
426,393
|
|
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 Company’s 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 lender’s 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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
Also,
the Company was required to issue 100 shares of restricted common stock which was valued at $100 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 required a
$200,000 partial prepayment if and when the Company sells the Miss Leah. The note is personally guaranteed by the Company’s
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.
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 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 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 2017 was the Black-Scholes model with the following
range of assumptions: Expected life in years 0.10; the conversion price of $0.54; Bond equivalent yield rate 1.28%.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND 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 amortized it to maturity.
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. 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.
On
March 22, 2017, the Company issued 1,000 shares of common stock to settle $30,000 of this note. These shares were valued at $73
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.
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 Company’s assets including the Luxuria I. At
March 31, 2019, the unamortized balance of the extension fee is $0.
Note
1 required 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 these 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 2,308 shares of common stock upon conversion $18,000 of Note 1. On August 10, 2017, the Company
issued 3,800 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.
On
September 14, 2017 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 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 shares of common stock upon conversion of Note 2 principal in the amount of $15,000.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
On
January 30, 2018, the Company issued 41,667 shares of common stock upon conversion of Note 2 principal in the amount of $15,000.
On February 6, 2018, the Company issued 50,000 shares of common stock upon conversion of Note 2 principal in the amount of $18,000.
On February 12, 2018, the Company issued 50,750 shares of common stock upon conversion of Note 2 principal in the amount of $15,225.
On February 19, 2018, the Company issued 95,000 shares of common stock upon conversion of Note 2 principal in the amount of $17,100.
On February 23, 2018, the Company issued 93,750 shares of common stock upon conversion of Note 2 principal in the amount of $11,250.
On March 2, 2018, the Company issued 95,000 shares of common stock upon conversion of Note 2 principal in the amount of $11,400.
On March 12, 2018, the Company issued 94,500 shares of common stock upon conversion of Note 2 principal in the amount of $11,400.
On March 20, 2018, the Company issued 95,000 shares of common stock upon conversion of Note 2 principal in the amount of $11,400.
On March 28, 2018, the Company issued 94,000 shares of common stock upon conversion of Note 2 principal in the amount of $11,280.
On April 16, 2018, the Company issued 158,000 shares of common stock upon conversion of Note 2 principal in the amount of $9,480.
At December 31, 2018, the valuation method utilized to compute the embedded derivative liability was the Black-Scholes model with
the following assumptions: Expected life in years 0.0; Stock price at December 31, 2018 $0.10; conversion price of $0.06; Bond
equivalent yield rate 2.44%.
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, 2019, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in
years 0.0001; Stock price at March 31, 2019 $0.01 with the conversion price of $0.006; Bond equivalent yield rate 2.41%. At March
31, 2019 the balance was $313,393 and the unamortized discount was $0.
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.
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 0.00010; Stock price at March 31, 2019 $0.01 with the conversion price of $0.006;
Bond equivalent yield rate 2.41%. The principal and interest balance was $17,959 and the unamortized discount balance was $0 at
March 31, 2019.The note is currently in default.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
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 $2 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 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, 2019, the total principal and interest under these notes was $42,457 and the unamortized
discounts were $0.
NOTE
7: 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, 2019, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life
in years 0.0001; Stock price at March 31, 2019 $0.01 with the conversion price of $0.006; Bond equivalent yield rate 2.41%. The
principal and interest balance was $34,706 at March 31, 2019.
NOTE
8: 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, net of $500 of the lender’s legal fees which was withheld from the funds provided. This note carries
a 14% 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).
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(7)
SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES, (continued)
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 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 March 20, 2018, $0.40 with the conversion price
of $0.122; Bond equivalent yield rate 1.76%.
This
note was paid in cash on March 27, 2019, and the Company recorded a loss on repayment of the debt of $8,594. The principal and
interest was $0 at March 31, 2019.
(8)
SHORT TERM LOANS - RELATED PARTY
On
May 4, 2017, the Company borrowed $20,000 from the Company’s CEO under an informal agreement. This loan carries an interest
rate of 8.98% and has a 36 month term. At March 31, 2019, this note balance is $4,104, as $2,258 was repaid during the
three months ended March 31, 2019.
During
the first quarter 2019, the CEO advanced $7,479 to the Company, and was repaid $1,010, under an undocumented advance which carries
no interest and has no stated maturity. At March 31, 2019, this note balance is $6,264
(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, 2019 the balance of this loan was $25,430,
of which $5,569 is due within one year.
(10)
COMMITMENTS AND CONTINGENCIES
a)
Stockholders deficit
At
March 31, 2019, 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, 2019, 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, 2019, 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 recorded in accrued liabilities at March 31, 2019.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(10)
COMMITMENTS AND CONTINGENCIES (continued)
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)
Material Contracts and Agreements
On
November 1, 2016, 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 shares of restricted common stock. These shares
were issued and valued at the market price on the grant date, $57.70 per share, for a total of $577,700, which was recorded as
prepaid officer compensation and was 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 as additional officer compensation.
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 Company’s election and three thousand one hundred (3,100) shares of our restricted common stock, to
be issued 1,100 on January 1, 2017, 1,000 issued on July 1, 2017 and 1,000 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 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 as related party professional fees.
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 shares of restricted
common stock. These shares were issued and valued at the market price on the grant date, $29 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 as related party professional fees.
d)
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
2017, valued at $70,000, based on a negotiated agreement.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(10)
COMMITMENTS AND CONTINGENCIES (continued)
e)
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, 2019 (unaudited), there were no pending or threatened lawsuits that could reasonably be expected to have a material
effect on the results of our operations.
A
former officer of the Company, t
his party discussed in d) above
has not accepted the stock certificate and 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
March 31, 2019 and December 31, 2018, the Company has 5,000,000,000 shares of par value $0.0001 common stock authorized
and 2,901,311 and 2,403,311 issued and outstanding. At March 31, 2019 and December 31, 2018, respectively,
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.
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, 2019, the balance of this note is $313,393, (see Note 7b).
(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 founder’s 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, 2019 and December 31, 2018, the Company had accrued interest of $8,920 and $8,427, 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.
Global
Boatworks Holdings, Inc.
Notes
to Consolidated Financial Statements
(Information
as to the three months ended March 31, 2019 is unaudited)
(13)
CONCENTRATIONS OF RISK
The
Company has no revenue producing asset at March 31, 2019, as the Luxuria I was not available for rentals. The Luxuria I
floating vessel has a firm contract to sell with a closing date of April 24, 2019, (see Note 14). 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. As of April
24, 2019, the Company has no revenue producing streams.
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, 2019 (unaudited) and December 31, 2018, respectively.
(14)
SUBSEQUENT EVENTS
a)
Short Term Debt and Short Term Convertible Notes
In
March 2019, the lender of Note 2 each in Notes 6 and 7 (with a combined total due of $947,840) agreed to a global settlement of
$600,000 upon the closing of the sale of the Luxuria I and $70,000 due six months thereafter. The lender agreed to forgive the
$277,840 balance. Upon the payment of the second tranche the Company will record a gain on debt settlement of $277,840 plus a
gain on the extinguishment of the derivative liability of $208,345.
b)
Fixed Asset Held for Sale
In
March 2019, the Company entered into a binding agreement to sell the Luxuria I to a third party for $750,000. The Company netted
$727,500 from this sale after paying a brokerage fee of $22,500. This transaction closed on April 24, 2019.