UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from   to  

 

Commission File No. 000-52297

 

FBEC Worldwide, Inc.
(Exact name of registrant as specified in its charter)

 

Wyoming 06-1678089
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

1621 Central Ave, Cheyenne, WY 82001
(Address of principal executive offices) (Zip Code)

 

(800) 785-4089

 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares outstanding of the Registrant’s Common Stock as of September 7, 2016 was 128,014,555.

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Unaudited Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
   
PART II - OTHER INFORMATION  
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Mine Safety Disclosures 15
Item 5. Other Information 15
Item 6. Exhibits 15
Signatures 16

  

  2  

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements


FBEC WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEET

 

    June 30, 2016     December 31, 2015  
    (Unaudited)     (Audited)  
ASSETS            
Current Assets                
Cash   $ 18,787     $ 45,309  
Inventories     22,576       16,844  
Total Current Assets     41,363       62,153  
                 
Property, plant, and equipment, net     837       –  
Intangible assets, net     50,000       50,000  
                 
Total assets   $ 92,200     $ 112,153  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current Liabilities:                
Accounts payable   $ 27,927     $ 35,495  
Accrued expenses     139,513       65,167  
Convertible notes payable     1,085,865       951,465  
Advances     22,675       22,675  
Derivative liabilities     719,877       993,070  
Total current liabilities     1,995,857       2,067,872  
                 
Total liabilities   $ 1,995,857     $ 2,067,872  
                 
Stockholders' Deficit:                
Preferred stock - par value $0.001; 20,000,000 shares authorized;10,000 shares issued and outstanding            
Common stock - par value $0.001; 2,200,000,000 shares authorized; 121,901,652 and 268,847,741 shares issued and outstanding, respectively     121,902       268,848  
Additional paid-in capital     3,303,671       3,847,153  
Accumulated deficit     (5,329,231 )     (6,071,721 )
Total stockholders' deficit     (1,903,657 )     (1,955,719 )
                 
Total liabilities and stockholders' deficit   $ 92,200     $ 112,153  

 

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

 

  3  

 

 

FBEC Worldwide, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

    Three Months Ended
June 30, 		    Six Months Ended
June 30, 		 
    2016     2015     2016     2015  
                         
Net revenues:                                
Net revenue   $ 31     $ –     $ 1,359     $ –  
Total net revenues     31       –       1,359       –  
                                 
Cost of Goods Sold     22       –       1,003       –  
                                 
Gross Income     9       –       356       –  
Operating expenses:                                
General, selling and administrative expenses     80,048       716,376       266,250       755,922  
                                 
Total operating expenses     80,048       716,376       266,250       755,922  
                                 
Income (loss) from operations     (80,039 )     (716,376 )     (265,894 )     (755,922 )
                                 
Other income (expense)                                
Interest expense     (47,954 )     (12,284 )     (58,633 )     (12,284 )
Gain (loss) on derivative liability     469,340       (1,287,444 )     310,216       (647,772 )
Other income (expense)     (37,022 )     (18,151 )     –       (18,151 )
                                 
Total other income (expense)     384,364       (1,317,879 )     251,583       (678,207 )
                                 
Income (loss) before income tax     304,325       (2,034,255 )     (14,311 )     (1,434,129 )
                                 
Provision for income taxes     –       –       –       –  
                                 
Net income (loss)   $ 304,325     $ (2,034,255 )   $ (14,311 )   $ (1,434,129 )
                                 
Basic income (loss)  per share   $ –     $ –     $ –     $ –  
Diluted income (loss) per share   $ –     $ –     $ –     $ –  
Weighted average shares - Basic     165,171,328       141,038,028       165,171,328       141,038,028  
Weighted average shares - Diluted     1,280,008,559       141,038,028       1,280,008,559       141,038,028  

 

The accompanying notes are integral part of these financials statements.

 

  4  

 

 

FBEC WORLDWIDE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

    Six Months ended
June 30, 2016 		    Six Months ended
June 30, 2015 		 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (14,311 )   $ (1,434,129 )
Adjustments to reconcile net loss to net cash used in operating activities:                 
(Gain) Loss on derivative liabilities     (735,739 )     647,772  
Amortization debt discounts     262,408       11,060  
Loss on extinguishment of liabilities     37,022       18,151  
Loss on debt converted into common stock     35,772       –  
Loss on derivative expenses     163,115          
Changes in operating assets and liabilities:                
Inventory     (5,732 )        
Accounts payable and accrued expenses     1,460       (612 )
Prepaid expenses             (19,940 )
Accrued expenses     65,320       57,132  
Net cash used in operating activities     (190,685 )     (720,566 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of Equipment     (837 )     (16,120 )
Purchase of Formula             (15,000 )
Net cash flow used in investing activities     (837 )     (31,120 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Stock issued against services             351,341  
Notes payable issued against services             200,000  
Proceeds from Notes Payable             247,750  
Proceeds from Convertibles Notes Payable     215,000       25,000  
Repayment of debt     (50,000 )     (30,000 )
Net cash provided by financing activities     165,000       794,091  
                 
Net increase (decrease) in cash     (26,522 )     42,405  
Cash, beginning of year     45,309       –  
Cash, end of the period   $ 18,787     $ 42,405  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
Interest paid   $ –     $ –  
Income taxes paid     –       –  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Common stock issued for conversion of debt   $ 30,000     $ 16,500  
Resolution of derivative liabilities     50,000       896,100  
Common stock issued in reverse merger     –       –  
Accounts payable converted to convertible debt     –       –  
Related party liabilities converted to debt     –       –  
Series 'A' Preferred Stock conversation     –       53,407  
Notes Payable issued against formula     –       35,000  
Common stock issued for settlement of liabilities     –       –  
Common stock issued for settlement of liabilities to related parties     –       –  
Debt discount due to derivative liabilities     354,000       25,000  

 

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

 

 

  5  

 

 

FBEC WORLDWIDE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BASIS OF PRESENTATION, GOING CONCERN AND CORRECTION OF PRIOR YEAR INFORMATION

 

Interim Financial Reporting

 

While the information presented in the accompanying interim financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). All adjustments are of a normal, recurring nature. Interim financial statements and the notes thereto do not contain all of the disclosures normally found in year-end audited financial statements and these Notes to Financial Statements are abbreviated and contain only certain disclosures related to the three and six month period ended June 30, 2016. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2015 as reported in the Form 10-K have been omitted. It is suggested that these interim financial statements be read in conjunction with our audited financial statements and related notes for the year ended December 31, 2015 included in our Form 10-K filed with the Securities Exchange Commission on May 19, 2016. Operating results for the three an six months ended June 30, 2016 are not necessarily indicative of the results that can be expected for the period from January 1, 2016 through December 31, 2016.

 

Earnings Per Share

 

We present both basic and diluted earnings per share (“EPS”) amounts in our financial reporting. Basic EPS excludes dilution and is computed by dividing income available to Common Stock holders by the weighted-average number of Common Stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our convertible debt. Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. During the three months ended June 30, 2015 and the six months ended June 30, 2016 and 2015, the shares underlying the outstanding convertible debt were excluded as their effect would have been anti-dilutive. For the three months ended June 30, 2016, the dilutive effect of the shares underlying the outstanding convertible debt of the Company was 1,114,837,231 and a reduction to net income of $469,340.

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business. At June 30, 2016, the Company has an accumulated deficit of $5,329,231 and has a working capital deficit of $1,234,618. These matters raise substantial doubt about the Company's ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. The Company’s ability to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.

 

NOTE 2 – STOCKHOLDERS’ DEFICIT

 

The Company is authorized to issue up to 2,200,000,000 shares of common stock at $0.001 par value per share and 20,000,000 shares of preferred stock at $0.001 par value per share. As of June 30, 2016 and December 31, 2015, the Company had 121,901,652 and 268,847,666 shares of common stock plus 1,000 and 1,000 shares of Series A preferred stock issued and outstanding, respectively (see Note 10).

 

  6  

 

NOTE 3 – RELATED PARTIES

 

As of June 30, 2016 and December 31, 2015, the Company has outstanding advances to former officers and directors aggregating $22,675. The advances are unsecured, due on demand and bear no interest.

 

In April 2015, the Company entered into a consulting agreement with Yorkshire Capital LLC. A retainer of $225,000 plus a management fee of $30,000 per month and 10% of any acquisition closed with the assistance of Yorkshire Capital LLC will be paid. During six months ended June 30, 2015, the Company paid $105,000 in total for consulting services, of which $90,000 was recognized as consulting expense and $15,000 was recognized as prepaid expenses. The agreement has been terminated.

 

In May 2015, the Company issued 150,000,000 shares of restricted common stock to the Company’s then President. These shares have a one year vesting period and were valued using the estimated enterprise value of the Company. The aggregate fair value of the warad was determined to be $498,421 of which $83,070 was recognized during the six months ended June 30, 2015 and $415,351 will be recognized over the remaining vesting period. The shares were purchased by Midam Ventures LLC and have all been cancelled. Midam Ventures LLc will have an exclusive right from February 26, 2016 to provide Investor and Public Relations services to the Company for five years.

 

In May 2015, the Company converted 8,999 shares of Series A Preferred stock into 53,406,528 shares of the Company’s common stock. These shares are owned by S&L Capital LLC, Robert Sand, majority owner and former President of the Company.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

On June 29, 2015, the Company purchased $16,120 of office equipment and telephone equipment.

 

Property and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations when incurred, while additions and improvements are capitalized. The Company depreciates the costs of these assets over their estimated useful lives. When assets are retired or disposed, the asset's original cost and related accumulated depreciation are eliminated from accounts and any gain or loss is reflected in income. Depreciation and amortization are generally accounted for using the straight line method over the estimated useful lives of the assets as follows:

 

Office, protective and demonstration, and computer equipment   4 Years
Manufacturing equipment 10 Years
Leasehold improvements lease term

 

These assets were consider consideration to Mr. Sand and removed from the Company in September 2015.

 

This year the Company has purchased $837 of computer equipment.

 

Long-lived Assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable.

 

NOTE 5 – INTANGIBLE ASSET

 

In June 2015, the Company purchased a hemp based drink formula for $50,000, paying $15,000 in cash and issuing a note for $35,000 (See Note-7 Notes Payable).

 

The Company's intangible assets comprise a license, trademarks and patents which are accounted for at cost. The license is amortized over 17 years which is the life of the agreement. The trademarks and patents are amortized straight-line over 20 years. Should the Company determine that there is permanent impairment in the value of the unamortized portion of an intangible asset an appropriate amount of the unamortized balance of the intangible asset would be charged to income at that time.

 

 

  7  

 

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

At June 30, 2016 and December 31, 2015, convertible notes payable consisted of the following:

 

      June 30,
2016 		      December 31,
2015 		 
Convertible notes payable   $ 1,085,865     $ 951,465  
Unamortized debt discounts   $ (288,590 )   $ (234,020 )
Total   $ 797,275     $ 717,445  

 

The outstanding convertible notes bear interest ranging from 8% to 12% on all notes in default and three notes from inception, are due on demand and are convertible into common stock at variable rates based upon discounts to the market price of the common stock. The Company identified embedded derivatives related to the outstanding convertible notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the convertible notes and to adjust the fair value as of each subsequent balance sheet date. At June 30, 2016, the aggregate fair value of the outstanding derivative liabilities was determined to be $719,876.  The fair value of the embedded derivatives was determined using the Black Scholes Option Pricing Model based on the following assumptions:  

 

The fair value of the outstanding embedded derivatives of $719,876 at June 30, 2016 was determined using the Black Scholes Option Pricing Model with the following assumptions:

 

Dividend yield:     -0-%  
Market price of common stock:     $0.013  
Expected volatility:     Maximum  
Risk free rate:     0.36%  

 

At June 30, 2016, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating gain of $256,365 and $735,739 for the three and six months ended June 30, 2016.

 

Notes in default and included in Current Notes Payable were $845,832 at June 30, 2016.

 

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: 

   

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

  8  

 

 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

  

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

 

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of June 30, 2016 and December 31, 2015:

 

 

    Total     Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) 		    Significant
Other
Observable
Inputs
(Level 2) 		    Significant
Unobservable
Inputs
(Level 3) 		 
June 30, 2016                                
Liabilities:                                
Derivative liabilities   $ 1,008,466     $ –     $ –     $ 1,008,466  
                                 
December 31, 2015                                
Liabilities:                                
Derivative liabilities   $ 993,070     $ –     $ –     $ 993,070  

 

The derivative liabilities are measured at fair value using the Black Scholes Option Pricing Model including quoted market prices and estimated volatility factors based on historical prices for the Company’s common stock and are classified within Level 3 of the valuation hierarchy.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2015:

 

Derivative Liabilities    

 

Balance, December 31, 2015   $ 993,070  
Additions at fair value     637,499  
Change in fair value     (622,103 )
Balance, June 30, 2016   $ 1,008,466  

 

NOTE 8 – NOTES PAYABLE

 

In February 2016, the Company entered into a convertible debt agreement with a principal amount of $40,000 with 0% interest per annum. This note is convertible at a 38% discount to the lowest market price of the 15 days preceding the conversion request. This note becomes convertible at or after maturity. The default interest rate is 12% per annum.

 

In March 2016, the Company entered into a convertible debt agreement with a principal amount of $25,000 with 10% interest per annum. This note is convertible at a 70% discount to the lowest market price of the 20 days preceding the conversion request. These notes are convertible at any time at the option of the holder. The default interest rate is 12% per annum.

 

  9  

 

 

 

In April 2016, the Company entered into a convertible debt agreement with a principal amount of $150,000 with 8% interest per annum. This note is convertible at a fixed rate of $.0008. These notes are convertible any time after 179 days from the date of the note at the option of the holder.

 

NOTE 9– SUBSEQUENT EVENTS

 

In July 2016, the Company issued 2,887,097 free trading common shares for the conversion of $8,950 in debt.

 

In August 2016, the Company issued a total of 3,225,806 free trading common shares for the conversion of $10,000 in debt.

 

 

 

 

 

 

 

 

 

 

 

 

 

  10  

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2015, as well as with our unaudited financial statements and the notes thereto included elsewhere herein.

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business and our industry, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, projections of our future financial performance and our anticipated growth, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

 

We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future perform ance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including but not limited to the risks and uncertainties discussed in our other filings with the SEC or our sales results or changes in costs associated with ingredients for our products, manufacture of our products, distribution and sales. We undertake no obligation to revise or update any forward-looking statement for any reason.

 

Overview

 

FBEC Worldwide is an innovative beverage company dedicated to offering proprietary products focused towards significant target markets, both domestic and abroad. We are committed to increasing our market size and scope through the optics of creative marketing and most importantly customer satisfaction. Our growth strategies will focus on a number of major initiatives including, unique branding opportunities that will be targeted at key demographic groups, and to develop strong community and distributor relationships.

 

As we look ahead FBEC Worldwide will develop and build name brands focused on strong rates of growth within key fundamental consumer groups. Our company is dedicated to becoming a leading developer of name brand beverage alternatives geared specifically towards large, significantly important demographics within major markets.

 

The Company's Common Stock is quoted on the OTC Market Groups, Inc. OTCQB (the “OTCQB”) under the symbol “FBEC.”

 

In June 2015, the Company entered into an Intellectual Property Purchase Agreement, Consulting Agreement, and Royalty Agreement with G. Randall & Sons, Inc. These agreements provide for the asset purchase of the proprietary hemp-based formula used in the Company’s beverage energy shot. G. Randall and Sons will provide ongoing consulting services in blending new formula(s) and working directly with FBEC to improve and blend existing formulas. The Company purchased the asset for $50,000. The purchase includes a $15,000 cash payment and $35,000 8% Convertible Note with a 6 month maturity date and conversion features of 75% of the average closing price 20 days previous to conversion. This represents a 25% discount to the average closing price 20 days previous to conversion.

 

 

  11  

 

 

Basis of presentation and going concern uncertainty

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business. At June 30, 2016, the Company has an accumulated deficit of $5,329,231 and has a working capital deficit of $1,977,169. The Company’s ability to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations; however, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations, therefore these matters raise substantial doubt about the Company's ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

 

Critical Accounting Policies

 

There have been no changes from the Critical Accounting Policies described in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 19, 2016.

 

Liquidity and Capital Resources

 

We began current operations in February 2014 and have yet to attain a level of operations which allows us to meet our current overhead requirements. We do not contemplate attaining profitable operations prior to 2017 and there is no assurance that such an operating level will ever be achieved. We will be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, production expenses and significant marketing related expenditures to gain market recognition, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

 

As of June 30, 2016, the Company’s cash balance was $18,787. Outstanding debt as of June 30, 2016 totaled $2,018,532, which is attributable accounts payable and accruals of $167,440, derivative liability $719,877 and loans and a dvances of $1,108,540. The Company’s working capital deficit as of June 30, 2016 was $1,977,169.

 

The Company will need to raise additional capital to expand operations to the point at which the Company can achieve profitability. The terms of financing that may be raised may not be on terms acceptable by the Company. If adequate funds cannot be raised outside of the Company, the Company’s current stockholders may need to contribute funds to sustain operations. The Company does not have any agreements with any of its stockholders to provide any capital and there can be no assurance that any stockholder would be able or willing to fund the Company's continued operations.

 

Results of Operations

 

For the period from January 1, 2016 through June 30, 2016 and January 1, 2015 through June 30, 2015, the Company’s revenue totaled $1,359 and $0, for which its respective cost of revenues totaled $1,003 and $0.

 

For the period from January 1, 2016 through June 30, 2016 and January 1, 2015 through June 30, 2015, the Company had operating expenses totaling $354,895 and $755,922, respectively. These costs were primarily from wages and consulting fees.

 

For the three months ended June 30, 2016 and three months ended June 30, 2015, the Company’s revenue totaled $31 and $0, for which its respective cost of revenues totaled $22 and $0.

 

For the three months ended June 30, 2016 and three months ended June 30, 2015, the Company had operating expenses totaling $80,048 and $716,376, respectively. These costs were primarily from wages and consulting fees.

 

  12  

 

 

Off Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements.

 

Inflation

 

The Company believes that inflation has not had, and is not expected to have, a material effect on our operations.

 

Climate Change

 

We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

 

Recently Issued Accounting Pronouncements

 

There are no recently issued accounting pronouncements that are expected to have a material impact on the unaudited condensed consolidated financial statements or notes thereto.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), Robert Sand, the Company's President and Principal Executive Officer and Treasurer and Principal Accounting Officer ("CFO") (the Company’s principal financial and accounting officer), initially evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.

 

Based upon that initial evaluation, Mr. Greene concluded, upon consultation with prior management,that the Company’s disclosure controls and procedures were not effective as of June 30, 2016 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s President/CFO, as appropriate, to allow timely decisions regarding required disclosure, due to the material weaknesses described below. These weaknesses are being addressed with the inclusion of additional board of director members and the intention to hire a Chief Financial Officer with requisite experience and knowledge of the requirements. When this is complete the Company will have an audit committee task with addressing and correcting all material weaknesses.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

 

The Company believes its weaknesses in internal controls and procedures is due to the Company's lack of sufficient personnel with expertise in the area of SEC, GAAP and tax accounting procedures. In addition, the Company lacks the personnel structure, size and complexity to segregate duties sufficiently for proper controls. The Company has not implemented a formal system of internal control that provides for multiple levels of supervision and review.

 

The Company is currently without sufficient funds to hire additional personnel with expertise in these areas and to segregate duties for proper controls and until such time as additional personnel are hired, the Company believes that it will continue to recognize a weakness in its internal controls and procedures. The Company currently engages outside consultants to assist in the areas of tax and accounting procedures. This will be addressed for correction during the period ending September 30, 2016.

 

The Company plans to hire additional personnel to properly implement a control structure during the quarter ending September 30, 2016. In the meantime, the Chief Executive Officer/Financial Officer will continue to perform or supervise the performance of additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures, to ensure that the Company's Annual Report and the financial statements forming part thereof are in accordance with GAAP.

 

  13  

 

 

Changes in Internal Control Over Financial Reporting

 

During the three months ended June 30, 2016, there were no changes in our internal control over financial reporting that occurred during 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

 

Our disclosure controls and procedures provide our principal executive and financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

 

Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company has only one director and executive officer dealing with general administrative and financial matters. This constitutes a significant deficiency in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management plans to re-evaluate this situation periodically. In light of the Company’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.

 

  14  

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no material pending legal or governmental proceedings relating to our Company or its properties to which we are a party, and to our knowledge, there are no material proceedings to which any of our directors, executive officers, affiliates or shareholders are a party adverse to us or have a material interest adverse to us.

 

ITEM 1A. RISK FACTORS

 

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

There are no unreported sales of unregistered securities during the six months ended June 30, 2015.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.

 

Exhibit Description
   
31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350*
101.1 Interactive data files pursuant to Rule 405 of Regulation S-T*

*Filed herewith.

 

  15  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     
September 12 , 2016 FBEC WORLDWIDE, INC.
     
  By: /s/ Jeffrey Greene
  Jeffrey Greene
 

President and Treasurer

(Principal Executive Officer, Principal Financial and

Accounting Officer and Authorized Signatory)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  16  

FBEC Worldwide (CE) (USOTC:FBEC)
Historical Stock Chart
From Dec 2024 to Jan 2025 Click Here for more FBEC Worldwide (CE) Charts.
FBEC Worldwide (CE) (USOTC:FBEC)
Historical Stock Chart
From Jan 2024 to Jan 2025 Click Here for more FBEC Worldwide (CE) Charts.