NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 1 – BASIS OF PRESENTATION
The following interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-K as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the period ended December 31, 2013. In the opinion of management, the interim unaudited financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
The consolidated financial statements for the six months ended June 30, 2014 include the financial statement of the Company and its operating subsidiary Carmela’s Pizzeria. For the six months ended June 30, 2013, the consolidated financial statements includes only Carmela’s. For the year ended December 31, 2013 the consolidated financial statements include the accounts of Carmela’s for the full year and the Company from October 1, 2013 through December 31, 2013.
For SEC reporting purposes, Carmela’s is treated as the continuing reporting entity that acquired GRAS. The reports filed after the transaction have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company pursuant to FASB ASC 805-40-45-1.
The statements of operations and cash flows reflect the results of operations and the changes in cash flows of the Company for the six month period ended June 30, 2014. Operating results for the six month period ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. As of June 30, 2014 and December 31, 2013, the Company had a working capital deficit and has incurred significant losses since inception. Further losses are anticipated raising substantial doubt as to the Company’s ability to continue as a going concern. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company plans to acquire sufficient capital from its investors with which to pursue its business plan. There can be no assurance that the future operations will be significant and profitable, or that the Company will have sufficient resources to meet its objectives. There is no assurance that the Company will be successful in raising additional funds.
NOTE 3 – ORGANIZATION AND NATURE OF BUSINESS
Greenfield Farms Food, Inc. (“GRAS” or the "Company") was incorporated under the laws of the State of Nevada on June 2, 2008. In October 2013, the Company entered into an Asset Purchase Agreement (the “Agreement”) with COHP, LLC (”COHP”) through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela’s Pizzeria (“Carmela’s”) through a newly formed wholly-owned subsidiary Carmela’s Pizzeria CO, Inc. Carmela's Pizzeria presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 year end.
Use of Estimates and Assumptions
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 those estimates.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The fair values of cash and cash equivalents pre-paid expenses, accounts receivable, inventory, deferred charges, accounts payable and accrued expenses, and notes payable approximate their carrying amounts because of the short maturities of these instruments.
The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.
Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).
Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.
The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The three hierarchy levels are defined as follows:
Level 1 – Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The Company has determined that its derivative liabilities related to convertible notes payable fall under Level 2. Derivative liabilities were $214,194 and $251,137 at June 30, 2014 and 2013, respectively.
Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap market.
Income Taxes
The Company has elected to be taxed as a “C” corporation. Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were warrants outstanding convertible into 53,965,942 shares of common stock at June 30, 2014. Basic and diluted loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $10,976 and $24,787 during the six month periods ended June 30, 2014 and 2013, respectively.
Property and Equipment
Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the three to five year estimated useful lives of the assets. Depreciation expense totaled $11,317 and 8,862 for the six month periods ended June 30, 2014 and 2013, respectively.
Revenue Recognition
The Company records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product/service is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products/services.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. During the six months ended June 30, 2014, the Company did not issue any stock-based payments to its employees.
Accounting Pronouncements
No accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
NOTE 5 – NOTES PAYABLE
The Company has outstanding a promissory note for $50,000 issued in 2011. The note is secured by the Company’s common stock, bears 8% interest, and was due on January 26, 2012. The note is currently in default. Total interest expense on this note was $1,984 for the six months ended June 30, 2014. An additional note in the amount of $100 was issued in the quarter ended March 31, 2014 and accrued interest expense of $3 during the six month period ended June 30, 2014.
NOTE 6 – NOTES PAYABLE – RELATED PARTIES
Entities controlled by the members have loaned monies to Carmela’s for working capital purposes. The loans are non-interest bearing and have no specific terms of repayment. A related party loan from KB Air is secured by all the assets of the Company. The total amount due under these notes was $100,687 as of December 31, 2013. An additional $73,261, net of payments, was loaned during the six month period ended June 30, 2014 for total loans outstanding at June 30, 2014 of $173,948. In addition, there is $31,400 in notes payable to parties related to the Company with interest expensed during the six month period ended of $1,246. Accordingly there was $205,348 in related party notes payable at June 30, 2014.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Effective with the Share Exchange at October 1, 2013, the outstanding convertible debt of GRAS was assumed by Carmela’s, the accounting acquirer, incorporating the following notes and transactions:
On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion. This note is currently in default. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the $6,350 remaining balance along with $3,340 in accrued interest on the this note to 27,685,715 shares at a price of $0.00035 per share. The remaining balance of the note after the conversions was $-0-. An $84,610 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On August 13, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $20,000 balance along with $1,600 in accrued interest on this note to 56,614,286 shares at a price of $0.00034 per share. The remaining balance of the note after the conversions was $-0-. A $123,850 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $53,000 with an interest rate of 8% per annum due on October 30, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $53,000 balance along with $2,120 in accrued interest on this note to 137,800,000 shares at a price of $0.0004 per share. The remaining balance of the note after the conversions was $-0-. A $259,903 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $15,500 with an interest rate of 8% per annum due on November 15, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $15,500 balance along with $620 in accrued interest on this note to 40,300,000 shares at a price of $0.0004 per share. The remaining balance of the note after the conversions was $-0-. A $51,905 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On May 14, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on February 13, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $32,500 balance along with $1,300 in accrued interest on this note to 75,111,111 shares at a price of $0.00045 per share. The remaining balance of the note after the conversions was $-0-. A $111,209 decrease in derivative liability was recorded as a result of these conversions.
On June 24, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $7,500 with an interest rate of 8% per annum due on March 19, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert the entire $7,500 balance along with $300 in accrued interest on this note to 17,333,333 shares at a price of $0.00045 per share. The remaining balance of the note after the conversions was $-0-. A $27,314 decrease in derivative liability was recorded as a result of these conversions.
On September 19, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on June 12, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert $16,600 in principal on this note to 36,888,889 shares at a price of $0.00045 per share. The remaining balance of the note after those conversions was $15,900. In April 2014, the remaining balance of this note was acquired by CareBourn Capital, which converted the entire remaining balance of $15,900 plus $1,378 in interest into 38,395,133 shares at a price of $0.00045 per shares. The remaining balance of this note after these conversions was $-0- at June 30, 2014. A $52,025 decrease in derivative liability was recorded as a result of these conversions.
As of December 31, 2013 there was a total of $11,133 due to an unaffiliated Trust in convertible notes payable that were convertible at 45% of the lowest trading price in the thirty trading days before the conversion creating a derivative liability. During the three months ended March 31, 2014 an additional $15,100 was loaned under the same conversion terms but are not convertible until six months following their issuance date. During the three month period ended March 31, 2014 the Trust issued a notice of conversion to convert $2,700 in principal on these notes to 6,000,000 shares at a price of $0.00045 per share. The remaining balance of these notes after the conversion was $23,533 at June 30, 2014. A $14,013 decrease in derivative liability was recorded as a result of the conversion.
At December 31, 2013, an $18,000 unsecured demand promissory note was outstanding with an interest rate of 8% convertible to common stock at 45% of the lowest trading price in the thirty trading days before the conversion, creating a derivative liability. During the three month period ended March 31, 2014 the holder of this note issued notices of conversion to convert the entire $18,000 balance on this note plus $138 in accrued interest to 36,643,111 shares at a price of $0.0005 per share. The remaining balance of the note after the conversions was $-0-. A $61,473 decrease in derivative liability was recorded as a result of these conversions.
At December 31, 2013, the Company had an outstanding convertible promissory note to CareBourn Capital in the principal amount of $2,010 with an interest rate of 8% per annum due on December 19, 2013. During the quarter ended December 31, 2013, CareBourn Capital converted the $2,010 balance on this note plus $416 in accrued interest to 7,851,742 shares at a price of $0.0005 per share. The remaining balance of the note after the conversions was $-0-. A $22,915 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
On October 1, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $9,300 with an interest rate of 8% per annum due on June 1, 2014 upon the conversion of $9,300 in accounts payable to Cresthill. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issuance date. During the quarter ended March 31, 2014 this note was assigned to CareBourn Capital, which converted the entire note balance of $9,300 along with $145 in accrued interest into 26,984,771 shares of common stock at $0.0005 per share. The remaining balance of this note was $-0- after this conversion and a loss on the conversion of $39,683 was recorded for the difference in the market value and the conversion price on the date of conversion.
On October 29, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $25,000 with an interest rate of 8% per annum due on October 29, 2014 in payment of a $25,000 fee for work performed to complete the acquisition of the assets of Carmela’s Pizzeria. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issue date. The entire balance of this note remained outstanding at June 30, 2014.
On November 25, 2013, the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $22,500 with an interest rate of 8% per annum due on August 27, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
On December 9, 2013, the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $5,000 with an interest rate of 8% per annum due on June 9, 2014. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
In January 2014, the Company issued a total of $10,000 in convertible promissory notes to CareBourn Capital with an interest rate of 8% per annum due in July 2014. These notes are convertible by the holder at any time at 45% of the average of the three lowest trading prices in the ten trading days before the conversion. The entire balance of these notes remained outstanding at June 30, 2014.
On February 18, 2014, the Company issued $62,500 in a convertible promissory note to CareBourn Capital with an interest rate of 8% per annum due in August 2014. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
On March 3, 2014, the Company issued a convertible promissory note to LG Funding in the principal amount of $35,000 with an interest rate of 8% per annum due on February 25, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
On April 7, 2014, the Company issued a convertible promissory note to Adar Bays in the principal amount of $37,000 with an interest rate of 8% per annum due on April 1, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
On April 17, 2014, the Company issued a convertible promissory note to Beaufort Capital in the principal amount of $25,000 with an interest rate of 10% per annum due on October 17, 2014. The note is convertible by the holder after 180 days at 60% of the lowest closing bid price in the twenty trading days before the conversion. The entire balance of this note remained outstanding at June 30, 2014.
Total interest expense on these notes was $5,803 for the six months ended June 30, 2014.
A summary of the derivative liability related to convertible notes payable as of June 30, 2014 is as follows. These amounts do not include convertible notes that may not yet be convertible or that are currently in default. As of June 30, 2014, the total face value of convertible notes payable was $245,533.
Face Value
|
|
Balances
12/31/13
|
|
|
Issuance of new convertible notes
|
|
|
Amortization of discount on convertible
Notes
|
|
|
Debenture conversions six months ended 6/30/14
|
|
|
Balances
6/30/14
|
|
2013 Notes
|
|
$
|
260,294
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(199,360
|
)
|
|
$
|
60,934
|
|
2014 Notes
|
|
|
-
|
|
|
$
|
184,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
184,600
|
|
Note discount
|
|
$
|
(55,423
|
)
|
|
|
(152,500
|
)
|
|
$
|
149,590
|
|
|
|
-
|
|
|
|
(58,333
|
)
|
Total
|
|
$
|
204,871
|
|
|
$
|
32,100
|
|
|
$
|
149,590
|
|
|
$
|
(199,360
|
)
|
|
$
|
187,201
|
|
NOTE 8 – DERIVATIVE LIABILITY
The Company has determined that the conversion features of certain of its notes represent an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, they are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the notes. Such discount will be accreted from the commencing date of conversion period to the maturity date of the notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet.
The beneficial conversion feature included in the notes resulted in initial debt discounts of $193,500 and an initial loss on the valuation of the derivative liabilities of $168,950 based on the initial fair value of the derivative liabilities of $362,450. The fair value of the embedded derivative liabilities were calculated at the conversion commencement dates utilizing the following assumptions:
Note convertible date
|
|
12/23/13
|
|
|
12/27/13
|
|
|
1/9/14
|
|
|
1/16/14
|
|
|
2/18/14
|
|
|
4/29/14
|
|
|
6/5/14
|
|
Note amount
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
$
|
62,500
|
|
|
$
|
25,000
|
|
|
$
|
22,500
|
|
Stock price at convertible date
|
|
$
|
.0005
|
|
|
$
|
.00048
|
|
|
$
|
.00084
|
|
|
$
|
.0008
|
|
|
$
|
.00069
|
|
|
$
|
.0011
|
|
|
$
|
.0008
|
|
Expected life (years)
|
|
|
.75
|
|
|
|
.75
|
|
|
|
.50
|
|
|
|
.50
|
|
|
|
.50
|
|
|
|
.25
|
|
|
|
.23
|
|
Risk free interest rate
|
|
|
.10
|
%
|
|
|
.10
|
%
|
|
|
.07
|
%
|
|
|
.07
|
%
|
|
|
.07
|
%
|
|
|
.02
|
%
|
|
|
.12
|
%
|
Volatility
|
|
|
319.1
|
%
|
|
|
319.1
|
%
|
|
|
420.22
|
%
|
|
|
420.88
|
%
|
|
|
401.57
|
%
|
|
|
96.79
|
%
|
|
|
105.85
|
%
|
Initial derivative value
|
|
$
|
17,783
|
|
|
$
|
12,663
|
|
|
$
|
16,621
|
|
|
$
|
12,122
|
|
|
$
|
191,384
|
|
|
$
|
43,040
|
|
|
$
|
27,907
|
|
At June 30, 2014, the following notes remained convertible and not fully converted or in default. All convertible notes in default were no longer valued for the derivative liability and a loss on the conversion of stock will be recorded at the time of any future conversion.
The fair value of the embedded derivative liabilities on the remaining convertible notes was calculated at June 30, 2014 utilizing the following assumptions:
Note convertible date
|
|
12/23/13
|
|
|
12/27/13
|
|
|
1/9/14
|
|
|
1/16/14
|
|
|
2/18/14
|
|
|
4/29/14
|
|
|
6/5/14
|
|
Note amount
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
$
|
62,500
|
|
|
$
|
25,000
|
|
|
$
|
22,500
|
|
Stock price at convertible date
|
|
$
|
.00036
|
|
|
$
|
.00036
|
|
|
$
|
.00028
|
|
|
$
|
.00028
|
|
|
$
|
.00032
|
|
|
$
|
.00036
|
|
|
$
|
.00036
|
|
Expected life (years)
|
|
|
.23
|
|
|
|
.24
|
|
|
|
.02
|
|
|
|
.04
|
|
|
|
.13
|
|
|
|
.08
|
|
|
|
.16
|
|
Risk free interest rate
|
|
|
.07
|
%
|
|
|
.04
|
%
|
|
|
.01
|
%
|
|
|
.01
|
%
|
|
|
.02
|
%
|
|
|
.03
|
%
|
|
|
.05
|
%
|
Volatility
|
|
|
84.87
|
%
|
|
|
83.79
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
2.71
|
%
|
|
|
1
|
%
|
|
|
24.79
|
%
|
6/30/14 derivative value
|
|
$
|
3,757
|
|
|
$
|
3,758
|
|
|
$
|
11,072
|
|
|
$
|
11,072
|
|
|
$
|
113,283
|
|
|
$
|
37,500
|
|
|
$
|
33,752
|
|
NOTE 9 – CAPITAL STOCK
Common Stock
The Company has authorized 950,000,000 common shares with a par value of $0.001 per share.
On October 31, 2013, the Company effected a 1 for 100 reverse split of its common stock whereby the 949,839,719 pre-split shares of common stock outstanding became 9,498,413 shares post-split. There was no change in authorized shares of the Company.
All share information presented in these financial statements and accompanying footnotes has been presented showing the historical changes in stockholders’ deficit of Carmela’s, the accounting acquirer in the Share Exchange, and including that of the Company following the Share Exchange as of October 31, 2013.
2014 Common Stock Issuances
During the six months ended June 30, 2014, the Company issued 507,608,091 shares of common stock upon conversion of $210,716 in principal and interest payable on convertible notes representing a value of $0.00042 per share. In addition, we incurred loss on conversion of the shares totaling $572,866 for a total cost to the Company of $783,582.
Preferred Stock
The Company has authorized 50,000,000 shares of preferred stock par value $0.001.
The Company authorized 100,000 Series A preferred shares and issued 96,623 Series A shares. The Series A shares have immediate voting rights equivalent to 7,000 shares of common stock for each Series A share and may be converted after a minimum one-year hold at the same rate. This gives effective control of the Company to the holders of the Series A preferred shares. The terms called for no conversion or Series A shares coming into the market from these sources until March 28, 2012 at the earliest. As of June 30, 2014 no conversion has taken place.
On July 15, 2013, the board of directors of the Company authorized the creation of the Series B Convertible Preferred Stock, which consists of up to 100,000 shares of preferred stock with par value of $0.001 per share and a stated value of $1.00 per share. A total of 44,000 shares of Series B Preferred Stock were issued on the conversion of debt payable by the Company, including $40,000 to the Company's then Chief Financial Officer, Henry Fong. The Series B Convertible Preferred is convertible to common stock at 100% of the stated value divided by 45% of the lowest trading price of the Company's common stock for the 90 trading days immediately preceding the Conversion Date. The Series B Preferred Stock has voting rights on an as if converted basis on the date of any vote to come before the Company's shareholders. As of June 30, 2014 no conversion has taken place.
Warrants
In connection with the acquisition of the assets of Carmela’s Pizzeria, COHP, LLC and its assigns received warrants to purchase a total of 53,965,942 shares of the Company’s common stock for a period of five years in the amounts and exercise prices as follows: 17,988,648 at $0.015; 17,988,647 at $0.02; and 17,988,647 at $0.025. These warrants were valued utilizing the Black-Scholes pricing model for a total fair market value at issuance of $507,280.
NOTE 10 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to June 30, 2014 to the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements other than those reported above.