Notes
to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
1.
NATURE OF OPERATIONS
Pacific
Ventures Group, Inc. (the “Company,” “we,” “us” or “our”) was incorporated under
the laws of the state of Delaware on October 3, 1986, under the name AOA Corporation. On November 12, 1991, the Company changed
its name to American Eagle Group, Inc. On October 22, 2012, the Company changed its name to “Pacific Ventures Group, Inc.”.
The
current structure of the Company resulted from a share exchange with Snöbar Holdings, Inc. (“Snöbar Holdings”),
which was treated as a reverse merger for accounting purposes. On August 14, 2015, the Company entered into a share exchange agreement
(the “Share Exchange Agreement”) with Snöbar Holdings, pursuant to which the Company acquired 100% of the issued
and outstanding shares of Snöbar Holdings’ Class A and Class B common stock in exchange for 22,500,000 restricted shares
of the Company’s common stock, while simultaneously issuing 2,500,000 restricted shares of the Company’s common stock
to certain other persons, including for services provided and to a former officer of the Company (the “Share Exchange”).
As
the result of the Share Exchange, Snöbar Holdings became the Company’s wholly owned operating subsidiary and the business
of Snöbar Holdings became the Company’s sole business operations and MAS Global Distributors, Inc., a California corporation
(“MGD”), became an indirect subsidiary of the Company.
Prior
to the Share Exchange, the Company operated as an insurance holding company and through its subsidiaries, which marketed and underwrote
specialized property and casualty coverage in the general aviation insurance marketplace. However, in 1997, after selling several
of its divisions, the Company’s remaining insurance operations were placed into receivership and the Company ceased operating
its insurance business.
Since
the Share Exchange represented a change in control of the Company and a change in business operations, the Company’s business
operations changed to that of Snöbar Holdings and the discussions of business operations accompanying this filing are solely
that of Snöbar Holdings and its affiliates and subsidiaries comprising of Snöbar Trust, International Production Impex
Corporation, a California corporation (“IPIC”) , and MGD.
Snöbar
Holdings was formed under the laws of the State of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary
of Snöbar Trust, a California trust (“Trust”), which was formed in June 1, 2013. The current trustee that holds
legal title to the Trust is Clark Rutledge, the father of Shannon Masjedi, the Company’s President, Chief Executive Officer,
Interim Chief Financial Officer, Treasurer, and majority stockholder. The Trust owns 100% of the shares of IPIC, which was formed
on August 2, 2001. IPIC is in the business of selling alcohol-infused ice cream and ice-pops and holds all of the rights to the
liquor licenses to sell such products and trade names “Snöbar”. As such, the Trust holds all ownership interest
of IPIC and its liquor licenses, permitting IPIC to sell its product to distributors, with all income, expense, gains and losses
rolling up to the Trust, of which Snöbar Holdings is the sole beneficiary. Snöbar Holdings also owns 99.9% of the shares
of MGD. MGD is in the business of selling and leasing freezers and providing marketing services. As a result of the foregoing,
Snöbar Holdings is the primary beneficiary of all assets, liabilities and any income received from the business of the Trust
and IPIC through the Trust and is the parent company of MGD.
The
Trust and IPIC are considered variable interest entities (“VIEs”) and Snöbar Holdings is identified as the primary
beneficiary of the Trust and IPIC. Under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 810, Snöbar Holdings performs ongoing reassessments of whether it is the primary beneficiary of a VIE.
As the assessment of Snöbar Holdings’ management is that Snöbar Holdings has the power to direct the activities
of a VIE that most significantly impact the VIE’s activities (it is responsible for establishing and operating IPIC), and
the obligation to absorb losses of the VIE that could potentially be significant to the VIE and the right to receive benefits
from the VIE that could potentially be significant to the VIE’s economic performance, it was therefore concluded by management
that Snöbar Holdings is the primary beneficiary of the Trust and IPIC. As such, the Trust and IPIC were consolidated in the
financial statements of Snöbar Holdings since the inception of the Trust, in the case of the Trust, and since the inception
of Snöbar Holdings, in the case of IPIC.
On
May 1, 2018, Royalty Foods Partners, LLC – a Florida Limited Liability Corporation and a subsidiary of Pacific Ventures
Group, Inc. – completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation. San Diego
Farmers Outlet was started over thirty-five years ago to provide primarily restaurant customers in southern California’s
three largest counties with quality food and produce and does business under the name of Farmers Outlet and San Diego Farmers
Outlet.
On
December 17, 2019, the Company completed an asset acquisition of Seaport Meat Company, (Seaport Meat), a California Corporation
with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and
Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport
Meat Company built a state-of-the-art food distribution and manufacturing facility in Spring Valley, California and owns the land
and the building. their 17,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site
daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological,
chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption
of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection
Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly
labeled and packaged
The
Company’s customers range from a wide variety of restaurants, including many well known in Southern CA, to institutions,
schools (UCSD, SDSU, etc.) and re-distributors such as US Foods and Sysco as well as to local distributors. They supply wholesale
food and restaurant supplies to San Diego, Los Angeles, Orange and Riverside and offer same day service. In addition, they have
clients in Arizona and Colorado that come to their facility to pick up their orders.
Because
Seaport Meat Company of America can efficiently add new product lines, they can easily expand the distribution of Pacific Ventures’
San Diego Farmers Outlet and SnoBar product line, thereby accelerating Pacific Ventures’ revenue growth. The combination
of a distribution and product company is unique in the San Diego area and will position the company for rapid growth.
They
manufacture and wholesale custom processed beef, pork, chicken, lamb, veal and seafood. In addition, they are redistributors of
a wide variety of dry goods, frozen foods, disposables and janitorial products. Their sales, distribution and finance processes
are very efficient and can be expanded to add new product lines, including fresh produce and dairy
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company, Snöbar Holdings and its subsidiaries, in which Snöbar
Holdings has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”)
provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been
eliminated upon consolidation.
The
Company applies the provisions of ASC 810 which provides a framework for identifying VIEs and determining when a company should
include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated financial statements.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the Company, Snöbar Holdings, San Diego Farmers Outlet, MGD, IPIC and the Trust,
which was established to hold IPIC, which in turn holds liquor licenses. All inter-company accounts have been eliminated during
consolidation. See the discussion in Note 1 above for variable interest entity treatment of the Trust and IPIC.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue
Recognition
The
Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed
to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified;
(2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price,
with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is
allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the
customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based
on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and
the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope
revenue streams; as such, no cumulative effect adjustment was recorded.
Unearned
Revenue
Certain
amounts are received pursuant to agreements or contracts and may only be used in the conduct of specified transactions or the
related services are yet to be performed. These amounts are recorded as unearned or deferred revenue and are recognized as revenue
in the year/period the related expenses are incurred, or services are performed. As of March 31, 2020, the Company has $0 in deferred
revenue. As of December 31, 2019, the Company also had $0 deferred revenue.
Leases
ASC
842, Leases, was required to be adopted for all financial years beginning after December 15, 2018 and requires long term leases
(longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term.
Currently the Company has 2 long-term leases SDFO & Seaport Meat Company.
Shipping
and Handling Costs
The
Company’s shipping costs are all recorded as operating expenses for all periods presented.
Disputed
Liabilities
The
Company is involved in a variety of disputes, claims, and proceedings concerning its business operations and certain liabilities.
We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and
can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available
information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters,
which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments
in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a
material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts, they
could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods
in which such change in determination, judgment or settlement occurs. As of March 31, 2020, the Company has $0 in disputed liabilities
on its balance sheet.
Cash
Equivalents
The
Company considers highly liquid instruments with original maturity of three months or less to be cash equivalents. As of March
31, 2020, the Company has a cash balance of $197,944 in cash and cash equivalents, compared to $315,967 at December 31, 2019.
Accounts
Receivable
As
of March 31, 2020, Accounts Receivable are stated at net realizable value of $1,407,035. This value includes an appropriate allowance
for estimated uncollectible accounts. The allowance is calculated based upon the level of past due accounts and the relationship
with and financial status of our customers. As of December 31, 2019, the Company wrote off $323 of bad debt expense. The Company
wrote off $2,771 of bad debts during the three (3) months ended March 31, 2020, and thus has not set an allowance for doubtful
accounts.
Inventories
Inventories
are stated at the lower of cost or market value. Cost has been determined using the first-in, first-out method. Inventory quantities
on-hand are regularly reviewed, and where necessary, reserves for excess and unusable inventories are recorded. Inventory consists
of finished goods and includes ice cream, popsicles and the related packaging materials. As of December 31, 2019, the Company
had total inventory assets of $830,504 consisting of $53,207 of San Diego Farmers Outlet, Inc.’s inventory assets of fresh
produce and food products and $777,297 of Seaport Meat Company’s inventory assets of fresh and frozen proteins and seafood
and all other restaurants supply items. As of March 31, 2020, the Company has $1,318,715 in inventories.
Income
Taxes
Deferred
taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Net
Income/(Loss) Per Common Share
Income/(loss)
per share of common stock is calculated by dividing the net income/(loss) by the weighted average number of shares of common stock
outstanding during the period. The Company has no potentially dilutive securities. Accordingly, basic and dilutive income/(loss)
per common share are the same.
Property
and Equipment
Property
and equipment are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful
lives of existing property and equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement
of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting
gain or loss is included in the results of operations. The Company provides for depreciation of property and equipment using the
straight-line method over the estimated useful lives or the term of the lease, as appropriate. The estimated useful lives are
as follows: vehicles, five years; office furniture and equipment, three to fifteen years; equipment, three years.
Identifiable
Intangible Assets
As
of March 31, 2020, the Company’s Identifiable Intangible Assets are as follows:
Intangible
Assets
Identifiable
Intangible Assets
Trade
Name (San Diego Farmers Outlet) $193,000
Trade
Name (Seaport Meat) $449,000
Wholesale
Customer Relationships (San Diego Farmers Outlet) $266,000
Wholesale
Customer Relationships (Seaport Meat) $2,334,239
Total
Identifiable Intangible Assets $3,242,239
Goodwill
Assembled
Workforce $21,000
Unidentified
Intangible Value $470,000
Total
Goodwill $491,000
Total
Intangible Assets $3,733,239
Management
does not believe that there is an impairment as of 2019.
Fair
Value of Financial Instruments
The
carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable, and
accrued expenses are representative of their fair values due to the short-term maturity of these instruments.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable.
The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses
with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.
Critical
Accounting Policies
The
Company considers revenue recognition and the valuation of accounts receivable, allowance for doubtful accounts, and inventory
and reserves as its significant accounting policies. Some of these policies require management to make estimates and assumptions
that may affect the reported amounts in the Company’s financial statements.
Recent
Accounting Pronouncements
In
June 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the
source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation
of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”).
Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) issued under authority of federal
securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the
Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is
organized and presented.
In
April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest
(Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, to simplify presentation of debt issuance costs
by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction
from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement
guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years
beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In
April 2015, FASB issued ASU No. 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for
the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”, which permits the entity to measure
defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply
that practical expedient consistently from year to year. The ASU is effective for public business entities for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is
permitted.
In
April 2015, FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance to customers
about whether a cloud computing arrangement includes a software license. If such includes a software license, then the customer
should account for the software license element of the arrangement consistent with the acquisition of other software licenses.
If the arrangement does not include a software license, the customer should account for it as a service contract. For public business
entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December
15, 2015. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be
any impact on our results of operations, cash flows or financial condition.
In
April 2015, FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master
Limited Partnership Dropdown Transactions”, which specifies that, for purposes of calculating historical earnings per unit
under the two-class method, the earnings (losses) of a transferred business before the date of a drop down transaction should
be allocated entirely to the general partner. In that circumstance, the previously reported earnings per unit of the limited partners
(which is typically the earnings per unit measure presented in the financial statements) would not change as a result of the dropdown
transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction
occurs for purposes of computing earnings per unit under the two-class method also are required. The ASU is effective for fiscal
years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.
In
June 2014, FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes
all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915
from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties
(Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about
the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided
to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which
may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest
in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014,
including interim periods therein. Early application is permitted with the first annual reporting period or interim period for
which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance
(other entities). Our company adopted this pronouncement.
In
June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based
Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”.
The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms
of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The
amendments require that a performance target that affects vesting and that could be achieved after the requisite service period
be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards
with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective
for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.
Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date
or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual
period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted,
the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements
should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition
is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected
to have a material impact on our results of operations, cash flows or financial condition.
In
August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) –
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance
in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability
to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance.
In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments
require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain
principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial
doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the
mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result
of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is
not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued
(or available to be issued).
All
other newly issued accounting pronouncements which are not yet effective have been deemed either immaterial or not applicable.
We
reviewed all other recently issued accounting pronouncements and determined these have no current applicability to the Company
or their effect on the financial statements would not have been significant.
3.
GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As shown
in the accompanying consolidated financial statements, the Company has incurred a net loss of $787,557 for the three (3) months
ended March 31, 2020 and has an accumulated deficit of $10,827,924 as of March 31, 2020.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is
significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing. There
are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to
continue as a going concern.
The
unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue
in existence. These conditions 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 arise from this uncertainty.
4.
INVENTORIES
As
of March 31, 2020, the Company had inventory assets for a total of $1,318,715. The Company had inventory assets of $830,504 as
of December 31, 2019.
5.
PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment at March 31, 2020 and December 31, 2019, consisted of:
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
Computers
|
|
$
|
11,788
|
|
|
$
|
11,788
|
|
|
Office Furniture
|
|
|
14,390
|
|
|
|
|
|
|
Building & Improvement
|
|
|
25,000
|
|
|
|
25,000
|
|
|
Leashold Improvement
|
|
|
13,000
|
|
|
|
|
|
|
Forklift 1
|
|
|
3,000
|
|
|
|
3,000
|
|
|
Forklift 2
|
|
|
2,871
|
|
|
|
2,871
|
|
|
Truck 2018 Hino 155 5347
|
|
|
30,181
|
|
|
|
30,181
|
|
|
Truck 2018 Hino 155 5647
|
|
|
30,181
|
|
|
|
30,181
|
|
|
Truck 2018 Hino 155 5680
|
|
|
30,181
|
|
|
|
30,181
|
|
|
Truck 2019 Hino 155 3710
|
|
|
24,865
|
|
|
|
24,865
|
|
|
Truck 2019 Hino 155 7445
|
|
|
34,213
|
|
|
|
34,213
|
|
|
Machinery & Equipment
|
|
|
921,992
|
|
|
|
913,696
|
|
|
Office Equipment
|
|
|
62,400
|
|
|
|
62,400
|
|
|
Vehicles
|
|
|
409,108
|
|
|
|
409,108
|
|
|
Accumulated Depreciation
|
|
|
(216,152
|
)
|
|
|
(99,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,397,017
|
|
|
$
|
1,477,668
|
|
Depreciation
and Amortization expenses for the three (3) months ended March 31, 2020 was $161,892 compared to $6,476 for the same period of
March 31, 2019.
6.
ACCRUED EXPENSE
As
of March 31, 2020, the Company had accrued expenses of $734,174 compared to $714,962, for the year-end December 31, 2019.
7.
INCOME TAX
The
Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under
this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse.
|
8.
|
RELATED
PARTY TRANSACTIONS
|
The
following table presents a summary of the Company’s promissory notes issued to related parties as of March 31, 2020:
|
Noteholder
|
|
Note Amount
|
|
|
Issuance Date
|
|
Unpaid Amount
|
|
|
S. Masjedi
|
|
$
|
150,000
|
|
|
12/10/2010
|
|
$
|
75,567
|
|
|
A. Masjedi
|
|
|
500,000
|
|
|
6/1/2013
|
|
|
294,830
|
|
|
M. Shenkman
|
|
|
10,000
|
|
|
2/21/2012
|
|
|
10,000
|
|
|
M. Shenkman
|
|
|
10,000
|
|
|
2/23/2012
|
|
|
10,000
|
|
|
M. Shenkman
|
|
|
10,000
|
|
|
3/14/2013
|
|
|
6,000
|
|
|
M. Shenkman (Entrust)
|
|
|
16,000
|
|
|
9/9/2014
|
|
|
16,000
|
|
|
|
|
$
|
696,000
|
|
|
|
|
$
|
412,397
|
|
The
following description represent note payable-related party transaction pre-Share Exchange that were assumed by the Company as
a condition to the Share Exchange:
In
January 2011, MGD, which is now a majority owned subsidiary of Snöbar Holdings, entered into an unsecured promissory note
with Mrs. Masjedi, who is now the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, director
and majority stockholder. The note had a principal balance of $150,000 with an interest rate of 3% and has a maturity date of
December 31, 2022. The balance of the note at March 31, 2020 was $75,567.
On
February 21, 2012, Snöbar Holdings entered into an unsecured promissory note with Mr. Shenkman, who is Chairman of the Board
of Directors and a shareholder of the Company. The note had a principal balance of $10,000 with an interest rate of 5% and is
due on demand. The note’s maturity date has subsequently been extended to December 31, 2022. Interest against the note was
extinguished in a subsequent extension of the term. The note had a principal balance of $10,000 as of March 31, 2020.
On
February 23, 2012, Snöbar Holdings entered into a promissory note with Mr. Shenkman for $10,000, maturing in one year at
an interest of 8%. The note has subsequently been extended to December 31, 2022. Interest under the note was extinguished in a
subsequent extension of the term. The note had an outstanding balance of $10,000 as of March 31, 2020.
On
March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a Mr. Shenkman, the Company’s Chairman
of the Board of Directors. The note had a principal balance of $10,000 with an interest rate of 5% and an original maturity date
of March 14, 2014, subsequently extended to December 31, 2022 with a lower interest rate of 2%/year. Mr. Shenkman also agreed
to make all interest retroactive and deferred. The note had an outstanding balance of $6,000 as of March 31, 2020.
On
June 1, 2013, Snöbar Holdings entered into a promissory note with Azizollah Masjedi, father-in-law to Shannon Masjedi who’s
the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, director and majority stockholder, in
an amount of $500,000 to purchase all the shares and interests of IPIC. The note matured on June 31, 2017. As of March 31, 2020,
the outstanding balance under this note was $294,930, which includes interest and penalty charges.
On
September 9, 2014, Snobar Holdings entered into a second unsecured promissory note with Mr. Shenkman, through his affiliate company
Entrust Group for a total amount of $6,000 and a third unsecured promissory note for a total amount of $10,000, both at an annual
interest rate of 2%. No term was provided for in each note, but Mr. Shenkman has agreed to a maturity date of December 31, 2022
and the accrual of interest rates and deferral to maturity. The notes had an aggregate outstanding balance of $16,000 as of March
31, 2020.
As
of December 31, 2019, the Company had total short-term notes payable of $1,362,605 and long-term notes payable of $8,669,129.
As of March 31, 2020, the Company had total short-term notes payable of $1,201,033 and long-term notes payable of $9,348,623.
9.
NOTES PAYABLE
The
following table presents a summary of the Company’s promissory notes issued to unrelated third parties as of March 31, 2020:
|
|
|
Note Amount
|
|
|
Issuance Date
|
|
Balance
|
|
|
A. Rodriguez
|
|
$
|
86,821
|
|
|
3/14/13
|
|
$
|
86,821
|
|
|
A. Rodriguez
|
|
|
15,000
|
|
|
7/22/13
|
|
|
15,000
|
|
|
A. Rodriguez
|
|
|
10,000
|
|
|
2/21/14
|
|
|
10,000
|
|
|
Henry Mahgerefteh
|
|
|
144,000
|
|
|
2/15/15
|
|
|
146,916
|
|
|
TRA Capital
|
|
|
106,112
|
|
|
3 loans
|
|
|
106,112
|
|
|
BNA Inv
|
|
|
223,499
|
|
|
6 loans
|
|
|
223,499
|
|
|
Brian Berg
|
|
|
30,000
|
|
|
2/1/12
|
|
|
25,000
|
|
|
Classic Bev
|
|
|
73,473
|
|
|
5/1/17
|
|
|
307,070
|
|
|
JSJ, Investments
|
|
|
75,000
|
|
|
7/12/17
|
|
|
47,039
|
|
|
PNC, Inc.
|
|
|
2,876,509
|
|
|
12/19/20
|
|
|
879,900
|
|
|
TCA Global fund
|
|
|
2,150,000
|
|
|
5/1/18
|
|
|
2,745,023
|
|
|
TCA Global fund 2
|
|
|
3,000,000
|
|
|
12/17/19
|
|
|
5,544,879
|
|
|
|
|
$
|
8,994,414
|
|
|
|
|
$
|
10,137,260
|
|
The
following description represent unrelated notes payable transactions pre-reverse merger between Snöbar and the Company that
were assumed by the Company as a condition to the Share Exchange Agreement:
In
February 2012, MGD entered into an unsecured promissory note with a certain unrelated party, now a shareholder of the Company
for a principal balance of $30,000 at in interest rate of 8% per year and maturity date of August 1, 2014. The note’s maturity
date has been extended to December 31, 2020 and the interest rate under the extinguished as part of the extension. The note had
an outstanding balance of $25,000 as of March 31, 2020.
On
March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party, now a shareholder
of the Company. The note had a principal balance of $86,821 with an interest rate of 5% and had a maturity date of March 14, 2014.
The note’s maturity date has subsequently been extended to February 1, 2020. The entire balance is owed and outstanding
as of March 31, 2020.
On
July 22, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party. The note had
a principal balance of $15,000 with an original interest rate of 5%. Maturity date has been extended to December 31, 2018, and
interest rate has been reduced to 2%, and lender agreed to make all interest retroactive and deferred. The balance of the note
was $15,000 as of March 31, 2020.
The
following description represents unrelated note payable transactions post-merger between Snöbar and the Company:
On
July 12, 2017, the issued a Convertible Promissory Note to JSJ Investments Inc. for total gross proceeds of $75,000. The company
entered into a mutually agreed upon settlement agreement that called out for monthly payments of $3,359.90. All payments are current
and the balance on the note as of March 31, 2020 was $47,039. There is no conversion feature to this settlement and only cash
payment.
Effective
September 30, 2017, the Company entered into amended promissory notes with BNA/TRA an unrelated third party in an amount of $372,500,
one for $172,500, and four others for $50,000 each. All of the notes have an interest rate of 8% and had a maturity date of August
13, 2017 but have been extended to November 15, 2017 for a fee of $15,000. The notes had a principal outstanding balance of $329,611
as of March 31, 2020, including the $15,000 extension fee.
Over
the past year Classic Beverage has periodically issued loans to the Company. The Company has agreed to pay interest 10% per year
and has agreed on penalty fees if late on payments. The note is due on demand. The current balance is $307,070, including capitalized
interest and penalty fees.
On
May 1, 2018, Pacific Ventures Group entered into a secured promissory note with TCA Global Master Fund. The note was secured by
interests in tangible and intangible property of Pacific Ventures Group. The effective interest rate on the note is 16%. The outstanding
balance of the notes with TCA Global Fund for San Diego Farmers Outlet is $2,745,023 as of March 31, 2020.
On
December 17, 2019 Pacific Ventures Group entered into a secured promissory note with TCA Special Situations Credit Strategies
ICAV. The note was secured by interests in tangible and intangible property of Pacific Ventures Group. The effective interest
rate is 16%. The outstanding balance of the notes for Seaport Meat is $5,544,879 as of March 31, 2020.
On
February 13, 2017, Pacific Ventures entered settlement with one of its creditors for $527,333 of its long-term notes payable.
As of December 31, 2019, the balance is $200,000 due on July 15, 2020.
As
of December 31, 2019, the Company had short-term notes payable of $1,362,605 and long-term notes payable of $8,669,129.
As
of March 31, 2020, the Company had short-term notes payable of $1,201,033 and long-term notes payable of $9,348,623.
10.
STOCKHOLDERS’ EQUITY
Share
Exchange
On
August 14, 2015, Snöbar Holdings entered into the Share Exchange Agreement with the Company and Snöbar Holdings’
shareholders (the “Snöbar Shareholders”) who held of record (i) at least 99% and up to 100% of the total issued
and outstanding shares of Class A Common Stock and (ii) 100% of the total issued and outstanding shares of Class B Common Stock,
of Snöbar Holding. In accordance with the terms and provisions of the Share Exchange Agreement, the Company acquired all
of the issued and outstanding shares of Snöbar Holdings’ Class A and Class B Common Stock from Snöbar Shareholders,
with Snöbar Holdings becoming a wholly owned subsidiary of the Company, in exchange for the issuance to the Snöbar Shareholders
of 22,500,000 shares of restricted common stock of the Company and the issuance of 2,500,000 restricted shares of the Company’s
common stock to certain other persons (as set forth below).
There
was 0 restricted shares of the Company’s common stock issued during the fiscal quarter ended March 31, 2020.
Common
Stock and Preferred Stock
The
Company is authorized to issue up to 10,000,000 shares of its preferred stock, $0.001 par value per share. The Company designated
6,000,000 shares of preferred stock as Series E Preferred Stock (the “Series E Preferred Stock”). Under the rights,
preferences and privileges of the Series E Preferred Stock, for every share of Series E Preferred Stock held, the holder thereof
has the voting rights equal to 10 shares of common stock. As of December 31, 2019, there were 6,000,000 shares of Series E Preferred
Stock issued and outstanding. Additionally, Company has designated 10,000 shares of Series F Preferred Stock and 10,000 shares
of the Series F Preferred Stock are issued and outstanding. Each share of Series F Preferred Stock is convertible into 0.1% of
the issued and outstanding stock at the time of conversion.
From
January 1, 2020 through March 31, 2020, the Company issued 0 shares of its common stock.
The
Company is authorized to issue up to 900,000,000 shares of its common stock, $0.001 par value per share. Holders of common stock
have one vote per share. As of March 31, 2019, and the same period in 2020, there were 275,858,986 and 570,859,333 shares of the
Company’s common stock issued and outstanding, respectively.
On
April 13, 2020 the Company effected a 500 for 1 reverse split of its common stock. The number of authorized common shares remained
900,000,000
11.
COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
Operating
Lease
The
Company is currently obligated under two operating leases for office spaces and associated building expenses. Both leases are
on a month-to-month basis at a monthly rate of $450 and $330, respectively.
SDFO
operations are located at 10407 Friars Rd, San Diego, CA 92110, where they occupy an aggregate of approximately 10,000 square
feet pursuant to leases. The 5-year leases are on an annual basis at a monthly rate of $6,000 per month.
Seaport
Group Enterprise LLC is located at 2533 Folex Way, Spring Valley CA 91978, where they occupy an aggregate of approximately 17,000
square feet pursuant to the lease. The 5-year leases are on an annual basis starting at a monthly rate of $14,750.00 per month.
San
Diego Farmers Outlet and Seaport Meat Company Operating Leases
The
Company in May 1, 2018 assumed a lease agreement for a facility site and entered into a lease agreement for office space for San
Diego Farmers Outlet. The lease has a term of five years expiring on April 30, 2023.
Future
minimum lease payments, as set forth in the lease, are below:
|
YEAR
|
|
|
AMOUNT
|
|
|
|
2020
|
|
|
$
|
72,000
|
|
|
|
2021
|
|
|
$
|
72,000
|
|
|
|
2022
|
|
|
$
|
72,000
|
|
|
|
2023
|
|
|
$
|
24,000
|
|
The
Company on December 1, 2019 entered into a lease agreement for a facility site for office space for Seaport Meat Company. The
lease has a term of five years expiring on November 30, 2024.
Future
minimum lease payments, as set forth in the lease, are below:
|
YEAR
|
|
|
AMOUNT
|
|
|
|
2020
|
|
|
$
|
177,000
|
|
|
|
2021
|
|
|
$
|
177,000
|
|
|
|
2022
|
|
|
$
|
177,000
|
|
|
|
2023
|
|
|
$
|
177,000
|
|
|
|
2024
|
|
|
$
|
162,250
|
|
12.
SUBSEQUENT EVENTS
ASC
855-16-50-4 establishes accounting and disclosure requirements for subsequent events. ASC 855 details the period after the balance
sheet date during which we should evaluate events or transactions that occur for potential recognition or disclosure in the financial
statements, the circumstances under which we should recognize events or transactions occurring after the balance sheet date in
its financial statements and the required disclosures for such events.
On
April 13, 2020 the Company effected a 500 for 1 reverse split of its common stock. The number of authorized common shares remained
900,000,000
