Cautionary Statement Regarding Forward-Looking Statements
This reportAnnual Report on Form 10-K (this “Annual Report”) contains forward-looking statements. The Securities and Exchange Commission (the "Commission")SEC encourages companies to disclose forward-looking information so that investors can better understand a company'scompany’s future prospects and make informed investment decisions. This reportAnnual Report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management'smanagement’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will"“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.
We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Use of Market and Industry Data
This Annual Report includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Annual Report are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Annual Report or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, references in this Annual Report to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Annual Report.
Forecasts and other forward-looking information obtained from these sources involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.
Trademarks, Service Marks and Trade Names
This Annual Report contains references to our trademarks, service marks and trade names and to trademarks, service marks and trade names belonging to other entities. Solely for convenience, trademarks, service marks and trade names referred to in this Annual Report, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names, service marks or trademarks or any artists’ or other individuals’ names to imply a relationship with, or endorsement or sponsorship of us by, any other companies or persons.
| ITEM 1. | BUSINESS |
Unless the context requires otherwise or unless otherwise stated, references to “our Company,” “Pacific Ventures,” “PACV,” “we,” “us,” “our” and similar references refer to Pacific Ventures Group, Inc. (the "Company" or "Pacific Ventures")and its consolidated subsidiaries.
Overview
During 2020, the U.S. foodservice industry faced unprecedented challenges as the COVID-19 pandemic caused substantial disruption across many of our customers’ operations and, in some cases, resulted in permanent closures of restaurants. As a company, we took several actions to increase liquidity, conserve cash, manage working capital, and reduce expenses to align with the decrease in demand.
We also acted quickly to protect the health and safety of our communities by implementing new protocols and enhanced safety measures to protect our frontline associates and customers, many of whom are “essential workers” and unable to work remotely. As we adapted to rapidly changing conditions, we also increased our efforts to stay connected to our current customers and attract new customer.
As was widely reported in the media, the U.S. meat industry experienced meat shortages due to massive outbreaks of COVID-19 and in some cases large facilities were forced to close, meat prices reached an all-time high due to the lack of product and increase in demand. While many of our competitors chose to pass these increases in price to the customers, The Companies Management made a conscious decision to support our customers by lowering our margins in order to offset the increase in prices caused by the pandemic. By lowering our margins during the second and third quarters we attracted many new customers and won the loyalty of its current customer base.
The Company was able to maintain the historical average of the prior year’s revenues but did share the burden of the pandemic.
During the onset of the pandemic Seaport’s sales staff and management acted quickly to recover any lost revenue due to the massive government mandated shutdown. Some of our largest customers were forced to stay closed for almost a year which include Petco Park (home of the San Diego Padres), and the SoCal County Fairs. We acted quickly, and attracted more business from Hospitals, Nursing Homes, and Naval Bases just to name a few.
The Company made concerted efforts to let our customers know that we appreciate their loyalty and continued support during these challenging times.
Corporate History
Pacific Ventures 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 Pacific Ventures resulted from a share exchange with Snöbar Holdings, Inc. (“Snöbar”), which was treated as a reverse merger for accounting purposes. On August 14, 2015, Pacific Ventures Group, Inc. and its stockholders entered into a share exchange agreement (the “Share Exchange Agreement”) with Snöbar Holdings, Inc. ("(“Snöbar Holdings"Holdings”), pursuant to which Pacific Ventures acquired 100% of the issued and outstanding shares of Snöbar Holdings'Holdings’ Class A and Class B common stock in exchange for 22,500,000 restricted shares of Pacific Ventures'Ventures’ common stock, while simultaneously issuing 2,500,000 shares of Pacific Ventures'Ventures’ restricted common stock to certain other persons.
Prior to the Share Exchange, the Company operated as an insurance holding company and through its subsidiaries, 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. Theoperations, the business operations will changechanged to the Food and Beverage industry and the discussions of business operations accompanying this filing are that of Snöbar Holdings.
Snöbar Holdings Inc. ("Snöbar Holdings") was formed inunder the laws of the State of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary of SnobarSnöbar Trust, a California trust ("Trust"(“Trust”), which was formed in June 1, 2013. The current trustee that holds legal title to the Trust is Clark Rutledge, who is the father of Shannon Masjedi, who controls Snöbar Holdings.Azita Davidiyan. The Trust owns 100% of the shares of International Production Impex Corporation, a California corporation ("IPIC"(“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"“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 MAS Global Distributors, Inc., a California corporation ("MGD"(“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"(“VIEs”) and Snöbar Holdings is identified as the primary beneficiary of the Trust and IPIC. Under ASCthe 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'Holdings’ management is that Snöbar Holdings has the power to direct the activities of a VIE that most significantly impact the VIE'sVIE’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'sVIE’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 in over thirty-five years ago to provide primarily restaurants customers in southern California’s three largest counties with quality food, produce, and dairy and does business under the names of Farmers Outlet and San Diego Farmers Outlet.
On August 20, 2019, Seaport Group Enterprises, LLC— a California Limited Liability Corporation was formed, and it is a subsidiary of Pacific Ventures Group, Inc.
On December 17, 2019, Seaport Group Enterprise LLC, completed the acquisition of the assets of PNC Inc. (the “Seller”) DBA Seaport Meat Company. Pursuant to the Asset Purchase Agreement as Amended, the purchase price is as follows:
| ● | $1,500,000 payment made at closing |
| ● | $660,000 inventory payment made at closing |
| ● | $850,000 note payable to the Seller |
| ● | $1,900,000 paid on March 17, 2020 |
| ● | A number of common shares of the Company equal to 2.5% of the issued and outstanding shares of the Company on the date of issuance to Seller with in fifteen (15) business days of the completion of the audit of the Company’s financial statements, including the assets acquired, for the year ended December 31, 2019. |
The assets acquired consist of assets and rights that belong to the Seaport Meat Company that are used in or pertain to the business and all necessary to operating the business as its currently being operated.
Our principal executive office is located at 117 West 9th Street, Suite 316, Los Angeles, California. Our main telephone number is (310) 392-5606.
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Description of Snöbar Holdings,Operations of Pacific Ventures Group, Inc.
General
On May 1, 2018, Royalty Foods Partners, LLC – a Florida Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc., a Delaware corporation ("Snöbar Holdings"), was incorporated in the state – completed an asset acquisition of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary of Snobar Trust, a California trust ("Trust"), which was formed in June 1, 2013. The trustee that holds legal title to the Trust is Clark Rutledge, who is the father of Shannon Masjedi. The Trust owns 100% of the shares of International Production Impex Corporation, a California corporation ("IPIC"), which was formed on August 2, 2001. IPIC is the owner of liquor licenses and the trade name "SnöBar" and is in the business of selling and distributing alcohol-infused ice creams and ice-pops through its distributors. Snöbar Holdings also owns 99.9% of the shares of MAS Global Distributors,San Diego Farmers Outlet, Inc. (SDFO), a California corporation ("MGD"). MGD isCorporation. San Diego Farmers Outlet was started in over thirty-five years ago to provide primarily restaurants 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.
Farmers Outlet provides a wide array of products to serve customers of all types. However, they do have a niche in providing fresh produce and food products. Farmers Outlet provides specialty produce that the larger distributors do not carry on a daily basis. Unlike some larger distributors who make their customers receive products on a day and time convenient to the distributor, Farmers Outlet delivers daily and pays attention to what the customer wants. Farmers Outlet added products to meet the needs of Restaurants, Hotels, Food Trucks, and Caterers.
Since the acquisition, SDFO has increased sales of its wholesale business, and still plan on expanding our current delivery territory from 25 miles to a 40-mile radius. SDFO has obtained 2 new delivery trucks to add to the current fleet of trucks. The Company has begun marketing to new restaurants in the business of sellingarea, most notably Asian and leasing freezersItalian restaurants, and providing marketing services. As a matter of law, IPIC may not be engagedhave let restaurants know that SDFO can deliver the finest produce in any business similarmarket.
SDFO installed new signage around the retail market, added additional landscaping to MGD. As a resultenhance the appearance of the foregoing, Snöbar Holdings ismarket, and purchased a new Point of Sale system to improve efficiency and ordering processes.
The Company will continue to evaluate its projected expenditures relative to its available cash and to seek additional means of financing in order to satisfy the beneficiaryCompany’s working capital and other cash requirements.
Market and Strategy
Unlike some larger distributors who make their customers receive products on a day and time convenient to the distributor, SDFO delivers daily and pays attention to what the customer wants. Farmers Outlet added products to meet the needs of Restaurants, Hotels, Food Trucks and Caterers. Free delivery was added to demonstrate that Farmers Outlet had customers interest first in mind.
Farmers Outlet provides a wide array of products to serve customers of all assets, liabilitiestypes. However, they do have a niche in providing fresh produce and any income received fromfood products. Farmers Outlet provides specialty produce that the businesslarger distributors do not carry on a daily basis.
Farmers Outlet covers a large market area servicing Los Angeles, Orange County and San Diego, which we have estimated to be a $2.5 billion addressable market. Farmers Outlet currently services the San Diego territory and has over 125 active customers, and no customer represents more than five percent of IPICFarmers Outlet gross revenues.
The company services customers in high, middle and low-income communities with a specialty in providing food and fresh produce to customers serving small to medium size restaurants of all nationalities, including Chinese, Korean, Mexican, American, Japanese and Thai.
Pacific Ventures intends to expand its business through the Trustacquisition of other food manufacturing and distribution companies that serve the Los Angeles, Orange County and San Diego area, thereby combining and expanding upon a combined customer base with an expanding range of products and services.
Pacific Ventures is establishing a new production relationship with a wholesale frozen food co-packing company that can meet our volume production and HAACP quality control requirements.
During the parent2019 fiscal year, the Company completed an asset acquisition of PNC Inc, DBA, Seaport Meat Company, a company of MGD.
The Company’s customers range from a stick, but made with premium liquor such as premium tequila and vodka and are currently manufactured in three flavors, Margarita, Cosmopolitan and Mojito. The alcohol freezing technology used to produce these beverage bars can be applied to almost any alcohol type and mixture, presenting significant market potential and an almost unlimitedwide variety of flavors and employment of premium brands. Each ice pop is the equivalent of a full cocktail.
Because Seaport Meat Company of America can efficiently add new accounts. IPIC intends to provide SnöBar products to more major groceries stores at a later date.
Seaport Meat Company manufactures and thereforewholesales custom processed beef, pork, chicken, lamb, veal and seafood. In addition, they may return the ice-pops, requiring IPIC to reimburse its distributorsare redistributors of a wide variety of dry goods, frozen foods, disposables and take such product back in to inventory for possible disposal. No assurancejanitorial products. Their sales, distribution and finance processes are very efficient and can be given that individual consumers will be educated in the proper freezing requirements of the SnöBar products.
Trademarks
IPIC sells the SnöBar products under a number of trademarks, brand names and trade names that are important to its continued success. The SnöBar brand is fully trademarked within the USA and is currently seeking worldwide trademark rights. IPIC'sUnited States. IPIC’s business could be adversely affected by the loss of any major brand or by material infringement of its intellectual property rights. The SnöBar products are also subject to intellectual property risks because existing trademark laws offer only limited protection, and the laws of some countries in which the SnöBar products are or may be developed, manufactured or sold may not fully protect the SnöBar products from infringement by others.
Employees
As of December 31, 2015, Snöbar Holdings does not have any employees. IPIC, a consolidated variable interest entity2020, Pacific Ventures comprised five (5) employees who managed the affairs of Snöbar Holdings, which conductsthe parent corporation and the operations of producing, selling and distributing alcohol-infused ice creams and ice-pops, its subsidiaries. On an as needed basis, the Company hires independent contractors to perform specific tasks related to the Company’s business interests. Seaport Group Enterprises LLC has five (5) employees as of December 31, 2015.
| ITEM 1A. | RISK FACTORS |
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this report before making a decision to invest in our common stock. If any of the following risks and uncertainties develop into actual events, our business, results of operations and financial condition could be adversely affected. In those cases, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Business and Industry
We are seeking to market and advertise alcohol infused frozenfood and beverage products and may not be able to accomplish our goal.
A key feature of our growth strategy is to engage in the marketing and advertising of alcohol infused frozenfood and beverage products. Doing so presents significant challenges and subjects our business to significant risks. For example, we face substantial competition in thesesome areas, and do not have as extensive a history of operating in these areas as some of our competitors. If we are unsuccessful in marketing and advertising alcohol infused frozen products, our ability to grow our business could be significantly limited.
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The alcohol and dessert industries are highly competitive and if we are unable to compete successfully, our business will be harmed.
The alcoholic beverage industry and the dessert industry are extremely competitive. If we are unable to compete successfully against current or future competitors in such industries, our revenues, margins and market share could be adversely affected, any of which could significantly harm our business, operating results or financial condition.
Our success depends on certain key personnel.
Our performance to date has been and will continue to be largely dependent on the talents, efforts and performance of our senior management and key technical personnel. It is anticipated that our executive officers will enter into employment agreements. However, while it is customary to use employment agreements as a method of retaining the services of key personnel, these agreements do not guarantee us the continued services of such employees. In addition, we have not entered into employment agreements with most of our key personnel. The loss of our executive officers or our other key personnel, particularly with little or no notice, could cause delays on projects and could have an adverse impact on our client and industry relationships, our business, operating results or financial condition.
We rely on highly skilled and qualified personnel, and if we are unable to continue to attract and retain such qualified personnel it will adversely affect our businesses.
Our success depends to a significant extent on our ability to identify, attract, hire, train and retain qualified creative, technical and managerial personnel. We expect competition for personnel with the specialized creative and technical skills needed to create our products and provide our services will continue to intensify. We often hire individuals on a project-by-project basis, and individuals who work on one or more projects for us may not be available to work on future projects. If we have difficulty identifying, attracting, hiring, training and retaining such qualified personnel, or incur significant costs in order to do so, our business and financial results could be negatively impacted.
We are dependent on one customer for the majority of our Total Sales Revenue.
Our primary customer, La Jolla, is responsible for generating 42.05% of our Total Sales Revenue. The loss of La Jolla as a customer or the reduction in La Jolla’s current business operations would have a material adverse effect on us as we would not have sufficient capital to continue operations for an extended period of time. We may be unsuccessful in our continuous efforts to acquire new customers to further diversify the sources of our revenue.
Risks associated with commodity price volatility and energy availability could adversely affect our business.
We are exposed to risks associated with commodity price volatility arising from supply conditions, geopolitical and economic variables, weather, and other unpredictable external factors. We buy commodities such as corn and other grains, molasses, grapes, sticks and plasticfresh produce for the production, packaging and distribution of our products. Availability increases and volatility in the prices of these commodities, as well as products sourced from third parties and energy used in making, distributing and transporting our products, could increase the manufacturing and distribution costs of our products. While in the past we have been able to mitigate the impact of these cost increases through productivity improvements and pricing adjustments, there is no assurance that we will be able to offset such cost increases in the future.
We rely on the performance of wholesale distributors and other marketing arrangements and could be adversely affected by consolidation, poor performance or other disruptions in our distribution channels and customers.
The replacement, poor performance or financial default of a major distributor or one of its major customers could adversely affect our business. Industry consolidation could also adversely affect our margins and profitability. Though large customers can offer efficiencies and unique opportunities, they can also seek to make significant changes in their volume of purchases, represent a large number of competing products, negotiate more favorable terms and seek price reductions, which could negatively impact our financial results.
| 5 |
We are reliant on one key supplier who may fail to deliver our products according to schedules, prices, quality, and volumes that are acceptable to us.
We purchase the majority of our product and supplies from one key supplier who is responsible for supplying 25% of our Total Cost of Sales of Product. This exposes us to multiple potential sources of product shortages. Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters, health epidemics such as the global COVID-19 pandemic, and other factors beyond our supplier’s control could adversely affect their operations or ability to remain solvent and operational. Occurrence of any of these risks would disrupt our supply chain and delay or prevent our operations.
As the scale of our operations increases, our supplier may not be able to sustainably meet our timelines or our cost, quality and volume needs, or may increase prices to do so, potentially requiring us to replace them with other sources and possibly on less favorable terms. Additionally, we may be unsuccessful in our continuous efforts to negotiate with our existing supplier to obtain cost reductions and avoid unfavorable changes to terms or to source less expensive suppliers. Any of these occurrences may harm our business, financial condition, and operating results. We intend to enter into agreements with additional suppliers to meet our supply needs as we pursue expansion of our operations. Any delay in entering into new supply agreements, the failure of a supplier to comply with its contractual obligations or being able to secure favorable terms likely will have a material adverse effect on our prospects, financial condition, and operating results.
Our operations may be adversely affected by failure to maintain or renegotiate distribution, supply, manufacturing or license agreements on favorable terms.
We have a number of distribution,distributions, supply, manufacturing and license agreements for our supplies and products. These agreements vary depending on the particular supply and/or product but tend to be for a fixed number of years. There can be no assurance that we will be able to renew these agreements on favorable terms or that these agreements will not be terminated. Termination of these agreements or failure to renew these agreements on favorable terms could have a negative effect on our results of operations and financial condition.
If we are unable to effectively manage organizational productivity and global supply chain efficiency and flexibility, then our business could be adversely affected.
We need to continually evaluate our organizational productivity and supply chains and assess opportunities to reduce costs. We must also enhance quality, speed and flexibility to meet changing and uncertain market conditions. Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and are able to respond to market pressures to protect profitability and cash flow or ramp up quickly and effectively to meet demand. Failure to achieve the desired level of quality, capacity or cost reductions could adversely affect our financial results. Despite our efforts to control costs and increase efficiency in our facilities, increased competition could still cause us to realize lower operating margins and profitability.
Our operating results may fluctuate significantly, which may cause the market price of our common stock to decrease significantly.
Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. As a result of these fluctuations, financial planning and forecasting may be more difficult and comparisons of our operating results on a period-to-period basis may not necessarily be meaningful. Accordingly, you should not rely on our annual and quarterly results of operations as any indication of future performance. Each of the risk factors described in this "Risks“Risks Related to Our Business"Business” section, and the following factors, may affect our operating results:
| ● | our ability to continue to attract clients for our services and products; | |
| ● | the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure; | |
| ● | our focus on long-term goals over short-term results; | |
| ● | the results of our investments in high risk products; | |
| ● | general economic conditions and those economic conditions specific to our industries; | |
| ● | changes in business cycles that affect the markets in which we sell our products and services; and | |
| ● | geopolitical events such as war, threat of war or terrorist actions. |
In response to these fluctuations, the value of our common stock could decrease significantly in spite of our operating performance. In addition, our business, and the alcoholic beverage business, has historically been cyclical and seasonal in nature, reflecting overall economic conditions as well as client budgeting and buying patterns.
The cyclicality and seasonality in our business could become more pronounced and may cause our operating results to fluctuate more widely.
We have a history of losses, have generated limited revenue to date, and may continue to suffer losses in the future.
We have a history of losses and have generated limited revenue to date. We expect to continue to incur losses for the foreseeable future. If we cannot become profitable, our financial condition will deteriorate, and we may be unable to achieve our business objectives, including without limitation, having to cease operations due to a lack of capital.
Our accountants have raised substantial doubt regarding our ability to continue as a going concern.
As noted in our consolidated financial statements, we had an accumulated stockholders'stockholders’ deficit of approximately $ 4,891,353$16,063,780 and recurring losses from operations as of December 31, 2015.2020. Our net loss for the fiscal year ended December 31, 2020 was $5,861,821. We also had a working capital deficit of approximately $2,045,677$4,589,002 as of December 31, 2015.2020. We intend to fund operations through raising additional capital through debt financing andand/or equity issuances and increased lending activities which may be insufficient to fund our capital expenditures, working capital or other cash requirements for the year ending December 31, 2015.2020. We are continuing to seek additional funds to finance our immediate and long termlong-term operations. The successful outcome of future financing activities cannot be determined at this time and there is no assurance that if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The audit report for the fiscal years ended December 31, 20152020 and 20142019 contain a paragraph that emphasizes the substantial doubt as to our continuance as a going concern. This is a significant risk that we may not be able to remain operational for an indefinite period of time.
We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available may require us to delay, scale back or cease our marketing or product development activities and operations.
We will require substantial additional capital in order to continue the marketing of our existing products and complete the development of our contemplated products. Raising funds in the current economic climate may be difficult and additional funding may not be available on acceptable terms, or at all.
The amount and timing of our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:
| ● | the number and characteristics of products that we pursue; | |
| ● | our potential need to expand operations, including the hiring of additional employees; | |
| ● | the costs of licensing, acquiring or investing in complimentary businesses, products and technologies; | |
| ● | the effect of any competing technological or market developments; | |
| ● | the need to implement additional internal systems and infrastructure, including financial and reporting systems; | |
| ● | obtaining market acceptance of our alcohol-infused popsicles and ice cream; and | |
| ● | the economic and other terms, timing of and success of our co-branding, licensing, collaboration or marketing relationships into which we have entered or may enter in the future. |
Some of these factors are outside of our control. It is currently anticipated that weWe will require an additional capital infusion in order to expand the marketing of our alcohol-infused popsicles and ice cream to all 50 states. Such additional fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and market our alcohol-infused products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back or discontinue the development or marketing of one or more of our products or product candidates or curtail our operations, which will have a Material Adverse Effect on our business, operating results and prospects.
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We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business.
We may seek additional funding through a combination of equity offerings, debt-financings, or other third partythird-party funding or other collaborations, strategic alliances or licensing arrangements. These financing activities may have an adverse impact on our stockholders'stockholders’ rights as well as our operations. For instance, any debt financing may impose restrictive covenants on our operations or otherwise adversely affect the holdings or the rights of our stockholders. In addition, if we seek funds through arrangements with partners, these arrangements may require us to relinquish rights to some of our technologies, products or product candidates or otherwise agree to terms unfavorable to us.
All or a portion of the PPP Loan may not be forgivable and our application for the PPP Loan could in the future be determined to have been impermissible which could adversely impact our business and reputation.
On May 20, 2020, we obtained a loan (the “Loan”) in the aggregate amount of $395,000, pursuant to the Paycheck Protection Program (the “PPP”), established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Our application for the PPP Loan could in the future be determined to have been impermissible which could adversely impact our business and reputation. Under the CARES Act, we may be eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities and other qualifying expenses, provided that we retain a certain number of employees and maintain compensation within certain regulatory parameters of the PPP. However, we cannot provide any assurance that we will be eligible for loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven.
In applying for the PPP Loan, we were required to certify, among other things, that the then current economic uncertainty made the PPP Loan necessary to support our ongoing operations. We made these certifications in good faith after analyzing, among other things, the requirements of the PPP loan, our current business activity and our ability to access other sources of liquidity sufficient to support our ongoing operations in a manner that would not be significantly detrimental to our business. We believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan was consistent with the broad objectives of the PPP of the CARES Act. The certification regarding necessity described above did not at the time contain any objective criteria and continues to be subject to interpretation. If, despite our good-faith belief that we satisfied all eligibility requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to civil, criminal and administrative penalties. Any violations or alleged violations may result in adverse publicity and damage to our reputation, a review or audit by the SBA or other government entity or claims under the False Claims Act. These events could consume significant financial and management resources and could have a material adverse effect on our business, results of operations and financial condition.
Acquisitions we pursue in our industry and related industries could result in operating difficulties, dilution to our stockholders and other consequences harmful to our business.
As part of our growth strategy, we may selectively pursue strategic acquisitions in our industry and related industries. We may not be able to consummate such acquisitions, which could adversely impact our growth. If we do consummate acquisitions, integrating an acquired company, business or technology may result in unforeseen operating difficulties and expenditures, including:
| ● | increased expenses due to transaction and integration costs; | |
| ● | potential liabilities of the acquired businesses; | |
| ● | potential adverse tax and accounting effects of the acquisitions; | |
| ● | diversion of capital and other resources from our existing businesses; | |
| ● | diversion of our management’s attention during the acquisition process and any transition periods; | |
| ● | loss of key employees of the acquired businesses following the acquisition; and | |
| ● | inaccurate budgets and projected financial statements due to inaccurate valuation assessments of the acquired businesses. |
Foreign acquisitions also involve unique risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.
Our evaluations of potential acquisitions may not accurately assess the value or prospects of acquisition candidates, and the anticipated benefits from our future acquisitions may not materialize. In addition, future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, including our common stock, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition.
Interruption or failure of our information technology systems could impair our ability to effectively and timely provide our services and products, which could damage our reputation and have an adverse impact on our operating results.
Our systems are vulnerable to damage or interruption from earthquakes, hurricanes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses or other attempts to harm our systems, and similar events. Our facilities are located in areas with a high risk of major earthquakes and are also subject to break-ins, sabotage and intentional acts of vandalism. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster or other unanticipated problems at our Santa Monica, California facility or California manufacturing facility, located in Orange County, California could result in lengthy interruptions in our projects and our ability to deliver services. An error or defect in the software, a failure in the hardware, a failure of our backup facilities could delay our delivery of products and services and could result in significantly increased production costs, hinder our ability to retain and attract clients and damage our brand if clients believe we are unreliable. Given our reliance on our industry relationships, it could also result in a decrease in our revenues and otherwise adversely affect our business and operating results.
We cannot predict the effect that rapid changes in consumer taste may have on our business or industry.
The alcoholic beverage and dessert industries are rapidly evolving, primarily due to changing consumer preferences and technological developments. The rapid growth of technology and shifting consumer tastes prevent us from being able to accurately predict the overall effect that changing consumer preferences may have on our potential revenue and profitability. If we are unable to develop and effectively market new products that adequately or competitively address the needs of these changing consumer preferences, it could have an adverse effect on our business and growth prospects.
Changes in regulatory standards could adversely affect our business.
Our business is subject to extensive domestic and international regulatory requirements regarding distribution, production, labeling, and marketing. Changes to regulation of the alcohol industry could include increased limitations on advertising and promotional activities or other non-tariff measures that could adversely impact our business. In addition, we face government regulations pertaining to the health and safety of our employees and our consumers as well as regulations addressing the impact of our business on the environment, domestically as well as internationally. Compliance with these health, safety and environmental regulations may require us to alter our manufacturing processes and our sourcing. Such actions could adversely impact our results of operations, cash flows and financial condition, and our inability to effectively and timely comply with such regulations could adversely impact our competitive position.
Changes in excise taxes, incentives and customs duties related to products containing alcohol could adversely affect our business.
Products containing alcohol are subject to excise taxation in many markets at the federal, state and/or local level. Any increase in federal, state or local excise taxes could have an adverse effect on our business by increasing prices and reducing demand, particularly if excise tax levels increase substantially relative to those for beer and wine. In addition, products containing alcohol are the subject of customs duties in many countries around the world. An unanticipated increase in customs duties in the markets where we may sell our products could also adversely affect our results of operations and cash flows.
| 9 |
Our insurance policies are expensive and only protect us from some business risks, which will leave us exposed to significant uninsured liabilities.
We do not carry insurance for all categories of risk that our business may encounter. Some of the policies that we generally maintain include general liability, automobile and property insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. In addition, we do not know if we will be able to obtain and maintain coverage for the business in which we engage. No assurance can be given that an insurance carrier will not seek to cancel or deny coverage after a claim has occurred. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, financial condition and business results.
We face potential product liability and, if successful claims are brought against us, we may incur substantial liability costs. If the use of our products harmsharm’s customers or third parties or is perceived to harm such persons even when such harm is unrelated to our products, our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims.
The sale and use of our products exposesexpose us to the risks of product liability claims. Product liability claims may be brought against us by consumers or other third parties. In addition, there is a risk that the use of our products could cause our customers to have an adverse health event. If we cannot successfully defend our product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in: impairment of our business reputation; costs due to related litigation; distraction of management'smanagement’s attention from our primary business; substantial monetary awards to customers or other claimants; the inability to commercialize our products; and/or decreased demand for our products.
We believe our product liability insurance coverage as supplemented by our umbrella insurance policy is sufficient in light of our current financial condition; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.
Our business is subject to the risks of earthquakes, fires, floods, power outages and other catastrophic events, and to interruption by manmade problems such as terrorism. A disruption at our production facility could adversely impact our results of operations, cash flows and financial condition.
A significant natural disaster, such as an earthquake, fire or a flood or a significant power outage could have a material adverse impact on our business, financial condition or operating results. If there were a catastrophic failure at our major production facility, our business would be adversely affected. The loss of a substantial amount of inventory – through fire, other natural or man-made disaster, contamination, or otherwise – could result in a significant reduction in supply of the affected product or products. Similarly, if we experienced a disruption in the supply of our products, our business could suffer. A consequence of any of these supply disruptions could be our inability to meet consumer demand for the affected products for a period of time. In addition, there can be no assurance that insurance proceeds would cover the replacement value of our products or other assets if they were to be lost. In addition, if a catastrophe such as an earthquake, fire, flood or power loss should affect one of the third parties on which we rely, our business prospects could be harmed. Moreover, acts of terrorism could cause disruptions in our business or the business of our third-party service providers, partners, customers or the economy as a whole.
Others may assert intellectual property infringement claims against us.
We use alcohol products from other companies in the making of our alcohol infused frozen desserts. Infringement or misappropriation claims (or claims for indemnification resulting from such claims) against us may be asserted or prosecuted, regardless of their merit, and any such assertions or prosecutions may adversely affect our business and/or our operating results. Irrespective of the validity or the successful assertion of such claims, we would incur significant costs and diversion of resources relating to the defense of such claims, which could have an adverse effect on our business and/or our operating results. If any claims or actions are asserted against us, we may seek to obtain a license of a third-party's intellectual property rights; however, under such circumstances such a license may not be available on reasonable terms or at all.
| 10 |
The inability to successfully manage the growth of our business may have an adverse effect on our operating results.
We expect to experience growth in the number of employees and the scope of our operations. Such growth will result in increased responsibilities for our management. If our management is unable to successfully manage expenses in a manner that allows us to both improve operations and at the same time pursue potential market opportunities, the growth of our business could be adversely impacted, which may, in turn, negatively affect our operating results or financial condition. In addition, we believe that a critical contributor to our success has been our creative culture. As we attempt to grow, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our future success.
We operate in a highly regulated area.
The alcohol industry is highly regulated on the national and state levels. These regulations are highly complex and, at times, may even be contradictory. Our failure to comply with these overlapping regulatory structures could materially adversely affect our business, financial condition and results of operation.
Changes in U.S., regional or global economic conditions could adversely affect our profitability.
A decline in economic conditions in the United States or in other regions of the world could lead to a decrease in discretionary consumer spending, which in turn could adversely affect alcoholic type products.all businesses. In addition, an increase in price levels generally, or in price levelsproduct availability a global change in a particular sector such as the energy sector,economy could result in a shift in consumer demand away from alcohol type products.
Current global economic challenges may continue, and a recovery may be slow or reverse, adversely impacting our results of operations, cash flows and financial condition.
Stable economic conditions globally, including strong employment, consumer confidence and credit availability, are important not only to the basic health of our consumer markets, but also to our own financial condition. There are presently significant challenges in the global economy, including high unemployment rates, low consumer confidence, record budget deficits and levels of government debt, and fragile credit and housing markets. In addition, instability in the global credit markets, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries, the instability in the geopoliticalCOVID environment in manyALL parts of the world and other disruptions, may continue to put pressure on global economic conditions. As a result, consumers'consumers’ increased price consciousness may endure, which may affect consumers'consumers’ willingness to pay for premium brands as well as the overall level of consumption of products containing alcohol, particularly in bars, restaurants, nightclubs and other public environments where consumers drink spirits.environments. Furthermore, our suppliers and customers could experience cash flow problems, increased costs or reduced availability of financing, credit defaults, and other financial hardships. These factors may increase our bad debt expense, cause us to reduce the levels of unsecured credit that we may provide to customers and otherwise adversely impact our results of operations, cash flows and financial condition. A prolonged global economic stagnation may impact our access to capital markets, result in increased interest rates on debt that we may take on to expand operations, and weaken operating cash flow and liquidity. Decreased cash flow and liquidity could potentially impact our ability to finance operations.
Demand for our alcohol-infused products may be adversely affected by many factors, including changes in consumer preferences and trends.
Consumer preferences may shift due to a variety of factors including changes in demographic and social trends, public health initiatives, product innovations, changes in travel, vacation or leisure activity patterns and a downturn in economic conditions, which may reduce consumers'consumers’ willingness to purchaseour products that contain alcohol or cause a shift in consumer preferences toward non-alcoholic alternatives. In addition, concerns about health issues relating to alcohol consumption,a dietary effects,effect, regulatory action or any litigation against companies in the industry may have an adverse effect on our business. Our success depends in part on fulfilling available opportunities to meet consumer needs and anticipating changes in consumer preferences with successful new products and product innovations. While we devote significant focus to the development of new products, we may not be successful in their development or these new products may not be commercially successful. In addition, global economic conditions or market trends could cause consumer preferences to trend away from our premium alcohol-infused popsiclesproducts and ice creamlook for alternatives, which may also adversely impact our results of operations and cash flows.
| 11 |
We face substantial competition in our industry and many factors may prevent us from competing successfully.
We compete on the basis of product taste and quality, brand image, price, service and ability to innovate in response to consumer preferences. It is possible that our competitors may either respond to industry conditions or consumer trends more rapidly or effectively or resort to price competition to sustain market share, both of which could adversely affect our sales and profitability. Further, while we believe that our scale, portfolio breadth and entrepreneurial organization relative to that of our competitors gives us the ability to outperform our market, we nevertheless face a risk that a continuing consolidation of the large distilled spirits companies could cause us to experience competitive disadvantages. Our inability to manage these and other competitive factors successfully could adversely affect our results of operations, cash flows and financial condition.
Future tax law changes and/or interpretation of existing tax laws may adversely affect our effective income tax rate and the resolution of unrecognized tax benefits.
We are subject to income taxation in the U.S. It is possible that future income tax legislation may be enacted that could have a material impact on our income tax provision. We believe that our tax estimates are reasonable and appropriate, however, there are inherent uncertainties in these estimates. As a result, the ultimate outcome from any potential audit could be materially different from amounts reflected in our income tax provisions and accruals. Future settlements of income tax audits may have a material effect on earnings between the period of initial recognition of tax estimates in the financial statements and the timing of ultimate tax audit settlement.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.
Provisions in our charter documents, as well as provisions of Delaware law, could make it more difficult for a third-party to acquire us, even if doing so would benefit our stockholders.
Potential liabilities and costs from litigation and other legal proceedings could adversely affect our business.
From time to time we may be subject to various lawsuits, claims, disputes and investigations in the normal conduct of our operations. These include, but are not limited to, commercial disputes, including purported class actions, employment claims, actions by tax and customs authorities, and environmental matters. Some of these legal proceedings may include claims for substantial or unspecified damages. It is possible that some of the actions could be decided unfavorably and could adversely affect our results of operations, cash flows or financial condition. In addition, because litigation and other legal proceedings can be costly to defend, even actions that are ultimately decided in our favor could have a negative impact on our results of operations and cash flows.
Historical financial statements may not be reflective of our future results of operations, cash flows, and financial condition.
Although we believe that you have been provided access to all material information necessary to make an informed assessment of our assets and liabilities, financial position, profits and losses and prospects, historical financial statements do not represent what our results of operations, cash flows, or financial position will be in the future.
We are unable to predict the impact of COVID-19 on our company.
We supply food products to retail and institutional customers. Due to the various “stay at home” orders precipitated by the spread of COVID-19 in California and specifically in Southern California, where our customers are located, we expect a significant decline in sales as many of these clients are not currently in operation as result of such orders. It is impossible for us to predict the effect this will have on our long-term operations as the duration of the “stay at home” orders are unknown.
Statements in this Quarterly Report on Form 10-K (this “Annual Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:
| ● | any declines in the consumption of food prepared away from home; |
| ● | the extent and duration of the negative impact of the COVID-19 pandemic on us; | |
| ● | cost inflation/deflation and commodity volatility; | |
| ● | competition; | |
| ● | reliance on third-party suppliers and interruption of product supply or increases in product costs; | |
| ● | changes in our relationships with customers and group purchasing organizations; | |
| ● | our ability to increase or maintain the highest margin portions of our business; | |
| ● | effective integration of acquired businesses; | |
| ● | achievement of expected benefits from cost savings initiatives; | |
| ● | increases in fuel costs; | |
| ● | economic factors affecting consumer confidence and discretionary spending; | |
| ● | changes in consumer eating habits; | |
| ● | reputation in the industry; | |
| ● | labor relations and costs and continued access to qualified and diverse labor; | |
| ● | cost and pricing structures; | |
| ● | changes in tax laws and regulations and resolution of tax disputes; | |
| ● | environmental, health and safety and other government regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses; | |
| ● | product recalls and product liability claims; | |
| ● | adverse judgments or settlements resulting from litigation; | |
| ● | disruption of existing technologies and implementation of new technologies; | |
| ● | cybersecurity incidents and other technology disruptions; | |
| ● | management of retirement benefits and pension obligations; | |
| ● | extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; | |
| ● | risks associated with intellectual property, including potential infringement; | |
| indebtedness and restrictions under agreements governing indebtedness; and | ||
| ● | interest rate increases. |
Risks Related to theOur Common Stock of Pacific Ventures Group, Inc.
There currently is only a minimal public market for our common stock. Failure to develop or maintain a trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.
There currently is only a minimal public market for shares of our common stock and an active market may never develop. Our common stock is quoted on the OTCQBOTC Pink Market operated by the OTC Market'sMarket’s Group, Inc. under the symbol "PACV"“PACV”. We may not ever be able to satisfy the listing requirements for our common stock to be listed on any stock exchange, including the trading platforms of the NASDAQ Stock Market which are often more widely-tradedwidely traded and liquid markets. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders'stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by, any of the several exchanges and markets to have our common stock listed.
The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your conversion price, which may result in substantial losses to you.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common stock areis sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common stock are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky"“risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain their current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.
The application of the "penny stock"“penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.
The SEC has adopted rule 3a51-1 which establishes the definition of a "penny“penny stock,"” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
| ● | that a broker or dealer approve a person’s account for transactions in penny stocks, and | |
| ● | the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person'sperson’s account for transactions in penny stocks, the broker or dealer must:
| ● | obtain financial information and investment experience objectives of the person, and | |
| ● | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
| ● | sets forth the basis on which the broker or dealer made the suitability determination, and | |
| ● | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock"“penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
| 14 |
The application of Rule 144 creates some investment risk to potential investors; for example, existing shareholders may be able to rely on Rule 144 to sell some of their holdings, driving down the price of the shares you purchased.
The SEC adopted amendments to Rule 144 which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
| ● | 1% of the total number of securities of the same class then outstanding (shares of common stock as of the date of this Report); or | |
| ● | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; |
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Shannon Masjedi, our principalmajority stockholder, director and executive officer, owns a large percentage of our voting stock, which allows her to exercise significant influence over matters subject to stockholder approval.
Shannon Masjedi, our principalmajority stockholder, director and executive officer, will have substantial influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. In particular, because our President, Chief Executive Officer, Interim Chief Financial Officer, Treasurer, Secretary and a certain officer, Shannondirector, Mrs. Masjedi, who owns 15,864,63910,130,454 shares of our Common Stockcommon stock and 1,000,0005,000,000 shares of Series E Preferred Stock (with 10 votes per share), she will be assuredand 10,000 Series F Preferred Stock (Each share of such control. This shareholder may also delay or prevent a changeSeries F Preferred Stock is convertible into 0.1% of control or otherwise discourage a potential acquirer from attemptingthe issued and outstanding stock at the time of conversion).
Conversion of Series F Preferred Stock would cause significant dilution to obtain controlexisting common stock shareholders.
We currently have 10,000 shares of us, even if such a changeSeries E Preferred Stock authorized with 10,000 shares issued and outstanding. Each share of control would benefit our other shareholders. This significant concentration of stock and voting ownership may adversely affect the valueSeries F Preferred Stock is convertible into 0.1% of our common stock dueissued and outstanding at the time of conversion. A conversion of Series F Preferred Stock by a Series F shareholder would cause significant dilution to investors' perception that conflictsexisting shareholders of interest may exist or arise.
We do not intend to pay dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the Board of Directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.
Risks Related to Our Acquisition Strategy
We can give no assurances as to when we will consummate any other future acquisitions or whether we will consummate any of them at all.
We intend to continue to build our business through strategic acquisitions. However, any acquisition is subject to certain closing conditions and other impediments to closing, including closing the financing and others that are beyond our control, and we may not be able to close on the terms described herein or at all. See above “Business — Recent Developments and Initiatives.”
We intend to pursue and consummate one or more additional acquisitions and to possibly use any remaining proceeds from the Financing, if any, to fund any cash portion of the consideration we will pay in thisconnection with those acquisitions. However, such additional acquisitions may also be subject to conditions and other impediments to closing, including some that are beyond our control, and we may not be able to close any of them successfully. In addition, our future acquisitions will be required to be closed within certain timeframes as negotiated between us and the acquisition target, and if we are unable to meet the closing deadlines for a given transaction, we may be required to forfeit payments we have made, if any, be forced to renegotiate the transaction on less advantageous terms and could fail to consummate the transaction at all.
If we are unable to close future acquisitions, it could significantly alter our business strategy and impede our prospects for growth. Further, we may not be able to identify suitable acquisition candidates to replace these acquisitions, and even if we were to do so, we may only be able to consummate them on less advantageous terms. In addition, some of the businesses we acquire may incur significant losses from operations, which, in turn, could have a material and adverse impact on our business, results of operations and financial condition.
We may face difficulty in integrating the operations of any businesses we may acquire in the future. As shown by our acquisition of SDFO, acquisitions have been and will continue to be an important component of our growth strategy; however, we will need to integrate these acquired businesses successfully in order for our growth strategy to succeed and for us to become profitable. We expect that the management teams of the acquired businesses will adopt our policies, procedures and best practices, and cooperate with each other in scheduling events, booking talent and in other aspects of their operations. We may face difficulty with the integration of any other businesses we acquire, such as coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures, the diversion of management’s attention from other business concerns, the inherent risks in entering markets or lines of business in which we have either limited or no direct experience; and the potential loss of key employees, individual service providers, customers and strategic partners of acquired companies.
Further, we expect that future target companies may have material weaknesses in internal controls relating to the proper application of accrual-based accounting under the accounting principles generally accepted in the United States of America (“GAAP”) prior to our acquiring them. The Public Company Accounting Oversight Board (the “PCAOB”) defines a material weakness as 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 annual reportor interim financial statements will not be prevented or detected on a timely basis. We will be relying on the proper implementation of our policies and procedures to remedy any such material weaknesses and prevent any potential material misstatements in our financial reporting. Any such misstatement could adversely affect the trading price of our common stock, cause investors to lose confidence in our reported financial information, and subject us to civil and criminal fines and penalties. If our acquired companies fail to integrate in these important ways, or we fail to adequately understand the business operations of our acquired companies, our growth and financial results could suffer.
We may enter into acquisitions and take actions in connection with such transactions that could adversely affect our business and results of operations.
Our future growth rate depends in part on our selective acquisition of additional businesses and assets. We may be unable to identify suitable targets for acquisition or make further acquisitions at favorable prices. If we identify a suitable acquisition candidate, our ability to successfully complete the acquisition would depend on a variety of factors and may include our ability to obtain financing on acceptable terms and requisite government approvals. In addition, any credit agreements or credit facilities that we may enter into in the future may restrict our ability to make certain acquisitions. In connection with future acquisitions, we could take certain actions that could adversely affect our business, including:
| ● | using a significant portion of our available cash; | |
| ● | issuing equity securities, which would dilute current stockholders’ percentage ownership; | |
| ● | incurring substantial debt; | |
| ● | incurring or assuming contingent liabilities, known or unknown; | |
| ● | incurring amortization expenses related to intangibles; and | |
| ● | incurring large accounting write-offs or impairments. |
We may also enter into joint ventures, which involve certain unique risks, including, among others, risks relating to the lack of full control of the joint venture, potential disagreements with our joint venture partners about how to manage the joint venture, conflicting interests of the joint venture, requirement to fund the joint venture and its business not being profitable.
In addition, we cannot be certain that the due diligence investigation that we conduct with respect to any investment or acquisition opportunity will reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. For example, instances of fraud, accounting irregularities and other deceptive practices can be difficult to detect. Executive officers, directors and employees may be named as defendants in litigation involving a company we are "forward-looking" statements,acquiring or have acquired. Even if we conduct extensive due diligence on a particular investment or acquisition, we may fail to uncover all material issues relating to such investment, including regarding controls and procedures of a particular target or the full scope of its contractual arrangements. We rely on our due diligence to identify potential liabilities in the businesses we acquire, including such things as well as historical information. Althoughpotential or actual lawsuits, contractual obligations or liabilities imposed by government regulation. However, our due diligence process may not uncover these liabilities, and where we identify a potential liability, we may incorrectly believe that we can consummate the expectations reflectedacquisition without subjecting ourselves to that liability. Therefore, it is possible that we could be subject to litigation in respect of these forward-looking statements are reasonable,acquired businesses. If our due diligence fails to identify issues specific to an investment or acquisition, we cannot assure youmay obtain a lower return from that transaction than the expectations reflected in these forward-looking statements will proveinvestment would return or otherwise subject ourselves to unexpected liabilities. We may also be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled "Risk Factors." Forward-looking statements include those that use forward-looking terminology, such as the words "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "plan," "will," "shall," "should" and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Actual results may be materially different than those described in this annual report. Important factorsforced to write-down or write-off assets, restructure our operations or incur impairment or other charges that could causeresult in our actual results, performancereporting losses. Charges of this nature could contribute to negative market perceptions about us or achievements to differ from these forward-looking statements include the factors described in the "Risk Factors" section and elsewhere in this annual report.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
As of December 31, 2020, there were 19no unresolved SEC comments issued by the SEC related to the Form 8-K filed on September 25, 2015, but were not answered due to delays by the Company in filing responses.
| ITEM 2. | PROPERTIES |
Pacific Venture'sVenture’s corporate headquarters are now located at 117 West 9th Street, Suites 316 and 423, Los Angeles, California 90015 where we occupy an aggregate of approximately 655 square feet pursuant to leases. The leases for Suites 316 and 423 are on a month-to-month basis.
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 12,000 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.
| ITEM 3. | LEGAL PROCEEDINGS |
From time to time, the Company may become involved in various lawsuits and legal proceedings that have occurred within the past ten years concerning our directors or officers which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participationarise in the securitiesordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or banking industries,other matters may have, individually or in the aggregate, a findingmaterial adverse effect on our business, financial condition or operating results. The Company is currently not aware of securitiesany pending legal proceedings, other than as set forth below.
On September 25, 2020 Pacific Ventures Group entered into a settlement agreement with BNA/TRA for a combined amount of $400,000 to be in monthly cash installments to be paid as follows; On or commodities law violations.before October 10, 2020, PACV paid the sum of thirty thousand dollars ($30,000); On or before November 1st, 2020, PACV paid the sum of thirty thousand ($30,000); On or before December 1, 2020, and continuing through and including May 1st 2023, PACV shall pay twenty-nine (29) consecutive monthly payments of eleven thousand five hundred ($11,500); On or before June 1st, 2023, PACV will pay the sum of six thousand five hundred ($6,500);
On or about May 13, 2020, SGE filed a lawsuit against PNC in Los Angeles Superior Court, based on PNC’s material breaches of the Asset Purchase Agreement and the Consulting and Covenant Not to Compete Agreement (the “Consulting Agreement”), as well material misrepresentations that PNC made to SGE. SGE’s complaint alleges multiple causes of action against PNC, including but not limited to, fraud.
On or about August 26, 2020, the Los Angeles Superior Court issued an order transferring the Action to San Diego Superior Court.
On or about October 19, 2020, PNC filed a Cross-Complaint alleging that SGE breached certain obligations set forth in the Asset Purchase Agreement and the Consulting Agreement and that SGE made certain material misrepresentations, including but not limited to, fraud. On or about December 31, 2020, PNC filed a First Amended Cross-Complaint against SGE. SGE intends to contest the allegations in the First Amended Cross-Complaint while simultaneously pursing recovery against PNC based on the claims that SGE has alleged in the Complaint. Except for Shannonas set forth above, we are unable to estimate the likelihood of an unfavorable outcome in the case or estimate the amount owed if or any possible loss at this time.
On or about November 23, 2020, in action in San Diego Supreme Court was filed against San Diego Farmers Outlet and Pacific Ventures Group. In the case, plaintiff seeks an award of damages in the sum of $41,168.00. The parties are engaged in ongoing settlement discussions. In the meantime, the company intends to contest the allegations against it vigorously. Except as set forth above, we are unable to estimate the likelihood of an unfavorable outcome in the case or estimate the amount owed range of potential loss at this time.
On February 22, 2018, a holder of a convertible note in the principal amount of $75,000.00 commenced and action in the Supreme Court New York against the Company. (JSJ v. Pacific Ventures). The suit asserts breach of contract due to failure to honor certain conversion notices allegedly tendered pursuant to the convertible note. This matter has been settled and both parties mutually agreed to monthly cash payments of $3,359.90 per month. JSJ has no rights to convert any stock and has no stock in reserve.
In 2010, Mrs. Masjedi, who filed for Chapter 7 personal bankruptcy in 2010, which was discharged in August 2011, and Marc Shenkman, who filed for Chapter 11 personal bankruptcy in 2010, which was dismissed but not discharged in May 2012, none of our directors or officers hashave filed for and hasor have been affiliated with any company that has filed for bankruptcy within the last ten years. We are not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director, is a party adverse to us or any of our or has a material interest adverse to us or any of our subsidiaries.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | MARKET |
Market Information
Pacific Ventures'Ventures’ Common Stock is quoted on the OTCQB,OTC Pink Market, under the symbol "PACV."
| Quarter Ended | High Bid | Low Bid | ||||||
| December 31, 2015 | $ | 0.75 | $ | 0.75 | ||||
| September 30, 2015 | $ | 0.70 | $ | 0.55 | ||||
| June 30, 2015 | $ | 0.51 | $ | 0.51 | ||||
| March 31, 2015 | $ | 0.30 | $ | 0.30 | ||||
| December 31, 2014 | $ | 0.55 | $ | 0.21 | ||||
| September 30, 2014 | $ | 1.25 | $ | 0.35 | ||||
| June 30, 2014 | $ | 0.85 | $ | 0.51 | ||||
| March 31, 2014 | $ | 1.00 | $ | 0.30 | ||||
| December 31, 2013 | $ | 0.30 | $ | 0.30 | ||||
| September 30, 2013 | $ | 0.75 | $ | 0.30 | ||||
| June 30, 2013 | $ | 0.75 | $ | 0.30 | ||||
| March 31, 2013 | $ | 0.50 | $ | 0.30 | ||||
| High | Low | |||||||
| Fiscal Year Ended December 31, 2020 | ||||||||
| Quarter ended December 31, 2020 | $ | 0.75 | $ | 0.39 | ||||
| Quarter ended September 30, 2020 | $ | 1.45 | $ | 0.67 | ||||
| Quarter ended June 30, 2020 | $ | 1.89 | $ | 0.54 | ||||
| Quarter ended March 31, 2020 | $ | 1.75 | $ | 0.85 | ||||
| Fiscal Year Ended December 31, 2019 | ||||||||
| Quarter ended December 31, 2019 | $ | 0.0084 | $ | 0.0016 | ||||
| Quarter ended September 30, 2019 | $ | 0.0075 | $ | 0.0017 | ||||
| Quarter ended June 30, 2019 | $ | 0.0060 | $ | 0.0027 | ||||
| Quarter ended March 31, 2019 | $ | 0.0179 | $ | 0.0048 | ||||
| Fiscal Year Ended December 31, 2018 | ||||||||
| Quarter ended December 31, 2018 | $ | 0.021 | $ | 0.016 | ||||
| Quarter ended September 30, 2018 | $ | 0.018 | $ | 0.013 | ||||
| Quarter ended June 30, 2018 | $ | 0.033 | $ | 0.024 | ||||
| Quarter ended March 31, 2018 | $ | 1.64 | $ | 0.98 | ||||
| 18 |
Number of Holders
On December 31, 2020, the Company had approximately 294 stockholders of record and 16,871,351 shares of common stock issued and outstanding.
Dividends
Since its inception, Pacific Venturesthe Company has not paid any dividends onone time in n 2018 to its Common Stock, and Pacific Venturesshare holds in the form of common stock but does not anticipate that it will pay dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During the year ended December 31, 2015, Pacific Ventures had approximately 264 stockholders31,2020, the Company issued a total of record and 25,799,031 shares15,728,570 of its Common Stock issued and outstanding.
The Company believes that the offers, sales andunregistered common stock to certain other persons.
Securities Authorized for Issuance Under Equity Compensation Plans
See “Item 12. Security Ownership of Certain Beneficial Owners and there are no redemption provisionsManagement and Related Stockholder Matters ― Securities Authorized for the common stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any preferred stock is authorized and issued. All outstanding shares of common stock are duly authorized, validly issued, fully paid and non-assessable.
| ITEM 6. | SELECTED FINANCIAL DATA |
Not applicable
| ITEM 7. |
Statements in this report. The management's discussion and analysis contains forward-lookingQuarterly Report on Form 10-Q (this “Quarterly Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.),“believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions identify certain ofand are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these forward-looking statements. These forward-looking statements are subject tonot guarantees of performance or results, and there are a number of risks, uncertainties and uncertainties, including those under "Risk Factors" in this Form 8-K,other important factors that could cause our actual results or events to differ materially from those expressed or implied byin the forward-looking statements.statements, including, among others:
| ● | any declines in the consumption of food prepared away from home; | |
| ● | the extent and duration of the negative impact of the COVID-19 pandemic on us; | |
| ● | cost inflation/deflation and commodity volatility; | |
| ● | competition; | |
| ● | reliance on third-party suppliers and interruption of product supply or increases in product costs; | |
| ● | changes in our relationships with customers and group purchasing organizations; | |
| ● | our ability to increase or maintain the highest margin portions of our business; | |
| ● | effective integration of acquired businesses; | |
| ● | achievement of expected benefits from cost savings initiatives; | |
| ● | increases in fuel costs; | |
| ● | economic factors affecting consumer confidence and discretionary spending; | |
| ● | changes in consumer eating habits; | |
| ● | reputation in the industry; | |
| ● | labor relations and costs and continued access to qualified and diverse labor; | |
| ● | cost and pricing structures; | |
| ● | changes in tax laws and regulations and resolution of tax disputes; | |
| ● | environmental, health and safety and other government regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses; | |
| ● | product recalls and product liability claims; | |
| ● | adverse judgments or settlements resulting from litigation; | |
| ● | disruption of existing technologies and implementation of new technologies; | |
| ● | cybersecurity incidents and other technology disruptions; | |
| ● | management of retirement benefits and pension obligations; | |
| ● | extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; | |
| ● | risks associated with intellectual property, including potential infringement; | |
| indebtedness and restrictions under agreements governing indebtedness; and | ||
| ● | interest rate increases. |
You should read the following discussion of our financial condition and results of operations together with the audited consolidated financial statements and notes to the financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. The Company'sforward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results and the timing of events could differ materially from those anticipated inthe results contemplated by these forward-looking statements asdue to a resultnumber of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date offactors, including those discussed under “Item 1A. Risk Factors” and other sections in this report.
The following discussion highlights Snöbar Holdings'Pacific Ventures’ results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Snöbar Holdings'Pacific Ventures’ audited and unaudited financial statements contained in this CurrentFinancial Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.
Basis of Presentation
The audited financial statements for our fiscal years ended December 31, 20152020 and 20142019 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.
| 20 |
Overview
, a Delaware corporation ("Snöbar Holdings"), was incorporated inOverview 2017 ― During 2017, the state of Delaware on January 7, 2013. As a result, we have currently available two years of financial results. These results have been presented inSouth Carolina distributor expanded the audited financial statements with fiscal years ended December 31, 2015 and 2014.
Overview 2018 ― During the 2018 fiscal year, the Company completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation with over thirty-five (35) years in business servicing restaurant and supported properly.
Overview 2019 ― During the SnöBar brand2019 fiscal year, 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 operates a distribution and manufacturing facility in Spring Valley, California their 12,000 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 test marketed in few storesconfident that the Food Safety and Inspection Service (FSIS), the public health agency in the Florida market. USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged
The first store sold outCompany’s customers range from a wide variety of more than 10 cases of SnöBar products within the first two weeks prompting an 85 case reorder. After a three month trial period, Walmart approved the expansion of SnöBar products in to more stores in the Florida market.
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 general marketingcombination 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
Overview 2020— During 2020, the U.S. foodservice industry faced unprecedented challenges as the COVID-19 pandemic caused substantial disruption across many of our customers’ operations and, in some cases, resulted in permanent closures of restaurants. As a company, we took several actions to increase liquidity, conserve cash, manage working capital, and reduce expenses to align with the decrease in demand.
We also acted quickly to protect the health and safety of our communities by implementing new protocols and enhanced safety measures to protect our frontline associates and customers, many of whom are “essential workers” and unable to work remotely. As we adapted to rapidly changing conditions, we also increased our efforts to stay connected to our current customers and attract new customer.
As was widely reported in the media, the U.S. meat industry experienced meat shortages due to massive outbreaks of COVID-19 and in some cases large facilities were forced to close, meat prices reached an all-time high due to the lack of product and increase in demand. While many of our competitors chose to pass these increases in price to the customers, The Companies Management made a conscious decision to support our customers by lowering our margins in order to offset the increase in prices caused by the pandemic. By lowering our margins during the second and third quarters we attracted many new customers and won the loyalty of its current customer base.
The Company was able to maintain the historical average of the prior year’s revenues but did share the burden of the pandemic.
During the onset of the pandemic Seaport’s sales staff and management acted quickly to recover any lost revenue due to the massive government mandated shutdown. Some of our largest customers were forced to stay closed for almost a year which include Petco Park (home of the San Diego Padres), and the SoCal County Fairs. We acted quickly, and attracted more business from Hospitals, Nursing Homes, and Naval Bases just to name a few.
The Company made concerted efforts to let our customers know that we appreciate their loyalty and continued support during these challenging times.
Strategy
In Fiscal Year 2021, the Company’s strategy is forfocused on:
| ● | incrementally increase sales and profitability of San Diego Farmers Outlet (SDFO) and Seaport Meat Company. | |
| ● | expanding Snöbar production and distribution | |
| ● | acquisition of food production or distribution companies that are synergistic with SDFO and Seaport Meat Company. |
We plan to grow SDFO’s wholesale business by expanding its delivery territory from 25 miles to a 75-mile radius and add to the current fleet of delivery trucks. The Company has already begun marketing to new restaurants in the area, most notably Asian and Italian restaurants, and have let restaurants know that SDFO can deliver the finest produce in market.
We plan to relaunch SnöBarbar production and distribution by partnering with third-party manufacturers and co-packers, and with third-party distributors that can sell Snöbar products to be sold to or sold in high-end restaurants, resorts, cruise lines and hotels worldwide. Additionally, various celebrity branding and product endorsements are currently being explored. Initially, the focus will be on establishing major accounts in four core markets consisting of Southern California, Phoenix, Las Vegas and Miami. The larger vision is to sell products in grocery stores such as Kroger, Wal-Mart and others, and thereafter to begin a national marketing program to all U.S. retailers. It is essentially a top downtop-down marketing plan where products are placed with the largest retailer then trickle down to the smallest seller in each market area. Furthermore, by being quoted as Pacific Ventures Group, Inc. onarea
We plan to acquire food production and distribution businesses that will help the OTC Markets QB Tier we intendCompany grow its food, beverage and alcohol-related products businesses. We continue to raise more capital from the marketsengage in preliminary discussions with potential investors in order to realize alsoproperly fund potential acquisitions, however, there are no assurances that the future stages of our growth path and expansion of distribution.required funding will be available on terms acceptable to us, or at all.
| 22 |
Going Concern
The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern. As discussed in this Annual Report and in the notes to the Company’s consolidated financial statements included elsewhere herein, we have incurred operating losses, and as atof December 31, 20152020 and 2014,2019, we have accumulated deficit of $4,891,353$16,063,780 and $5,420,431$10,040,367 respectively. For the year ended December 31, 2015,2020, we have a working capital deficiency of approximately $2 million.$4,589,002. These factors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in their report for the years ended December 31, 20152020 and 20142019 regarding concerns about our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our generating operating cash flow and raising capital sufficient to fund operations. We have discussed our strategy and plans relating to these matters elsewhere in this Current Report although the consolidated financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties. Our business strategy may not be successful in funding ongoing operations and accelerating our domestic and international expansion, and if we cannot continue as a going concern, our stockholders may lose their entire investment in us.
Plan of OperationOperations for the Next Twelve (12) Months
Our plan is to increaseachieve meaningful sales revenue from the sale of the SnöBarSDFO and Seaport Meat Company products to meet our operating needs. However, it is very likely that we will not be able to increase our sale revenue sufficiently to meet these needs in time. It is also unlikely that we will be able to satisfy all of our obligations to pay interest and repay principal in the estimated aggregate amount of $852,000 due and payable within the next twelve (12)12 months under the various forms of our outstanding debt. Although we have been able to extend the maturity dates as well as repayment terms of a substantial amount of such debt, there is no assurance that we will be able to further extend such repayments or maturity dates to avoid a default, as such further extension depends on the consent of the holders of such debt. If we are unable to make such payments and repayments and unable to extend and delay required payments or maturities of such debt, the holders of such debt will have the right to take legal action seeking enforcement of the debt. If any legal action is taken against us, we would face the risk of having to deplete our limited cash resources to defend against such suit or face the entry of a default judgment. In either event, such action would have grave impact on our operations. Our ability to continue operations will be dependent upon the successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to be successful in our new business plan. If not, we will likely be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.
Critical Accounting Estimates
We regularly evaluate the accounting estimates that we use to prepare our financial statements. A complete summary of these policies is included in the Notes to our audited financial statements. In general, management'smanagement’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition
| 23 |
Concentrations of Credit Risk
Accounts Receivable (AR): AR as at the years-ended December 31, 20152020 and 2014,2019, were $0$1,213,991 and $12,721$1,290,637, respectively. As of December 31, 2015, 85% of the Company's sales were from two distributors. CustomerHistorically, customer accounts typically are collected within a short period of time and based on its assessment of current conditions and its experience collecting such receivables, management believes it has no significant risk related to its concentration within its accounts receivable.
Results of Operations
We generate our revenues from the domestic and international sales of SnöBar ice creams and ice pops of IPIC, which is owned by the Trust, of which Snöbar Holdings is the 100% beneficiary.
| PACIFIC VENTURES GROUP, INC. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| For the Year Ended, | ||||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Sales, net of discounts | $ | 255,213 | $ | 128,002 | ||||
| Cost of Goods Sold | (113,118 | ) | (107,665 | ) | ||||
| Gross Profit | 142,096 | 20,337 | ||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | 172,237 | 487,938 | ||||||
| Depreciation expense | 3,993 | 166,373 | ||||||
| Salaries and wages | 16,666 | 413,161 | ||||||
| Operating Expenses/(Loss) | 192,896 | 1,067,472 | ||||||
| Loss from Operations | (50,800 | ) | (1,047,135 | ) | ||||
| Other Non-Operating Income and Expenses | ||||||||
| Interest expense | (80,619 | ) | (89,558 | ) | ||||
| Extraordinary Items | 66,867 | - | ||||||
| Net Income/(Loss) before Income Taxes | (64,552 | ) | (1,047,135 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net Income/(Loss) | $ | (64,552 | ) | $ | (1,047,135 | ) | ||
, decreasing by about $75,806Revenues and Cost of Goods Sold. Revenue for the fiscal year ended December 31, 2020 increased to $30,212,420 from $5,918,337 during the comparable period as a result of the acquisition of Seaport Meat Company.
Cost of goods sold (“COGS”) is comprised of production costs, shipping, and handling costs. For the fiscal year ended December 31, 2020, we had costs of goods sold of $26,857,783, as compared to $5,070,322 in the samecomparable period ended December 31, 2020. The percentage of COGS against sales was 85.67% in 2014 amountthe fiscal year ended December 31, 2019 to 88.89% in the fiscal year ended December 31, 2020.
Operating Expenses. Our Selling, General and Administrative (“SG&A”) expenses consist of $(89,558),sales and marketing, professional services, rents, and general office expenses (including wages for non-officer personnel). During the fiscal year ended December 31, 2020 our SG&A expenses increased to $5,077,008 from $1,365,942 in the comparable prior period, an increase of $3,711,066. These increases were the result of increases in general office expenses, professional services and marketing expenses. On December 31, 2020, total general office expense was $5,077,008, marketing expenses was $45,837 and professional fees was $913,293. Amortization and depreciation expenses increased from $229,036 to $696,144 for the fiscal years December 31, 2019 and December 31, 2020, respectively, due to the addition of depreciable assets in the second quarter of 2019 related to the acquisition of San Diego Market Outlet, Inc and Seaport Meat Company.
Total operating expenses for the fiscal year ended December 31, 2020 were $7,032,283 representing an increase of $4,480,723, as compared to $2,551,560 for the comparable prior period ended December 31, 2019.
Other Non-Operating Income and Expenses. Non-operating expenses for the fiscal year ended December 31, 2020 were $2,204,391, consisting all in non-recurring gain such as settlementinterest expense compared to a non-operating expense of debt.$970,488, consisting of also all in interest expense, in the comparable prior period ended December 31, 2019.
Net Loss
2014 amount of ($1,136,693).
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 210 | $ | - | ||||
| Accounts receivable | - | 12,721 | ||||||
| Inventory, net | 2,020 | 58,256 | ||||||
| Deposits | 1,500 | 1,500 | ||||||
| Total Current Assets | 3,730 | 72,477 | ||||||
| Fixed Assets | ||||||||
| Fixed assets, net | 35,831 | 106,740 | ||||||
| Total Fixed Assets | 35,831 | 106,740 | ||||||
| TOTAL ASSETS | $ | 39,561 | $ | 179,217 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Bank overdraft | $ | - | $ | 2,589 | ||||
| Accounts payable | 206,383 | 358,867 | ||||||
| Accrued expenses | 189,433 | 891,532 | ||||||
| Deferred revenue | 90,042 | - | ||||||
| Current portion, notes payable | 28,510 | 550,333 | ||||||
| Current portion, notes payable - related party | 253,140 | 278,821 | ||||||
| Current portion, leases payable | - | 36,012 | ||||||
| Total Current Liabilities | 767,507 | 2,118,154 | ||||||
| Long-Term Liabilities: | ||||||||
| Notes payable - related party | 527,333 | 324,522 | ||||||
| Notes payable | 132,821 | 6,553 | ||||||
| Total Long-Term Liabilities | 660,154 | 331,075 | ||||||
| Total Liabilities | $ | 1,427,661 | $ | 2,449,229 | ||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Preferred stock, $.001 par value, 10,000,000 shares authorized, | ||||||||
| none issued and outstanding | $ | - | $ | - | ||||
| Class A common stock, $.001 par value, 30,000,000 shares | ||||||||
| authorized, 25,799,031 and 25,799,031 issued and outstanding, | ||||||||
| respectively | 25,799 | 19,322 | ||||||
| Class B common stock, $.001 par value, 10,000,000 shares | ||||||||
| authorized, 1,000,000 issued and outstanding, respectively | 1,000 | 1,000 | ||||||
| Additional paid in capital | 3,455,745 | 3,130,097 | ||||||
| Accumulated deficit | (4,870,645 | ) | (5,420,431 | ) | ||||
| Total Stockholders' Equity (Deficit) | (1,388,100 | ) | (2,270,012 | ) | ||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 39,561 | $ | 179,217 | ||||
Fiscal years ended December 31, 2020 and 2019
As of December 31, 2015,2020, we had cash on hand of $210 and a working capital deficit of approximately $2 million.$4,589,002 comprised of $58,233 in cash and cash equivalents, $1,213,991 of accounts receivable, $1,216,562 inventory assets, other current assets of $283,379 (includes current portion of Rent to Use Asset) and $16,845 in deposits which were offset by accounts payable of $2,809,136, $902,442 in accrued expenses, $88,417 in lease payables, $3,239,017 in current note payables and $249,000 in lease liability. For the fiscal year ended December 31, 2020 we used $2,327,148 in operating activities. Cash used in investing activities totaled $186,519, consisting of purchase of equipment, building and improvement and fixed assets for $186,519. Cash provided in financing activities totaled $2,255,943, consisting of $1,532,737 in proceeds from notes payable, $3,246,100, $122,815 for debt conversion, $5,000 for issuance of preferred “E” shares, and $161,592 in prior year adjustments, which is offset with note or loan repayments for $315,349, $29,218 and $2,144,550 for non-related notes, related notes and long-term loans, respectively.
In the comparable prior period in 2019, we had a working capital deficit of $1,118,654 comprised of $315,957 in cash and cash equivalents, $1,290,637 of accounts receivable, $830,504 inventory assets, other current assets of $283,379 (includes current portion of Rent to Use Asset) and $16,845 in deposits which were offset by accounts payable of $1,409,420, $714,962 in accrued expenses, $119,988 in lease payables, $1,362,605 in current note payables and $249,000 in lease liability. For the fiscal year ended December 31, 2019 we used $2,620,665 in operating activities. Cash used in investing activities totaled $4,202,000, consisting of purchase of equipment, building and improvement and fixed assets for $1,384,382 and for goodwill and intangible assets $2,783,239, all of which related to the recent acquisition of Seaport Meat Company. Cash provided in financing activities totaled $6,987,564, consisting of $2,960,899 in proceeds from notes payable, $3,461,606 in proceeds from long term loans, of which $3,015,780 was for the acquisition and working capital of Seaport Meat Company, $119,542 from proceeds from note payables from related parties, $166,000 for debt conversion, $60,000 for issuance of preferred “E” shares, $446,711 in common shares issued for debt conversion and $111,304 in prior year adjustments.
On December 31, 2020, we had cash and cash equivalents of $58,233 as compared to $315,957 on December 31, 2019.
Cash used in operations for the fiscal year ended December 31, 2020 was $2,327,148 as compared to $2,620,665 in the comparable prior fiscal year ended December 31, 2019. Cash used decreased by $293,517 between periods.
For the fiscal year ended December 31, 2020, cash used in investing totaled $186,519. We have incurred operating losses, andused $4,202,000 from investing activities December 31, 2019, which was related to the acquisition of Seaport Meat Company.
Cash provided from financing activities on December 31, 2020 was $2,255,943 as compared to $6,987,564 at December 31, 2015 and 2014, we have accumulated deficit2019.
As of $4,891,353 and $5,420,431 respectively. These factors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in their report for the years ended December 31, 20152020, we had total current liabilities of $7,378,012 and 2014 regarding concerns abouttotal liabilities were $18,706,866 as compared to $3,855,976 and $13,386,354, respectively, for December 31, 2019.
We depend upon debt and/or equity financing to fund our abilityongoing operations and to continue asexecute our business plan. If continued funding and capital resources are unavailable at reasonable terms, we may curtail our plan of operations. We will be required to obtain alternative or additional financing from financial institutions or otherwise, in order to maintain and expand our existing operations. The failure by us to obtain such financing would have a going concern.
Capital Resources
Our principal sources of liquidity have been cash generated by issuing new shares in Snöbar Holdingsloan proceeds and cash generated from operations.
We plan to continue raising capital in order to meet our liquidity needs. However, we may be unable to raise sufficient additional capital when we need it or to raise capital on favorable terms. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
decreasing by about $53,053 compared to the same period in 2014 amount of $629,798, due to difference in net income between the two reporting period and partially offset by non-cash charges of $614,338 for prior period adjustment and net cash used by changes in our operating assets and liabilities.
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
| 25 |
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("(“U.S. GAAP"GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company'scompany’s critical accounting policies as the ones that are most important to the portrayal of the company'scompany’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our consolidated financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
| ITEM | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PACIFIC VENTURES GROUP, INC.
December 31, 2020
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) * | Option Awards ($) * | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Bob Smith, CEO | 2015 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
| 2014 | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) * | Option Awards ($) * | All Other Compensation ($) | Total ($) | ||||||
| Shannon Masjedi, Secretary and Chief Operating Officer | 2015 | $160,000 | -0- | -0- | -0- | -0- | $160,000 | ||||||
| 2014 | $160,000 | -0- | -0- | -0- | -0- | $160,000 | |||||||
| Marc Shenkman, Vice President | 2015 | -0- | -0- | -0- | -0- | -0- | -0- | ||||||
| 2014 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||
Amount and Nature of Beneficial Ownership(1) | Percentage of Class Common(3) | |||||||
| Executive Officers and Directors | ||||||||
Robert E. Smith (2) | 100,000 | 0.4 | % | |||||
Shannon Masjedi (3) | 15,864,639 | 62.6 | % | |||||
Marc Shenkman (4) | 650,000 | 2.6 | % | |||||
| All officers and directors a group (3 group) | 16,614,639 | 65.5 | % | |||||
| 5% Shareholders | ||||||||
ACD Trust(3) | 15,864,639 | 62.6 | % | |||||
Amount and Nature of Beneficial Ownership(1) | Percentage of Class Preferred | |||||||
| Executive Officers and Directors | ||||||||
| Robert E. Smith | 0 | 0.0 | % | |||||
Shannon Masjedi (2) | 1,000,000 | 100.0 | % | |||||
| Marc Shenkman | 0 | 0.0 | % | |||||
| All officers and directors a group (3 group) | 1,000,000 | (2) | 100.0 | % | ||||
| 5% Shareholders | ||||||||
| None | 0 | 0 | % | |||||
| For fiscal year end December 31, 2015: | $ | 20,000 | ||
| For fiscal year end December 31, 2014: | $ | 20,000 | ||
| We did not pay any other fees as specified in Item 9(e) of Schedule 14A. | ||||
| We do not have audit committee pre-approval policies and procedures. | ||||
| Report of Independent Registered Public Accounting Firm | F-1 | |||
| Consolidated Balance Sheets as of December 31, 2018 and 2017 | F-3 | |||
| F-4 | ||||
| Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2018 and 2017 | F-5 | |||
| F-6 | ||||
| Notes to | F-7 | |||
| 27 |
| F-2 |
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 210 | $ | - | ||||
| Accounts receivable | - | 12,721 | ||||||
| Inventory, net | 2,020 | 58,256 | ||||||
| Deposits | 1,500 | 1,500 | ||||||
| Total Current Assets | 3,730 | 72,477 | ||||||
| Fixed Assets | ||||||||
| Fixed assets, net | 35,831 | 106,740 | ||||||
| Total Fixed Assets | 35,831 | 106,740 | ||||||
| TOTAL ASSETS | $ | 39,561 | $ | 179,217 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Bank overdraft | $ | - | $ | 2,589 | ||||
| Accounts payable | 206,383 | 358,867 | ||||||
| Accrued expenses | 189,433 | 891,532 | ||||||
| Deferred revenue | 90,042 | - | ||||||
| Current portion, notes payable | 28,510 | 550,333 | ||||||
| Current portion, notes payable - related party | 253,140 | 278,821 | ||||||
| Current portion, leases payable | - | 36,012 | ||||||
| Total Current Liabilities | 767,507 | 2,118,154 | ||||||
| Long-Term Liabilities: | ||||||||
| Notes payable - related party | 527,333 | 324,522 | ||||||
| Notes payable | 132,821 | 6,553 | ||||||
| Total Long-Term Liabilities | 660,154 | 331,075 | ||||||
| Total Liabilities | $ | 1,427,661 | $ | 2,449,229 | ||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Preferred stock, $.001 par value, 10,000,000 shares authorized, | ||||||||
| none issued and outstanding | $ | - | $ | - | ||||
| Class A common stock, $.001 par value, 30,000,000 shares | ||||||||
| authorized, 25,799,031 and 25,799,031 issued and outstanding, | ||||||||
| respectively | 25,799 | 19,322 | ||||||
| Class B common stock, $.001 par value, 10,000,000 shares | ||||||||
| authorized, 1,000,000 issued and outstanding, respectively | 1,000 | 1,000 | ||||||
| Additional paid in capital | 3,455,745 | 3,130,097 | ||||||
| Accumulated deficit | (4,870,645 | ) | (5,420,431 | ) | ||||
| Total Stockholders' Equity (Deficit) | (1,388,100 | ) | (2,270,012 | ) | ||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 39,561 | $ | 179,217 | ||||
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 58,234 | $ | 315,957 | ||||
| Accounts receivable | 1,213,991 | 1,290,637 | ||||||
| Inventory Asset | 1,216,562 | 830,504 | ||||||
| Other Current Asset | 34,379 | 34,379 | ||||||
| Right to Use Asset | 249,000 | 249,000 | ||||||
| Deposits | 16,845 | 16,845 | ||||||
| Total Current Assets | 2,789,011 | 2,737,322 | ||||||
| Fixed Assets | ||||||||
| Fixed assets, net | $ | 1,169,441 | $ | 1,477,668 | ||||
| Total Fixed Assets | 1,169,441 | 1,477,668 | ||||||
| Other Assets | ||||||||
| Intangible Assets | $ | 3,468,222 | $ | 3,680,371 | ||||
| Right to Use Asset | 755,752 | 861,250 | ||||||
| Rent & Utilities Deposit | 11,520 | 12,421 | ||||||
| 4,235,494 | 4,554,042 | |||||||
| TOTAL ASSETS | $ | 8,193,945 | $ | 8,769,032 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 2,809,136 | $ | 1,409,420 | ||||
| Accrued expenses | 902,442 | 714,962 | ||||||
| Lease Liability | 249,000 | 249,000 | ||||||
| Current portion, notes payable | 2,891,023 | 1,022,364 | ||||||
| Current portion, notes payable - related party | 437,995 | 340,241 | ||||||
| Current portion, leases payable | 88,417 | 119,988 | ||||||
| Total Current Liabilities | $ | 7,378,012 | $ | 3,855,976 | ||||
| Long-Term Liabilities: | ||||||||
| Notes payable | $ | 10,541,853 | $ | 8,627,129 | ||||
| Notes payable - related party | 42,000 | 42,000 | ||||||
| Lease Liability | 745,000 | 861,250 | ||||||
| Total Long-Term Liabilities | 11,328,853 | 9,530,379 | ||||||
| Total Liabilities | $ | 18,706,866 | $ | 13,386,354 | ||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $.001 par value, 10,000,000 shares authorized, 5,000,000 Series E, issued and outstanding | $ | 5,000 | $ | 6,000 | ||||
| 10,000 Series F, issued and outstanding | 10 | - | ||||||
| Common stock, $0.498 par value, 900,000,000 shares authorized, and 16,871,351 issued and outstanding at December 31, 2020, which reflects the 1-for-500 reverse stock split that occurred on Apr 13, 2020 | 8,415,444 | 570,033 | ||||||
| Additional paid in capital | (2,869,593 | ) | 4,847,013 | |||||
| Accumulated deficit | (16,063,780 | ) | (10,040,367 | ) | ||||
| Total Stockholders’ Equity (Deficit) | $ | (10,512,919 | ) | $ | (4,617,321 | ) | ||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | 8,193,945 | $ | 8,769,032 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
| PACIFIC VENTURES GROUP, INC. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| For the Year Ended, | ||||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Sales, net of discounts | $ | 255,213 | $ | 128,002 | ||||
| Cost of Goods Sold | (113,118 | ) | (107,665 | ) | ||||
| Gross Profit | 142,096 | 20,337 | ||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | 172,237 | 487,938 | ||||||
| Depreciation expense | 3,993 | 166,373 | ||||||
| Salaries and wages | 16,666 | 413,161 | ||||||
| Operating Expenses/(Loss) | 192,896 | 1,067,472 | ||||||
| Loss from Operations | (50,800 | ) | (1,047,135 | ) | ||||
| Other Non-Operating Income and Expenses | ||||||||
| Interest expense | (80,619 | ) | (89,558 | ) | ||||
| Extraordinary Items | 66,867 | - | ||||||
| Net Income/(Loss) before Income Taxes | (64,552 | ) | (1,047,135 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net Income/(Loss) | $ | (64,552 | ) | $ | (1,047,135 | ) | ||
| Basic and Diluted Loss per Share - Class A Common Stock | $ | (0.00250 | ) | $ | (0.05 | ) | ||
| Basic and Diluted Loss per Share - Class B Common Stock | $ | (0.0646 | ) | $ | (1.05 | ) | ||
| Weighted Average Number of Shares Outstanding: | ||||||||
| Basic and Diluted Class A Common Stock | 25,799,031 | 19,322,390 | ||||||
| Basic and Diluted Class B Common Stock | 1,000,000 | 1,000,000 | ||||||
Consolidated Statements of Operations
| For the period ended | ||||||||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Sales, net of discounts | $ | 30,212,420 | $ | 5,918,337 | ||||
| Cost of Goods Sold | 26,857,783 | 5,070,322 | ||||||
| Gross Profit | 3,354,637 | 848,015 | ||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | 5,077,008 | 1,365,942 | ||||||
| Marketing and Advertising | 45,837 | 100,508 | ||||||
| Amortization and Depreciation expense | 696,144 | 229,036 | ||||||
| Professional fees | 913,293 | 556,074 | ||||||
| Salary and wages | ||||||||
| Officer Compensation | 300,000 | 300,000 | ||||||
| Operating Expenses/(Loss) | 7,032,283 | 2,551,560 | ||||||
| Income/ (Loss) from Operations | (3,677,646 | ) | (1,703,545 | ) | ||||
| Other Non-Operating Income and Expenses | ||||||||
| Interest expense | (2,204,391 | ) | (970,488 | ) | ||||
| Net Income/(Loss) before Income Taxes | (5,882,038 | ) | (2,674,033 | ) | ||||
| Provision for income taxes | ||||||||
| Net Ordinary Income/(Loss) | (5,882,038 | ) | (2,674,033 | ) | ||||
| Other Income / Expense | ||||||||
| Other Income - Other | 20,217 | 21,407 | ||||||
| Net Income/(Loss) | $ | (5,861,821 | ) | (2,652,626 | ) | |||
| Basic and Diluted Loss per Share - Common Stock | $ | (0.34744 | ) | $ | (0.00465 | ) | ||
| Weighted Average Number of Shares Outstanding: | ||||||||
| Basic and Diluted Class A Common Stock | 16,871,351 | 570,859,333 | ||||||
Common stock outstanding shares reflect the 1-for-500 reverse stock split that occurred on Apr 13, 2020.
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
Statement of Stockholders’ Equity (Deficit)
For the Years Ended December 31, 2019 and 2020
| Total | ||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Series E Preferred Stock | Series F Preferred Stock | Additional Paid | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | in Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Note conversion | 332,888,888 | 332,889 | 107,322 | 440,211 | ||||||||||||||||||||||||||||||||
| Shares Issued | 633,000 | 633 | 5,000,000 | 5,000 | 60,867 | 66,500 | ||||||||||||||||||||||||||||||
| Cancelled shares | ||||||||||||||||||||||||||||||||||||
| Reverse split | ||||||||||||||||||||||||||||||||||||
| Prior Period Adjustment | 111,304 | 111,304 | ||||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2019 | (2,652,626 | ) | (2,652,626 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 570,859,333 | $ | 570,033 | 6,000,000 | $ | 6,000 | $ | $ | 4,847,012 | $ | (10,040,367 | ) | $ | (4,617,321 | ) | |||||||||||||||||||||
| Reverse split on April 13, 2020 for 1-for-500 | (569,717,118 | ) | ||||||||||||||||||||||||||||||||||
| Reverse split adjustment Apr 20, 2020 | 566 | |||||||||||||||||||||||||||||||||||
| Note conversion | ||||||||||||||||||||||||||||||||||||
| Shares Issued for Services | 5,728,570 | 2,857,411 | 10,000 | 10 | (2,729,606 | ) | 127,815 | |||||||||||||||||||||||||||||
| Cancelled shares | ||||||||||||||||||||||||||||||||||||
| Shares Issued in exchange of preferred E shares | 10,000,000 | 4,988,000 | (1,000,000 | ) | (1,000 | ) | (4,987,000 | ) | ||||||||||||||||||||||||||||
| Prior Period Adjustment | (161,592 | ) | (161,592 | ) | ||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2020 | (5,861,821 | ) | (5,861,821 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 16,871,351 | $ | 8,415,444 | 5,000,000 | $ | 5,000 | 10,000 | $ | 10 | $ | (2,869,593 | ) | $ | (16,063,779 | ) | $ | (10,512,919 | ) | ||||||||||||||||||
| Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
| Balance, December 31, 2012 | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | (1,682,243 | ) | $ | (1,682,243 | ) | |||||||||||||||||||
| Shares issued for exchange agreement | 1,154,500 | 1,154 | 971,846 | 973,000 | ||||||||||||||||||||||||||||||||
| Debt converted into shares | 428,900 | 429 | 999,571 | 1,000,000 | ||||||||||||||||||||||||||||||||
| Shares sold for cash | 751,729 | 752 | 949,248 | 950,000 | ||||||||||||||||||||||||||||||||
| Imputed interest - contributed capital | 11,531 | 11,531 | ||||||||||||||||||||||||||||||||||
| Founder's shares | 14,832,733 | 14,833 | 1,000,000 | 1,000 | 15,833 | |||||||||||||||||||||||||||||||
| Shares issued for services | 2,043,200 | 2,043 | 38,012 | 40,055 | ||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Net loss for the yeard ended December 31, 2013 | (2,601,495 | ) | (2,601,495 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2013 | - | $ | - | 19,211,062 | $ | 19,211 | 1,000,000 | $ | 1,000 | $ | 2,970,208 | $ | (4,283,738 | ) | $ | (1,293,319 | ) | |||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Note conversion | 111,328 | 111 | 159,889 | 160,000 | ||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Net loss for the yeard ended December 31, 2014 | (1,136,693 | ) | (1,136,693 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2014 | - | $ | - | 19,322,390 | 19,322 | $ | 1,000,000 | $ | 1,000 | - | $ | (5,420,431 | ) | $ | (2,270,012 | ) | ||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Note conversion | 6,476,641 | 6,477 | 325,648 | 332,125 | ||||||||||||||||||||||||||||||||
| Prior period adjustment | 614,338 | 614,338 | ||||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Net loss for the yeard ended December 31, 2015 | (85,260 | ) | (85,260 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2015 | - | $ | - | 25,799,031 | $ | 25,799 | 1,000,000 | $ | 1,000 | $ | 3,455,745 | $ | (4,891,353 | ) | $ | (1,408,809 | ) | |||||||||||||||||||
Consolidated Statements of Cash Flows
| For the period ended | ||||||||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (5,861,821 | ) | $ | (2,652,626 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Shares issued for services | (127,815 | ) | 6,500 | |||||
| Accumulated Depreciation | 3,989 | |||||||
| Depreciation & Amortization Expense | 696,144 | |||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 5,255 | (939,104 | ) | |||||
| Inventory | (386,059 | ) | (669,646 | ) | ||||
| Other Current Assets | 72,293 | |||||||
| Other Assets | - | |||||||
| Accounts payable | 1,361,741 | 1,205,383 | ||||||
| Accrued expenses | 316,745 | 101,122 | ||||||
| Other Current liabilities | (64,398 | ) | ||||||
| Capitalized interest or penalty fees | 1,660,767 | 311,877 | ||||||
| Other Changes in Assets | �� | 11,840 | ||||||
| Net Cash Provided by / (Used in) Operating Activities | (2,327,148 | ) | (2,620,665 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Receivable - Related | - | (34,379 | ) | |||||
| Purchase of equipment, building & improvements & fixed assets | (186,519 | ) | (1,384,382 | ) | ||||
| Goodwill and Intangible Assets | - | (2,783,239 | ) | |||||
| Net Cash Provided by / (Used In) Investing Activities | (186,519 | ) | (4,202,000 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | 1,532,737 | 2,960,900 | ||||||
| Proceeds from notes payable - Related | - | 119,542 | ||||||
| Repayment of notes payable | (315,349 | ) | ||||||
| Repayment of notes payable - Related | (29,218 | ) | ||||||
| Proceeds from long-term loans | 3,246,100 | 3,461,606 | ||||||
| Repayment of long-term loans | (2,144,550 | ) | ||||||
| Repayment of debt by Shares | - | (166,000 | ) | |||||
| Common Shares Issued for Cash | - | |||||||
| Shares Issued for Debt | 122,815 | 440,211 | ||||||
| Preferred Stocks issued | 5,000 | 60,000 | ||||||
| Prior period adjustment to retained earnings | (161,592 | ) | 111,304 | |||||
| Net Cash Provided by / (Used in) Financing Activities | 2,255,943 | 6,987,564 | ||||||
| NET INCREASE (DECREASE) IN CASH | (257,724 | ) | 164,898 | |||||
| CASH AT BEGINNING OF PERIOD | 315,956 | 151,058 | ||||||
| CASH AT END OF PERIOD | $ | 58,233 | $ | 315,957 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| CASH PAID FOR: | ||||||||
| Interest and penalty fees | $ | 292,150 | $ | 142,695 | ||||
| NON CASH FINANCING ACTIVITIES: | ||||||||
| Issuance of shares for debt conversion | $ | 122,815 | $ | 440,211 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-6 |
| For the Year Ended, | ||||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (64,552 | ) | $ | (1,136,693 | ) | ||
| Adjustments to reconcile net loss to | ||||||||
| net cash used in operating activities: | ||||||||
| Shares issued for services | - | - | ||||||
| Depreciation | 3,993 | 166,373 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 12,721 | (5,877 | ) | |||||
| Inventory | 56,237 | (27,762 | ) | |||||
| Deposits | 102,577 | 16,900 | ||||||
| Accounts payable | (108,111 | ) | 38,235 | |||||
| Accrued expenses | (685,716 | ) | 319,026 | |||||
| Net Cash Used in Operating Activities | (682,851 | ) | (629,798 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Disposal of fixed asset | 233,289 | 53,645 | ||||||
| Net Cash Provided By (Used In) Investing Activities | 233,289 | 53,645 | ||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | 526,709 | 550,333 | ||||||
| Repayment of notes payable | (13,785 | ) | - | |||||
| Common stock issued for cash | 80,738 | |||||||
| Proceeds from related party notes payable | 17,724 | |||||||
| Bank overdraft | - | 2,589 | ||||||
| Repayment on the leases payable | (48,301 | ) | (24,517 | ) | ||||
| Repayment of note payable - related party | (93,000 | ) | - | |||||
| Net Cash Provided by Financing Activities | 452,361 | 546,129 | ||||||
| NET INCREASE (DECREASE) IN CASH | 2,799 | (30,024 | ) | |||||
| CASH AT BEGINNING OF PERIOD | (2,589 | ) | 30,024 | |||||
| CASH AT END OF PERIOD | $ | 210 | $ | - | ||||
| SUPPLEMENTAL DISCLOSURES OF | ||||||||
| CASH FLOW INFORMATION: | ||||||||
| SUPPLEMENTAL DISCLOSURS OF CASH FLOW INFORMATION | ||||||||
| CASH PAID FOR: | ||||||||
| Interest | $ | 80,619 | $ | 76,820 | ||||
| NON CASH FINANCING ACTIVITIES: | ||||||||
| Issuance of shares for debt conversion | $ | - | $ | 160,000 | ||||
For the years ended December 31, 2020 and 2019
1.NATURE OF OPERATIONS
The Company and Nature of Business
Pacific Ventures Group, Inc. (the "Company"“Company,” “we,” “us” or "Pacific Ventures"“our”) was incorporated under the laws of the Statestate 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“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, Pacific Ventures Group, Inc. and its stockholdersthe Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Snöbar Holdings, Inc. ("Snöbar Holdings"), pursuant to which Pacific Venturesthe Company acquired 100% of the issued and outstanding shares of Snöbar Holdings'Holdings’ Class A and Class B common stock in exchange for 22,500,000 restricted shares of Pacific Ventures'the Company’s common stock, while simultaneously issuing 2,500,000 restricted shares of Pacific Ventures' restrictedthe Company’s common stock to certain other persons.
As the result of the Share Exchange, representsSnöbar 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. Theoperations, the Company’s business operations will changechanged to that of Snöbar Holdings.
Snöbar Holdings was formed inunder the laws of the State of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary of Snobar Snöbar Trust, a California trust ("Trust"(“Trust”), which was formed in June 1, 2013. The current trustee that holds legal title to the Trust is Clark Rutledge, who is the father of Shannon Masjedi, who controls Snöbar Holdings. the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, Treasurer, and majority stockholder. The Trust owns 100% of the shares of International Production Impex Corporation, a California corporation ("IPIC"),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"“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 MAS Global Distributors, Inc., a California corporation ("MGD").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"(“VIEs”) and Snöbar Holdings is identified as the primary beneficiary of the Trust and IPIC. Under ASCthe 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'Holdings’ management is that Snöbar Holdings has the power to direct the activities of a VIE that most significantly impact the VIE'sVIE’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'sVIE’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 in over thirty-five years ago to provide primarily restaurants 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 8, 2019, Seaport Group Enterprises LLC—a California Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc.—complete an asset acquisition of Seaport Meat Company, a California Corporation. Seaport Meat Company was started in over thirty years ago and is a USDA inspected fresh meat processing company. Seaport Meat Company delivers to all of Southern California as well as Arizona, customers include US Foods, SYSCO, and large restaurant chains.
Principles of Consolidation
The consolidated financial statements include the accounts of Pacific Ventures, Inc.,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"(“VIE”) provisions of ASC 810, "Consolidation" ("“Consolidation” (“ASC 810"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.
In general, a VIE is a corporation, partnership, limited-liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that is unable to make significant decisions about its activities, (3) has a group of equity owners that does not have the obligation to absorb losses or the right to receive returns generated by its operations or (4) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity'sentity’s activities (for example, providing financing or buying assets) either involve or are conducted on behalf of an investor that has disproportionately fewer voting rights.
ASC 810 requires a VIE to be consolidated by the party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) that has both of the following characteristics: a) the power to direct the activities of a VIE that most significantly impact the VIE'sVIE’s economic performance and b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that could potentially be significant to the VIE.
A variable interest holder that consolidates the VIE is called the primary beneficiary. If the primary beneficiary
of a variable interest entity (VIE) and the VIE are under common control, the primary beneficiary shall initially measure the assets, liabilities, and non-controlling interests of the VIE at amounts at which they are carried in the accounts of the reporting entity that controls the VIE (or would be carried if the2.
Principles of Consolidation -
The consolidated financial statements include Pacific Ventures, Inc., a Delaware corporation,the Company, Snöbar Holdings, Inc. a Delaware corporation ("Snöbar Holdings"), MAS Global Distributors, Inc., a California corporation ("MGD"), International Production Impex Corporation, a California corporation ("IPIC"),San Diego Farmers Outlet, Seaport Meat Company, MGD, IPIC and Snobarthe Trust, a California trust ("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.
| F-8 |
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 - Sales revenues are generally recognized
The Company recognizes revenue in accordance with the SAB 104 Public Company Guidance, when an agreement existsFinancial 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 determinable,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 are shippedand services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the customers or services are rendered, netaccounting for any of discounts, returns and allowance and collectability is reasonably assured. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In the instances in which we have received payment from our customers in advance of recognizingin-scope revenue we include the amounts in deferred or unearned revenue on our consolidated balance sheet.
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 at 12/31/2015,of December 31, 2019, and December 31, 2018, the Company had $0 in 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 $90,041.67 in deferred revenue as a result of prepayment by two of its customers.
Shipping and Handling Costs-
The Company'sCompany’s shipping costs are all recorded as operating expenses for all periods presented.
Gain From Settlement of Debt - The Company recorded a gain on debt settlement of $ 66,867 for the year ended December 31, 2015.
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 at 12/31/2015,of December 31, 2020, the Company has $39,307.59$31,858 in disputed liabilities on its balance sheet.
| F-9 |
Non-Recurring Items – Non-recurring items come from discontinued operations, extraordinary items, unusual or infrequent items, or changes in accounting principles. Because these items are infrequent and did not constitute operating items they are not included in the Company's result of operation. During the year ended 12/31/2015, the Company recorded a gain of $ 66,867 as non-recurring items.
Cash Equivalents -
The Company considers highly liquid instruments with original maturity of three months or less to be cash equivalents.
Accounts Receivable -
Accounts receivable are stated at net realizable value.value of $1,213,991. 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, 2020, the Company wrote off $14,588 of bad debt expense. The Company did not write off any bad debt$323 during the yearsyear ended December 31, 2015 and 2014, 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.
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 December 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) $226,000
Wholesale Customer Relationships (Seaport Meat) $2,334,239
Total Identifiable Intangible Assets $3,189,371
| F-10 |
Goodwill
Assembled Workforce $21,000
Unidentified Intangible Value $470,000
Total Goodwill $491,000
Total Accumulated Amortization is $265,017.
Total Intangible Assets $ 3,468,222
Management does not believe that there is an impairment as of 2020.
Fair Value of Financial Instruments -
The carrying amounts of Pacific Ventures'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 Pacific Venturesthe 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"(“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.
Advertising Costs - The Company expenses advertising costs when incurred. Advertising costs incurred amounted to $22,060 and $79,701 for the years ended December 31, 2015 and 2014, respectively.
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 Pacific Ventures'the Company’s financial statements.
Recent Accounting Pronouncements -
In June 2009, the FASB established the Accounting Standards Codification ("Codification"(“Codification” or "ASC"“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"(“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission ("SEC"(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 May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This standard is effective for fiscal years and interim reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017.
In April 2015, FASB issued Accounting Standards Update ("ASU"(“ASU”) No. 2015-03, "Interest“Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs"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. 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. 2015-04, "Compensation“Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer'sEmployer’s Defined Benefit Obligation and Plan Assets"Assets”, which permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity'sentity’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. 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. 2015-05, "Intangibles“Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer'sCustomer’s Accounting for Fees Paid in a Cloud Computing Arrangement"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“Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions"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. 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 June 2014, FASB issued ASU No. 2014-10, "Development“Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation"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'scompany’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'sentity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). Our company adopted this pronouncement for year ended December 31, 2014.
In June 2014, FASB issued ASU No. 2014-12, "Compensation“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"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. 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 August 2014, the FASB issued ASU 2014-15 on "Presentation“Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity'sEntity’s Ability to Continue as a Going Concern"Concern”. Currently, there is no guidance in U.S. GAAP about management'smanagement’s responsibility to evaluate whether there is substantial doubt about an entity'sentity’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'sentity’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'smanagement’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management'smanagement’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). 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.
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 $64,552$5,861,821 for the year ended December 31, 2015,2020 and has an accumulated deficit of $4,870,645$16,063,780 as of December 31, 2015.
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 audited 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'sCompany’s ability to continue as a going concern. These audited consolidated financial statements do not include any adjustments that might arise from this uncertainty.
4.INVENTORIES
As of December 31, 2015 and 2014, consisted2020, the Company had inventory assets for a total of the following:
| December 31, 2015 | December 31, 2014 | |||||||
| Finished Goods | $ | 2,020.34 | $ | 58,256 | ||||
5.PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 20152020 and 2014, consisted of:
| December 31, 2015 | December 31, 2014 | |||||||
| Computers | $ | 15,985.53 | $ | 15,985.53 | ||||
| Freezers | 39,152.82 | 106,069.29 | ||||||
| Office Furniture | 15,686.82 | 15,686.82 | ||||||
| Rugs | 6,000.00 | 6,000.00 | ||||||
| Software - Accounting | 2,901.07 | 2,901.07 | ||||||
| Telephone System | 5,814.00 | 5,814.00 | ||||||
| Video Camera | 1,527.95 | 1,527.95 | ||||||
| Accumulated Depreciation | (51,237.67 | ) | (47,244.66 | ) | ||||
| Net Book Value | $ | 35,830.52 | $ | 106,740.00 | ||||
| December 31, 2020 | December 31, 2019 | |||||||
| Computers | $ | 11,788 | $ | 11,788 | ||||
| Office Furniture | 23,908 | |||||||
| Building & Improvement | 29,673 | 25,000 | ||||||
| Forklift 1 | 3,000 | 3,000 | ||||||
| Forklift 2 | 2,871 | 2,871 | ||||||
| Truck 2019 Hino 3710 | 24,865 | 24,865 | ||||||
| Truck 2019 Hino 7445 | 34,213 | 34,213 | ||||||
| Truck 2018 Hino 155 5347 | 30,181 | 30,181 | ||||||
| Truck 2018 Hino 155 5647 | 30,181 | 30,181 | ||||||
| Truck 2018 Hino 155 5680 | 29,592 | 30,181 | ||||||
| Machinery & Equipment | 994,540 | 913,696 | ||||||
| Leasehold Improvements | 66,932 | |||||||
| Office Equipment | 62,400 | 62,400 | ||||||
| Vehicles | 409,108 | 409,108 | ||||||
| Accumulated Depreciation | (583,810 | ) | (99,815 | ) | ||||
| $ | 1,169,441 | $ | 1,477,668 | |||||
Depreciation and 2014 was $3,993.01 and $166,373 respectively.
6.ACCRUED EXPENSE
As of December 31, 2020, the Company had accrued expenses of $189,433 and $891,532, respectively. During July 2015, Snöbar Holding issued 350,000 shares of class A common stock$902,442 compared to $714,962 for $225,000 of accrued payroll liabilities. In September of 2015, Snöbar Holding's officers with the board of directors' approval, forgave an additional $600,000 of accrued payroll liabilities. This amount was considered forgiveness of debt by a related party and the entire $600,000 was recorded in prior period adjustment towards a reduction of accumulated deficit.
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 December 31, 2019:
| Noteholder | Note Amount | Issuance Date | Unpaid Amount | |||||||
| S. Masjedi | $ | 150,000 | 12/10/2010 | $ | 46,474 | |||||
| A. Masjedi | 500,000 | 6/1/2013 | 391,521 | |||||||
| 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 | $ | 479,995 | |||||||
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 an officerMrs. Masjedi, who is now the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, director and shareholder.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, 2017.2022. The balance of the note at December 31, 2015 and 2014,2020 was $28,292 and $125,000 respectively.
On February of21, 2012, MGDSnöbar Holdings entered into an unsecured promissory note with Mr. Shenkman, who is Chairman of the Board of Directors and a shareholder.shareholder of the Company. The note had an originala principal balance of $30,000$10,000 with an interest rate of 8%5% and ais due on demand. The note’s maturity date of August 1, 2014. The
On February 23, 2012, Snöbar Holdings entered into a promissory note agreement with a relative and former officer to purchase all shares and interestsMr. Shenkman for $10,000, maturing in IPIC, including liquor licenses, for $500,000.one year at an interest of 8%. The note bears no interest and payments are due in five installments of $100,000 due each year beginning onhas subsequently been extended to December 31, 2013 and going through December 31, 2017.2022. Interest under the note was extinguished in a subsequent extension of the term. The entire purchase pricenote had an outstanding balance of $500,000 was expensed in 2013. As$10,000 as of December 31, 2015 and 2014, the balance on the note $219,522 and $299,522, respectively.
On March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a shareholder.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. The maturity date has been2014, subsequently extended to December 31, 2019, and2022 with a lower interest rate has been reduced toof 2%. Lender/year. Mr. Shenkman also agreed to make all interest retroactive and deferred. The note had an outstanding balance of $6,000 as of December 31, 20152020.
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 2014.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 December 31, 2020, the outstanding balance under this note was $391,521, 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 December 31, 2020.
As of December 31, 2020, the Company had total short-term notes payable of $1,969,853 and long-term notes payable of $10,583,853.
9. NOTES PAYABLE
The following table presents a summary of the Company’s promissory notes issued to unrelated third parties as of December 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 | 135,696 | |||||||
| TRA Capital | 106,112 | 3 loans | 125,247 | |||||||
| BNA Inv | 223,499 | 6 loans | 191,753 | |||||||
| Brian Berg | 30,000 | 2/1/12 | 25,000 | |||||||
| Classic Bev | 73,473 | 5/1/17 | 380,051 | |||||||
| JSJ, Investments | 75,000 | 7/12/17 | 19,911 | |||||||
| PowerUp | 168,500 | various | 168,500 | |||||||
| PNC, Inc. | 850,000 | 12/19/20 | 850,000 | |||||||
| PPP | 509,700 | 5/20/20 | 509,700 | |||||||
| SBA Loan | 309,900 | 4/1/20 | 309,900 | |||||||
| Dicer | 64,678 | 7/20/20 | 62,231 | |||||||
| TCA Global fund | 2,150,000 | 5/1/18 | 2,980,815 | |||||||
| TCA Global fund 2 | 3,000,000 | 12/17/19 | 6,202,086 | |||||||
| $ | 7,816,633 | $ | 12,073,711 | |||||||
| F-15 |
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 shareholder.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 December 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 original interest rate of 5%, and an originalhad a maturity date of March 14, 2014. MaturityThe note’s maturity date has subsequently been extended to December 31, 2019,February 1, 2020. The entire balance is owed and interest rate has been reduced to 2%, and lender agreed to make all interest retroactive and deferred. The balance of the note was $86,821outstanding as of December 31, 2015 and 2014.
On July 22, 2013, Snöbar Holdings entered into an unsecured promissory note with a shareholder.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 December 31, 20152020.
The following description represents unrelated note payable transactions post-merger between Snöbar and 2014.
On July 12, 2017, the issued a Convertible Promissory Note to JSJ Investments Inc.
In August 2020, the year ended December 31, 2014, Snöbar HoldingsCompany entered into unsecured promissory notesa financing arrangement with an entity owned by a shareholder. The notes hadPower Up Lending pursuant to which the Company borrowed a total principal balance of $16,000 with an interest rate of 2% and were due on demand. Maturity date has been modified to December 31, 2019, and lender agreed to make all interest retroactive and deferred. The balance$168,500 secured by shares of the Company’s common stock. The notes were $16,000subject to a 6 month hold before any stock was issued. The current balance as of December 31, 20152020 is $168,500.
Over the past year Classic Beverage has periodically issued loans to the Company. The Company has agreed to pay interest 10% per year and 2014.
On February 23, 2012, Snöbar HoldingsMay 1, 2018, Pacific Ventures Group entered into a secured promissory note with a shareholder. The note had a principal balance of $10,000 with no interest rate. The note is due upon demand. The balance of the note was $10,000 as of December 31, 2015 and 2014.
On March 10, 2014, MGDDecember 17, 2019 Pacific Ventures Group entered into a secured promissory note with a principal balance of $23,000. The note was secured by MGD future sales and accounts receivable totaling $31,970. The Company was to remit 2% of revenues and accounts receivables daily until the entire balance of $31,970 has been received. The outstanding balance on the notes was paid off by other financing and has a balance of $0 as of December 31, 2015.
On May 20, 2020, The Company entered into a SBA loan and all interest dueSBA PPP note in the amounts of $309,900 and payable was deemed to$509,700, respectively as a result of the COVID-19 pandemic. The note is current, and the Company believes that this not will be forgiven by the SBA. The standards set forth for forgiveness have been paidmet and exceeded to order to obtain forgiveness by the conversion rightsSBA. The Company’s forgiveness application is pending.
On July 20,2020, Seaport Group Enterprises LLC entered into a note in the amount of $64,678.00 for a new piece of machinery in order to upgrade the processing line. The note were removed. The modification also removed and deleted,is payable monthly in its entirety, all secured interests in cash, accounts receivable, other receivables, inventory, supplies, and other assets of Snöbar Holdings, including intangibles, and rights of each liquor license owned by Snöbar Trust.
On December 8, 2019, The Company entered into a Seller Carryback note with PNC Inc in the amount of $850,000. The note was due in three installment payments over 18 months. As of December 31, 2020 no payments have been made toward the outstanding balance.
As of December 31, 2019, the Company had total short-term notes payable of $1,362,605 and long-term notes payable onof $8,669,129.
As of December 31, 2020, the Second Extended Maturity Date. The balanceCompany had short-term notes payable of $1,969,853 and long-term notes payable of $10,583,853.
10. Purchase Receivables
In September, October and November 2020, Seaport Group Enterprises LLC and CapCall entered into a revenue based factoring agreement and received an aggregate of $1,000,000 in exchange for $1,300,000 of future receipts relating to monies collected from customers or other third-party payors. Under the terms of the noteagreement, the Company is required to make payments of $21,500, $13,000 and $8,995. As of December 31, 2020 the balance was $820,515.
In November 2020, Seaport Group Enterprises LLC and Fox Capital entered into a revenue based factoring agreement and received an aggregate of $475,000 in exchange for $607,500 of future receipts relating to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make daily payments to $4,050. As of December 31, 2020 the balance was $538,650.
The following table presents a summary of the Company’s purchase receivables with unrelated third parties as of December 31, 2015 and 2014 is $527,333.
| Vendor | Amount | Issuance Date | Balance | |||||||
| Cap Call | $ | 1,000,000 | 3 loans 2020 | $ | 820,515 | |||||
| Fox Capital | 607,500 | 12/1/20 | 538,650 | |||||||
| $ | 1,607,500 | $ | 1,359,165 | |||||||
As of December 31, 2015 and 2014.
11. STOCKHOLDERS’ EQUITY
Share Exchange
On August 14, 2015, Snöbar Holdings entered into athe Share Exchange Agreement ("Exchange Agreement") with Pacific Ventures Group, Inc., a Delaware corporation ("Pacific Ventures"),the Company and Snöbar Holdings'Holdings’ shareholders ("Snö(the “Snöbar Shareholders"Shareholders”) who holdheld 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.Stock, of Snöbar Holding. In accordance with the terms and provisions of the Share Exchange Agreement, Pacific Ventures shall acquire (i) at least 99% and up to 100%the Company acquired all of the total issued and outstanding shares of Snöbar Holdings'Holdings’ Class A Common Stock and (ii) 100% of the total issued and outstanding shares of Snöbar Holdings' Class B Common Stock from Snöbar Holdings' Shareholders, thus makingwith Snöbar Holdings becoming a majority-owned or wholly-ownedwholly owned subsidiary of the Company, in exchange for the issuance to the Snöbar Shareholders of at least 22,285,000 and up to 22,500,000 shares of restricted common stock of Pacific Ventures for each sharethe Company and the issuance of common stock of Snöbar while simultaneously issuing 2,500,000 restricted shares of restrictedthe Company’s common stock of Pacific Ventures to certain other persons.
The 2,500,00015,728,136 restricted shares of restrictedthe Company’s common stock issued during the fiscal year ended December 31, 2020 were issued for the following:
Common Stock and Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of restricted commonits preferred stock, in exchange for his 1,000,000$0.001 par value per share. The Company designated 6,000,000 shares of preferred stock as Series E Preferred Stock.
From January 1, 2020 through December 31, 2020, the Company issued 5,728,570 shares of its common stock in exchange for various services and has no preferences to dividends or liquidation rights. As10,000,000 shares in exchange of 1,000,000 Series E preferred shares.
From January 1, 2020 through December 31, 2015 there are 1,000,0002020, the Company issued no shares of Preferred Class E Stock issued and outstanding.
The Company is authorized October 22, 2012 forto issue up to 100,000,000900,000,000 shares of its common stock, $0.4988 par value $0.001 per share. Common Stock shareholders getHolders of common stock have one vote per share. As of December 31, 2015,2019, and 2020, there were 25,799,031570,859,333 and 16,871,351 shares of Common Stock outstanding.
12. 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 monthmonth-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 month basis.
Seaport Group Enterprise LLC is located at 2533 Folex Way, Spring Valley CA 91978, where they occupy an aggregate of approximately 12,000 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 on 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 | ||
Concentration Risk
The Company is potentially subject to concentration risk in its sales revenue and from a major supplier of goods for sale.
Major Customer
The Company has one major customer that accounted for approximately 42.05% and $11,543,363 of sales for the year ended December 31, 20152020. The Company expects to maintain this relationship with the customer.
Major Vendor
The Company has one major vendor that accounted for approximately 25% and 2014, International Production$5,888,519 of cost of sales for the year ended December 31, 2020. The Company expects to maintain this relationship with the vendor.
13. EQUITY INCENTIVE PLAN
On November 3, 2017, the Company’s Board of Directors approved the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), which reserves a total of 1,500,000 shares of the Company’s common stock for issuance under the 2017 Plan. Incentive awards authorized under the 2017 Plan include, but are not limited to, incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, subject to the approval of the 2017 Plan by the Company’s stockholders. If an incentive award granted under the 2017 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with the exercise of an incentive award, the shares subject to such award and MGD had rent expensethe surrendered shares will become available for further awards under the 2017 Plan. All of $9360the shares under the 2017 Plan were registered in the Company’s Registration Statement on Form S-8 filed with the Securities and $9360 respectively.
14. 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. We have
The Company has evaluated all subsequent events through the date these consolidated financial statements were issued, and determined the following are material to disclose:disclose.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision of our Chief Executive Officer and Interim Chief Financial Officer performed an evaluation (the “Evaluation”) of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, due to the presence of material weaknesses described below, our disclosure controls and procedures were ineffective because of the material weaknesses described below.
Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our Company and our consolidated subsidiaries to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting for our Company. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; | |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failure. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission’s Internal Control-Integrated Framework. The following material weaknesses in our internal control over financial reporting continued to exist at December 31, 2020:
| ● | Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act; | |
| ● | we outsourced the functions of the principal financial officer on an interim basis to assist us in implementing the necessary financial controls over the financial reporting and the utilization of internal management and staff to effectuate these controls; | |
| ● | ||
| ● | we do not have an independent audit committee of our board of directors; and | |
| ● |
We believe that these material weaknesses primarily relate, in part, to our lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.
Pending obtaining sufficient resources to implement these measures, we plan to take a number of actions to correct these material weaknesses, including, but not limited to, establishing an audit committee of our board of directors comprised of three independent directors, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements. However, we may need to take additional measures to fully mitigate these issues, and the measures we have taken, and expect to take, to improve our internal controls may not be sufficient to (1) address the issues identified, (2) ensure that our internal controls are effective or (3) ensure that the identified material weakness or other material weaknesses will not result in a material misstatement of our annual or interim financial statements.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Attestation Report of the Independent Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the Dodd-Frank Act that permanently exempted smaller reporting companies from the auditor attestation requirement.
Changes in Internal Control Over Financial Reporting
An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Interim Chief Financial Officer, of whether any change in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended December 31, 2019. Based on that evaluation, our management, including our Chief Executive Officer and Interim Chief Financial Officer, concluded that there were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 29 |
CEO and CFO Certifications
Exhibits 31.1 and 31.2 to this Annual Report are the Certifications of the Chief Executive Officer and the Interim Chief Financial Officer, respectively. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 9A. of this Annual Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
| ITEM 9B. | OTHER INFORMATION |
None
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Officers and Board of Directors
The following individuals serve as executive officers and directors of Pacific Ventures as of March 28, 2018:
| Name | Age | Positions | ||
| Shannon Masjedi (1) | 49 | President, Chief Executive Officer, Interim Chief Financial Officer, Secretary and Director | ||
| Marc Shenkman | 61 | Chairman of the Board of Directors |
(1) In October 2017, Mrs. Masjedi was appointed as the Company’s Interim Chief Financial Officer.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.
At this time, we do not have a written employment agreement and/or a formal compensation agreement with our new officers and directors. Compensation arrangements are the subject of ongoing development and we will make appropriate additional disclosures as they are further developed and formalized.
Marc Shenkman. Mr. Shenkman, as Chairman of the Board of Directors of Pacific Ventures, is responsible for, among other things, the general oversight of the affairs of Pacific Ventures, has corporate oversight of all of its business, including implementation of long-term plans, and preside when present at all meetings of the stockholders and the Board of Directors. Mr. Shenkman has served as a director of Snöbar Holdings since January 20162013. From year 2000 to present, Mr. Shenkman worked as the President of Priority Financial Network. Priority Financial Network is a mortgage brokerage company that closes FHA, and “A” through “D” residential and commercial loans over the past several years. In 2020, Priority Financial Network, has produced loans totaling almost $1.67 billion and has over 300 employees and loan officers. Mr. Shenkman graduated from the University of Vermont with a Bachelor of Arts in Economics and a Bachelor of Arts in Political Science. Mr. Shenkman brings knowledge and experience in the banking and financial industries. His experience in the financial markets will help Pacific Ventures Group navigate in the public marketplace. Mr. Shenkman does not hold, and has not previously held, any directorships in any other reporting companies. Mr. Shenkman was a member of Raynol LLC which filed for Chapter 11 bankruptcy in May 2010, which bankruptcy was dismissed (not discharged) in May 2012.
Shannon Masjedi. Mrs. Masjedi, as President, Chief Executive Officer and Secretary of Pacific Ventures, will be responsible for, among other things, subject to the supervision and direction of the Board of Directors of Pacific Ventures, the general management and control of its specified day-to-day business operations, and implementing its short and long term plans, and, as Secretary of Pacific Ventures, will be responsible for, among other things, attending all meeting of the stockholders, the Board, and, as required, committees of the Board and recording all the proceedings of such meetings in books to be kept for that purpose.
Mrs. Masjedi has served as a director and Chairman of the Board of Directors, Chief Executive Officer, President, Vice President, Treasurer, Chief Financial Officer, Secretary of Snöbar Holdings since January 2013. From June 1, 2010 to present, Mrs. Masjedi worked as a director of operations for IPIC, where she implemented all current operating platforms including development of SnöBar product line, packaging and research and development and oversaw all day-to-day operations of IPIC as well as managing all the contractors of IPIC. Mrs. Masjedi was in charge of all compliance and regulatory issues for IPIC and obtained all necessary licenses for IPIC to distribute and export products worldwide.
Mrs. Masjedi attended Arizona State University where she studied Aeronautical Technology. Mrs. Masjedi also attended flight school and obtained her pilot’s license. Mrs. Masjedi has had extensive experience with creating the distribution platform for the SnöBar product line in the alcohol industry. Her knowledge in the frozen ice cream category and alcohol category combined make her indispensable to Pacific Ventures. Mrs. Masjedi has long standing relationships within these industries which allow Snobar Holdings went into defaultproducts to be distributed efficiently. Mrs. Masjedi does not hold, and has not previously held, any directorships in any other reporting companies. In 2010, Mrs. Masjedi filed for Chapter 7 personal bankruptcy, which was discharged in August 2011.
Committees of our Board of Directors
Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent, and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
We have not established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee, any committee performing a similar function. The functions of those committees are being undertaken by Board of Directors as a whole. Because we have only two directors, none of whom are independent, we believe that the establishment of these committees would be more form over substance.
We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees. In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our Board.
None of our directors is an “audit committee financial expert” within the meaning of Item 401(e) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or Board of Directors who:
| ● | understands generally U.S. GAAP and financial statements, | |
| ● | is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves, | |
| ● | has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements, | |
| ● | understands internal controls over financial reporting, and | |
| ● | understands audit committee functions. |
Indemnification of Directors and Officers
Section 145 of the Delaware Corporation Law provides in relevant parts as follows:
(1) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine on application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a corporation has been successful on the notemerits or otherwise in defense of any action, suit, or proceeding referred to in (1) or (2) of this subsection, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.
(4) The indemnification provided by this section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.
The foregoing discussion of indemnification merely summarizes certain aspects of indemnification provisions and is limited by reference to the above discussed sections of the Delaware Corporation Law.
The Company’s Certificate of Incorporation and Bylaws provide that the Company “may indemnify” to the full extent of its power to do so, all directors, officers, employees, and/or agents. It is anticipated that the Company will indemnify its officer and director to the full extent permitted by the above-quoted statute.
Insofar as indemnification by the Company for liabilities arising under the Securities Act may be permitted to officers and directors of the Company pursuant to the foregoing provisions or otherwise, the Company is aware that in the opinion of the U.S. Securities and Exchange Commission (the “SEC”), such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Family Relationships
There are no family relationships between or among any of our directors or executive officers or persons nominated or chosen by us to become directors or executive officers.
Where You Can Find More Information
We file with the SEC, located on 100 F Street NE, Washington, D.C. 20549, Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and other reports, statements and information as required under the Exchange Act. The reports, statements and other information that we have filed with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains a web site (http://www.sec.gov.) that contains the registration statements, reports, proxy and information statements and other information regarding registrants that file electronically with the SEC such as us. You may access our SEC filings electronically at this SEC website. These SEC filings are also available to the public from commercial document retrieval services.
| ITEM 11. | EXECUTIVE COMPENSATION |
Pacific Ventures Compensation
The following table sets forth certain compensation information for: (i) Pacific Ventures’ principal executive officer serving in such capacity during fiscal years ended December 31, 2019 and 2018; (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2019 and 2018; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2019 and 2018. Compensation information is shown for the fiscal years ended December 31, 2019 and 2018:
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) * | Option Awards ($) * | All Other Compensation | Total ($) | |||||||||||||||||||||
| Bob Smith, CEO (1) | 2018 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
| Shannon Masjedi, CEO | 2019 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
| ShannonMasjedi, CEO | 2020 | $ | 385,000 | -0- | -0- | -0- | -0- | $ | 385,000 | |||||||||||||||||||
(1) Mr. Smith was terminated as CEO in March 2017.
Snöbar Holdings Compensation
The following table sets forth certain compensation information for: (i) San Diego Farmers Outlet’ and Seaport Meat Company principal executive officer serving in such capacity during the fiscal years ended December 31, 2020 and 2019; (ii) Pacific Ventures Group’ two most highly compensated executive officers other than its principal executive officer who were serving as executive officers at December 31, 2020 and 2019; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2020 and 2019. Compensation information is shown for the fiscal years ended December 31, 2020 and 2019:
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) * | Option Awards ($) * | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Shannon Masjedi, CEO/President | 2020 | $ | -385,000- | -0- | -0- | -0- | -0- | $ | 385,000- | |||||||||||||||||||
| 2019 | $ | -0- | -0- | -0- | -0- | -0- | $ | -0- | ||||||||||||||||||||
Employment Agreements
We have a written employment/compensation agreement with our officers or directors.
Compensation of Directors
We have not established standard compensation arrangements for our directors and the compensation payable to JRSR26. each individual for their service on our Board is determined from time to time by our Board of Directors based upon the amount of time expended by each of the directors on our behalf. During the 2020 fiscal year, none of our directors received any compensation specifically for their services as a director.
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Compensation Committee Interlocks and Insider Participation
We have no compensation committee of our board of directors, and during the year ended December 31, 2020, our directors and officers participated in deliberations of our board of directors regarding officer compensation. During the year ended December 31, 2020, no executive officer of our Company (i) served as a member of the compensation committee (or other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our board of directors, (ii) served as a director of another entity, one of whose executive officers served on our board of directors, or (iii) served as a member of the compensation committee (or other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of our Company.
Narrative Disclosure of Compensation Policies and Practices as They Relate to the Company’s Risk Management
We believe that our compensation policies and practices for all employees and other individual service providers, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on us.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The company decidedfollowing table sets forth information regarding beneficial ownership of our capital stock by:
| ● | each person who is known by us to be the beneficial owner of more than 5% of our outstanding voting stock; | |
| ● | each director; | |
| ● | each named executive officer; and | |
| ● | all of our current executive officers and directors as a group. |
The following table is based upon information supplied by to tryus by our officers, directors and certain principal stockholders. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to renegotiatepersons who possess sole or shared voting power or investment power with respect to those securities. These shares are deemed to be outstanding and beneficially owned by the repaymentperson holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Unless otherwise indicated, the business address of each person listed is in care of Pacific Ventures Group, Inc., 117 West 9th Street, Suite 316, Los Angeles, California 90015.
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COMMON STOCK
Amount and Nature of Beneficial Ownership (1) | Percentage of Class Common (2) | |||||||
| Executive Officers and Directors | ||||||||
| Shannon Masjedi (2) | 10,130,454 | 60.0 | % | |||||
| Marc Shenkman | 1,500,000 | 8.8 | % | |||||
| All officers and directors a group (2 persons) | 11,630,454 | 68.8 | % | |||||
| 5% Shareholders | ||||||||
| Azita Davidyan | 3,000,000 | 17.7 | % | |||||
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the shares. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of our common stock held by them. Applicable percentage ownership is based on 16,871,351 shares of our common stock outstanding on a pre-split basis. |
(2) | Includes 130,454 shares of our common stock owned by ACD Trust (“Trust”). The trustee of the Trust is Shannon Masjedi who holds voting and investment power over the shares of our common stock owned by the Trust. |
PREFERRED STOCK
Amount and Nature of Beneficial Ownership(1) | ||||||||||||
| Series E | Series F | Percentage of Preferred(1) | ||||||||||
| Executive Officers and Directors | ||||||||||||
| Shannon Masjedi | 5,000,000 | 10,000 | 100.0 | % | ||||||||
| Marc Shenkman | 0 | 0.0 | % | |||||||||
| All officers and directors a group (2 persons) | 5,000,000 | (2) | 10,000 | (3) | 100.0 | % | ||||||
| 5% Shareholders | ||||||||||||
| None | 0 | 0 | % | |||||||||
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the shares. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of our preferred stock held by them. Applicable percentage ownership is based on 5,000,000 shares of our Series E Preferred Stock and 10,000 of our Series F Preferred Stock issued and outstanding. |
| (2) | Each share of Series E Preferred Stock has a 10-to-1 voting preference where everyone share of Series E Preferred Stock is equivalent in votes to ten shares of Common Stock, resulting in the equivalent of 50,000,000 voting shares of common stock. When combined with the voting rights of current common and preferred shareholders, the Series E Preferred shareholder(s) has a 21.2% vote on all company matters on a fully diluted basis. |
| (3) | Represents 10,000 shares of our Series F Preferred Stock owned directly by Mrs. Masjedi. Each share of Series F Preferred Stock is convertible into 0.1% of the issued and outstanding stock at the time of conversion and has voting rights equivalent to the conversion rights for a total of 168,713,510 common stock voting share equivalents representing 71.6% of the voting power on fully diluted basis. |
Securities Authorized for Issuance Under Equity Compensation Plans
On November 3, 2017, Pacific Ventures’ board of directors (the “Board of Directors”) adopted, by written consent, in accordance with the General Corporation Law of the State of Delaware, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”), which reserves a total of 1,500,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) for issuance under the 2017 Plan. As described below, incentive awards authorized under the 2017 Plan include, but are not limited to, incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). If an incentive award granted under the 2017 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2017 Plan.
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Administration ― The Compensation Committee of the Board of Directors, or the Board of Directors in the absence of such a committee, will administer the 2017 Plan. Subject to the terms of the modification2017 Plan, the Compensation Committee or the Board of Directors has complete authority and discretion to determine the terms upon which awards may be granted under the 2017 Plan.
Grants ― The 2017 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Code and stock appreciation rights, as described below:
| ● | Options granted under the 2017 Plan entitle the grantee, upon exercise, to purchase up to a specified number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option generally cannot be less than the fair market value of Common Stock on the date of grant unless agreed to otherwise at the time of the grant. In addition, in the case of an incentive stock option granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the per share exercise price will be no less than 110% of the fair market value of Common Stock on the date of grant. | |
| ● | Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units. | |
| ● | The Compensation Committee or the Board of Directors may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions. | |
| ● | The 2017 Plan authorizes the granting of stock awards. The Compensation Committee or the Board of Directors will establish the number of shares of our common stock to be awarded (subject to the aggregate limit established under the 2017 Plan upon the number of shares of our common stock that may be awarded or sold under the 2017 Plan) and the terms applicable to each award, including performance restrictions. | |
| ● | Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common Stock on the date of grant of the SAR. |
Duration, Amendment, and Termination ― The Board of Directors has the power to amend, suspend or terminate the 2017 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year of such change. Unless sooner terminated, the 2017 Plan would terminate ten years after it is adopted.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The following includes a summary of transactions since January 1, 2017 to which we have been a party, in orderwhich the amount involved in the transaction exceeded $120,000 , and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation arrangement, which are described above under “Executive Compensation.”
We believe that all purchases from or transactions with affiliated parties were on terms and at prices substantially similar to those available from unaffiliated third parties.
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The Snöbar Trust
The Snobar Trust (the “Trust”) a California Trust formed on June 1, 2013. Snöbar Holdings is the trustor and sole beneficiary of Trust. The current trustee that holds legal title to the Trust is Azita Davidiyan. So long as the trustor is in existence, on demand of the trustor or the beneficiary, the trustee shall distribute to the trustor any or all of the property contained in the beneficiary. Subject to the terms of the Trust, the trustor may remove any acting trustee, or designate one or more successor trustees. Any trustee may resign at any time. The Trust shall terminate upon the earlier of (i) withdrawal or distribution of all assets from the Trust or the date upon which the trustor ceases to be in existence. As of the date of this annual report, the Trust owns 100% of the shares 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. Snöbar Holdings also owns 99.9% of the shares of MGD, which 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.
There have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.
With regard to any future related party transaction, we plan to fully disclose any and all related party transactions, including, but not put financial pressurelimited to, the following:
| ● | disclose such transactions in prospectuses where required; | |
| ● | disclose in any and all filings with the Securities and Exchange Commission, where required; | |
| ● | obtain disinterested directors’ consent; and | |
| ● | obtain shareholder consent where required. |
Indemnification Agreements
Our Bylaws provide that none of our officers or directors shall be personally liable for any obligations of our Company or for any duties or obligations arising out of any acts or conduct of said officer or director performed for or on behalf of our Company, including without limitation, acts of negligence or contributory negligence. In addition, our Bylaws provide that we shall indemnify and hold harmless each person and their heirs and administrators who shall serve at any time hereafter as a director or officer of our Company from and against any and all claims, judgments and liabilities to which such persons shall become subject by reason of their having heretofore or hereafter been a director or officer of our Company, or by reason of any action alleged to have heretofore or hereafter taken or omitted to have been taken by him or her as such director or officer, and that we shall reimburse each such person for all legal and other expenses reasonably incurred by him or her in connection with any such claim, judgment or liability, including our power to defend such persons from all suits or claims as provided for under the provisions of the Delaware General Corporation Law; provided, however, that no such persons shall be indemnified against, or be reimbursed for, any expense incurred in connection with any claim or liability arising out of his (or her) own willful misconduct. In addition, in the future, we may enter into indemnification agreements with our directors and officers and some of our executives may have certain indemnification rights arising under their employment agreements with us. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our Bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Policies and Procedures for Transactions with Related Persons
We have not yet adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of “related-person transactions.”
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Director Independence
We are not subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our board of directors comprised of a majority of “independent directors.” Our board of directors has determined that neither of the members of our board of directors qualifies as an “independent” director under Nasdaq’s definition of independence.
Our board of directors’ acts as the audit committee and we currently have no separate committees. Due to the small size of our board of directors, we believe that currently it is appropriate and most efficient for our entire board of directors to execute the functions that a separate audit committee, compensation committee and nominating committee would typically perform.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Audit Fees
| For fiscal year end December 31, 2020: | $ | 40,000. |
We did not pay any other fees as specified in Item 9(e) of Schedule 14A.
Pre-Approval Policies and Procedures
We do not currently have a separate audit committee. Our board of directors is responsible for the pre-approval of all audits and permitted non-audit services to be performed for our Company by the independent auditors. The fees paid to the independent auditors that are shown in the chart above for 2020 and 2019 were approved by our board of directors in accordance with the procedures described below.
Our board of directors reviews and approves all audit and non-audit services proposed to be provided, other than de minimis non-audit services which may instead by preapproved in accordance with applicable SEC rules.
There were no audit or non-audit services provided to us for the years ended December 31, 2020 and 2019 that were not approved by our board of directors. Our board of directors determined that the services rendered by Dylan Floyd Accounting & Consulting are compatible with maintaining their independence as our independent auditors.
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
| (a) | List of Documents Filed. |
(1) Financial Statements (Included in Item 8 of this Annual Report)
Consolidated Financial Statements of Pacific Ventures Group, Inc.:
| ● | Report of Independent Registered Public Accounting Firm | |
| ● | Consolidated Balance Sheets as of December 31, 2020 and 2019 | |
| ● | Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 | |
| ● | Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2020 and 2019 | |
| ● | Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 | |
| ● | Notes to the Consolidated Financial Statements |
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(2) Financial Statement Schedules
All schedules have been omitted since they are either not applicable or the information is contained elsewhere in this Annual Report.
** SEC Counsel or CPA to add footnotes below **
| (b) | Exhibits. |
The following exhibits are filed as part of this Form 10-K and this list includes the Exhibit Index.
| † | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to the requirements of Item 15(a)(3) of Form 10-K. |
| †† | Schedules have been omitted pursuant to Item 601(b)(ii) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PACIFIC VENTURES GROUP, INC. | ||
| Date: April 15, 2021 | By: | /s/ Shannon Masjedi |
| President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the company.dates indicated.
| Signature | Title | Date | ||
| /s/ Shannon Masjedi | Director | April 15, 2021 | ||
| Shannon Masjedi | ||||
| /s/ Marc Shenkman | Chairman of the Board of Directors | April 15, 2021 | ||
| Marc Shenkman |
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