UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: DECEMBER 31, 2013 | |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from __________ to __________. |
Commission File Number 333-157281
GREENFIELD FARMS FOOD, INC.
(Name of small business issuer in its charter)
| NEVADA | 26-2909561 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
319 Clematis Street – Suite 400, West Palm Beach, Florida 33401
(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (561) 514-9042
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ¨ Yes x No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days: x Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:
| Large Accelerated Filer | o | Accelerated Filer | o |
| Non-Accelerated Filer | o | Smaller Reporting Company | x |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ¨ Yes x No
The aggregate market value of the voting common equity held by non-affiliates of the issuer as of March 31, 2014 was $645,232, based on the last sale price of the issuers common stock ($0.0012 per share) as reported by the OTCQB.
The Registrant had 652,840,771 shares of common stock outstanding as of May 30, 2014.
Documents incorporated by reference: None
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
The discussion contained in this 10-K under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-K. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-K that are not historical facts.
DESCRIPTION OF BUSINESS
Plan of Operations
We were founded in 2008 as Sweet Spot Games, Inc., a Nevada corporation on June 2, 2008. We changed our name to Green Field Farms Food, Inc. ("Greenfield") on March 31, 2011. In October 2013, we entered into an Asset Purchase Agreement (the “Agreement”) with COHP, LLC, through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela’s Pizzeria through a newly formed wholly-owned subsidiary Carmela’s Pizzeria CO, Inc. Carmela's Pizzeria presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Carmela’s has been noted in Dayton Daily News as one of “The Best Pizzerias” in Dayton.
The Carmela’s Pizzeria assets and liabilities were acquired in exchange for 1,000 shares of our newly issued Series C Convertible Preferred Stock (“Series C”) that converted on October 31, 2013 into 53,965,942 shares of common stock upon the effective date of a 1 for 100 reverse split. In addition, COHP and its assigns received warrants to purchase a total of 53,965,942 shares of our common stock exercisable for a period of five years in the amounts and exercise prices as follows: 17,988,648 at $0.015; 17,988,647 at $0.02; and 17,988,647 at $0.025. The value of these assets was $1,586,599 at December 31, 2013, which represents the fair market value of the common stock and warrants issued in the acquisition at their issuance dates.
Prior to the acquisition of Carmela’s Pizzeria, we operated as a consumer and wholesale driven producer of grassfed beef. The Company had supplied Lowes Food Stores, a North Carolina based grocer with over 100 locations in North and South Carolina on a very limited basis. Greenfield Farms Grassfed Beef and its collective group of producers represented over 2500 acres in pasture under management and approximately 2000 head of cattle at its peak.
On March 12, 2013, Greenfield announced that we were beginning a new licensing program for our "Greenfield Farms Grassfed Beef" trademark, which we believed would allow us to expand our business and enhance market and brand presence. With this program, we phased away from our traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such products. The Company believed the trademark licensing concept allows for more rapid market penetration with less risk and the ability to more easily ascertain assumed returns. Greenfield signed its first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it became non-exclusive. The management of Hill Meadow Foods is headed by former Greenfield Chief Executive Officer, Mr. Larry Moore. This agreement proved unsuccessful and we have not yet identified other potential licensors through which to continue such agreements. Currently, we do not intend to move forward with this program in light of the acquisition of the operations of Carmela’s Pizzerias.
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The Company will continue to explore other business opportunities in complementary food related business segments much like the acquisition of Carmela’s Pizzeria, although no further agreements have been reached.
With the acquisition of Carmela’s Pizzeria operations, our business operations moving forward will focus on the operations of the existing three restaurants and we are presently formulating plans to begin offering franchise opportunities later in 2014.
For SEC reporting purposes, Carmela’s is treated as the continuing reporting entity that acquired GRAS as a result of the Carmela’s acquisition transaction. The quarterly and annual reports filed after the transaction, beginning with this report, have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company.
Our Operations
We currently offer two restaurant concepts including:
| · | A full-service dining room menu comprising a Carmela’s Pizzeria and including a limited pizza buffet and alcohol and a Sports Grill. |
| · | A smaller Carmela’s Pizzeria with full menu dining room including limited pizza buffet, delivery and carry-out. |
In addition, one of our locations currently offer a “Carmela’s Treats” walk-up window offering ice cream style dessert treats offered to both diners within the restaurant or patrons looking for dessert only offerings.
Each concept is designed to offer quality meals at affordable prices with an emphasis on efficiencies in food ordering, preparation and service. We believe that the overall configuration of each concept results in simplified scalable operations, increased efficiency and improved consistency and quality of our food products. Our restaurants may be configured to adapt to a variety of building shapes and sizes by utilizing the restaurant concept that best fits the individual location. This offers the flexibility necessary for our concepts to be operated at a multitude of locations.
In addition to offering New York style pizza for dine-in, carry-out or delivery at select locations, our buffet menu offers a variety of pizza toppings and special combinations of toppings. Stores offering full buffets also offer pasta, salads, comfort foods, and in a family-oriented atmosphere.
We recently announced and are currently working on creating a franchising concept to involve three separate business elements including:
| · | A full-service dining room menu comprising a Carmela’s Pizzeria and including a limited pizza buffet and alcohol and a Sports Grill. |
| · | A smaller Carmela’s Pizzeria with full menu dining room including limited pizza buffet, delivery and carry-out. |
| · | A Carmela’s Pizzeria delivery and carry-out model similar to those of the leading pizza delivery chains. |
In addition, there are plans for a Carmela’s catering division as a separate business unit that prospective franchisees may add to build sales and profits. A Carmela’s Treats walk-up window concept may also be added providing a separate profit center offering ice cream desserts. We are currently working on the initial phase of the national franchising program including development of the Franchise Disclosure Document (“FDD”), the legal document presented to prospective franchise buyers in the presale process. In addition, candidate review and screening for a national franchise director has commenced but not yet been completed as of the filing of this report. The Company is also working to complete the franchise operating system, collateral marketing materials and other supporting legal documentation.
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One of our long-term objectives is to selectively expand through franchising along with adding a small number of Company-owned restaurants by identifying appropriate opportunities. We believe that developing a domestic network of franchise and Company-owned restaurants will play an important strategic role in a predominately franchised operating structure. In addition to generating revenues and earnings, we expect to use domestic Company-owned restaurants as test sites for new products and promotions as well as restaurant operational improvements and as a forum for training new managers and franchisees. We also believe that as the number of franchise and Company-owned restaurants increases, they may add to the economies of scale available for advertising, marketing and other costs for the entire system.
Food and Supply Distribution
We currently purchase our restaurant supplies from local wholesale food distributors in the Dayton Ohio area. If we are able to expand through franchising, we will identify a suitable partner for outsourcing our warehousing and distribution services to a reputable and experienced restaurant distribution company. There are many regional and national companies to choose from that we believe will offer significant choice to tailor a program necessary for our specific needs. We may also choose to outsource our product sourcing, purchasing, quality assurance, franchisee order and billing services, and logistics support functions. These decisions will be made as we move forward with development of our franchising program during 2014.
Advertising
We presently advertise locally in the Dayton Ohio area mainly through direct marketing. As we move to create our franchising concept, we will be required to communicate a common brand message at the regional, local market and restaurant levels, to create and reinforce a strong, consistent marketing message to consumers in order to create successful franchise start-ups and garner sufficient market share. It is typical to require franchisees to participate in, and contribute to, an advertising program as part of their franchising fees. Once again, these decisions will be made as we move forward with development of our franchising program during 2014.
Government Regulation
We are subject to various federal, state and local laws affecting the operation of our restaurants. Each restaurant is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, wage and hour, alcoholic beverage, building and fire agencies in the state or municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or approvals could delay or prevent the opening of a new restaurant or require the temporary or permanent closing of existing restaurants in a particular area.
We will be subject to Federal Trade Commission (“FTC”) regulation and to various state laws regulating the offer and sale of franchises once our planned franchising program commences. The FTC will require us to furnish to prospective franchisees the FDD containing prescribed information. Substantive state laws that regulate the franchise or franchisee relationship presently exist in a number of states, and bills have been introduced in Congress from time to time that would provide for further federal regulation of the franchisor-franchisee relationship in certain respects. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship.
Competition
The restaurant industry, and specifically the pizza restaurant industry, is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater brand recognition and financial and other resources than us. Competitors include a large number of easily recognizable international, national and regional restaurant and pizza chains, as well as local restaurants and pizza operators. Some of our competitors may be better established in the markets where our restaurants are or may eventually be located. Within the pizza segment of the restaurant industry, we believe currently that our primary competitors are national pizza chains. As we move forward with franchising plans, our competition will potentially include regional chains, local restaurants as well as “take and bake” concept offerings. We also compete against the frozen pizza products available to consumers in all manners of retail stores. A change in the pricing or other market strategies of one or more of our competitors could have an adverse impact on our sales and earnings.
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With respect to the potential sale of franchises, we will compete with many franchisors of restaurants and other business concepts. We believe that the principal competitive factors affecting the sale of franchises are franchise entry costs, product quality, price, value, consumer acceptance, franchisor experience and support, and the quality of the relationship maintained between the franchisor and its franchisees. In general, there is also active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.
Employees
In addition to our executive officers, as of March 31, 2014 we had twelve full-time and thirty-three part-time employees at our Company owned restaurants. None of our employees are currently covered by collective bargaining agreements.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR BUSINESS
The purchase of shares of our common stock is very speculative and involves a very high degree of risk. An investment in our stock is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of Inhibiton.
OUR AUDITORS HAVE NOTED THERE IS CERTAIN DOUBT ABOUT OUR ABILITY TO OPERATE AS A GOING CONCERN
Management has taken steps to revise the Company's operating and financial requirements. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. However, there can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.
The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
WE ARE NOT CURRENTLY PROFITABLE AND MAY NEVER BECOME PROFITABLE.
We have a history of significant losses with our grassfed beef operations and expect to incur additional losses and negative operating cash flow for the foreseeable future as we move to expand our business with franchising plans for our restaurant operations. As a result, we may never achieve or maintain profitability. Even if we succeed in further developing our franchising plans, we may continue to incur losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and those expenses may not be offset by our revenues in any substantial way. As a result, we will need to generate significant revenues or raise additional capital in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our stock.
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OUR CURRENT MANAGEMENT CONTROL OUR BUSINESS AFFAIRS IN WHICH CASE YOU WILL HAVE LITTLE OR NO PARTICIPATION IN OUR BUSINESS
Our current management effectively control the company through ownership of our convertible preferred stock. As a result, they will have significant and potentially total control over all matters requiring approval by our stockholders without the approval of minority stockholders in some cases. They would be able to elect all of the members of our Board of Directors, which will allow them to control our affairs and management. They will also be able to affect most corporate matters requiring stockholder approval by written consent, without the need for a duly noticed and duly-held meeting of stockholders. As a result, they will have significant influence and control over all matters requiring approval by our stockholders. Accordingly, you will be limited in your ability to affect change in how we conduct our business.
WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.
We expect to incur significant costs associated with our public company reporting requirements, costs associated with applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. While we have extremely limited experience as a public company, we estimate that these additional costs will total approximately $50,000 per year. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
RISKS RELATIING TO OUR SECURITIES
THERE IS CURRENTLY A VERY LIMITED MARKET FOR OUR COMMON STOCK AND NO ASSURANCE THAT A MORE LIQUID MARKET WILL DEVELOP.
There is currently a limited trading market for our shares of Common Stock, under the symbol “GRAS.” Any market price for shares of our Common Stock is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our Common Stock. Further, there is no correlation between the present limited market price of our Common Stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our Common Stock should not be considered indicative of the actual value of the Company or our Common Stock.
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FUTURE SALES OF OUR COMMON STOCK COULD PUT DOWNWARD SELLING PRESSURE ON OUR CHASES AND ADVERSELY AFFECT THE STOCK PRICE. THERE IS A RISK THAT THIS DOWNWARD PRESSURE MAY MAKE ITIMPOSSIBLE FOR AN INVESTOR TO SELL HIS SHARES AT ANY REASONABLE PRICE
Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could put downward selling pressure on our shares, and adversely affect the market price of our common stock. Such sales could be made pursuant to Rule 144 under the Securities Act of 1933, as amended, as shares become eligible for sale under the Rule.
Because our shares are deemed high risk “penny stocks,” you may have difficulty selling them in the secondary trading market. The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as therein defined) less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Additionally, if the equity security is not registered or authorized on a national securities exchange, the equity security also constitutes a "penny stock." As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. These regulations generally require broker-dealers who sell penny stocks to persons other than established customers and accredited investors to deliver a disclosure schedule explaining the penny stock market and the risks associated with that market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. These regulations also impose various sales practice requirements on broker-dealers. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market is limited. As a result, the market liquidity for our common stock is severely and adversely affected. We can provide no assurance that trading in our common stock will not be subject to these or other regulations in the future, which would negatively affect the market for our common stock.
IF A STEADY MARKET DEVLEOPS FOR OUR SECURITIES THERE COULD BE SIGNIFICANT VOLATILITY AND THE SECURITIES MAY NOT APPRECIATE IN VALUE
If a more steady market should develop for our securities, of which we have no assurance, the market price is likely to fluctuate significantly. Fluctuations could be rapid and severe and may provide investors little opportunity to react. Factors such as changes in results from our operations, and a variety of other factors, many of which are beyond the control of the Company, could cause the price of our common stock to fluctuate substantially. Also, stock markets in penny stock shares tend to have extreme price and volume volatility. The market prices of shares of many smaller public companies securities are subject to volatility for reasons that frequently unrelated to the actual operating performance, earnings or other recognized measurements of value. This volatility may cause declines including very sudden and sharp declines in the market price of our common stock. We cannot assure investors that the stock price will appreciate in value, that a market will be available to resell your securities or that the shares will retain any value at all.
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK AND YOU MAY NEVER RECEIVE DIVIDENDS. THERE IS A RISK THAT AN INVESTOR IN OUR COMPANY WILL NEVER SEE A RETURN ON INVESTMENT AND THE STOCK MAY BECOME WORTHLESS.
We have never paid dividends on our common stock. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be at the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Future dividends may also be affected by covenants contained in loan or other financing documents, which may be executed by us in the future. Therefore, there can be no assurance that cash dividends of any kind will ever be paid.
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WE HAVE RAISED CAPITAL THROUGH THE USE OF CONVERTIBLE DEBT INSTRUMENTS THAT CAUSES SUBSTANTIAL DILUTION TO OUR STOCKHOLDERS.
Because of the size of our Company and its status as a "penny stock" as well as the current economy and difficulties in companies our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 65% discounts to the market price of our common stock on conversion and in many cases provide for the immediate sale of our securities into the open market. Accordingly, this has caused dilution to our stockholders and will continue to do so in 2013 and the foreseeable future. As of December 31, 2013, we had approximately $260,000 in convertible debt outstanding. This convertible debt balance as well as any additional convertible debt we incur in the future is very likely to cause substantial dilution to our current stockholders.
ITEM 1 B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES.
The Company maintains office facilities provided by our Chief Financial Officer. During 2013, there were no rents or other amounts paid for these facilities although that will not preclude the company from paying reasonable rental rates or reimbursement for use of these facilities in the future.
The Company leases its restaurant under certain leases with varied expiration dates. Certain leases provide for the payment of taxes and operating costs, such as insurance and maintenance in addition to the base rental payments.
| Location | Sq Ft | Lease End | ||
| Brookville | 2,400 | July 2018 | ||
| Park Layne | 3,700 | March 2024 | ||
| Springboro | 2,000 | November 2016 |
Aggregate minimum annual rental payments under the non-cancelable operating leases are as follows:
| Year ended December 31, 2014 | $ | 64,500 | ||
| 2015 | 61,500 | |||
| 2016 | 60,800 | |||
| 2017 | 35,250 | |||
| Total | $ | 222,050 |
ITEM 3. LEGAL PROCEEDINGS.
We are not presently involved in any litigation that is material to our business. We are not aware of any pending or threatened legal proceedings. In addition, none of our officers, directors, promoters or control persons has filed or been involved for the past five years:
| · | in any conviction of a criminal proceeding or involved in a pending criminal proceeding (excluding traffic violations and minor Offenses) |
| · | is subject to any order, judgment or decree enjoining, barring |
| · | Suspending or otherwise limiting their involvement in any type of business, securities, or banking activities, |
| · | or has been found to have violated a federal or state securities or commodities law. |
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Trading Market for Common Equity
There is currently a limited market for the Company's Common Stock, which is traded over-the-counter and quoted under the trading symbol “GRAS".
Future sales of our common stock could put downward selling pressure on our shares, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his shares at any reasonable price.
The Company's Common Stock is not listed on any exchange; however, market quotes for the Company’s common stock may be obtained from the OTC Markets "QB" platform (“OTCQB”). The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter (“OTC”) securities. The following table sets forth, for the indicated fiscal periods, the high and low sales prices (as reported by the OTCQB) for the Company’s common stock. On October 31, 2013, we executed a 1 for 100 reverse split of our common stock. All per share prices have been adjusted to reflect this reverse split.
| Price | ||||||||
| High | Low | |||||||
| Fiscal year ended December 31, 2013 | ||||||||
| Quarter ended December 31, 2013 | $ | 0.03 | $ | 0.001 | ||||
| Quarter ended September 30, 2013 | $ | 0.07 | $ | 0.01 | ||||
| Quarter ended June 30, 2013 | $ | 0.36 | $ | 0.02 | ||||
| Quarter ended March 30, 2013 | $ | 0.70 | $ | 0.10 | ||||
| Fiscal year ended December 31, 2012 | ||||||||
| Quarter ended December 31, 2012 | $ | 0.75 | $ | 0.10 | ||||
| Quarter ended September 30, 2012 | $ | 0.74 | $ | 0.12 | ||||
| Quarter ended June 30, 2012 | $ | 4.00 | $ | 0.45 | ||||
| Quarter ended March 30, 2012 | $ | 5.60 | $ | 2.70 | ||||
Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth above are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.
Dividends
We have never paid a cash dividend on our common stock. The payment of dividends may be made at the discretion of our Board of Directors, and will depend upon, among other things, our operations, capital requirements, and overall financial condition. There are no contractual restrictions on our ability to declare and pay dividends.
Securities Authorized for Issuance under Equity Compensation Plans
As of the date of this Report, we have not authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities under any equity compensation plan.
Transfer Agent
Our transfer agent is West Coast Stock Transfer, Inc. located at 2010 Hancock Avenue, Suite A, and San Diego, California 92110. Their telephone number is (619) 664-4780.
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As the registrant qualifies as a smaller reporting company under Rule 229.10(f) (1), it is not required to provide this information.
The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the factors discussed in the section entitled "Risk Factors" and the following:
| · | The effect of political, economic, and market conditions and Geopolitical events; |
| · | Legislative and regulatory changes that affect our business; |
| · | The availability of funds and working capital; |
| · | The actions and initiatives of current and potential competitors; |
| · | Investor sentiment; and |
| · | Our reputation. |
We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Form 10-K.
Overview
With the acquisition of the operation of Carmela’s Pizzeria in October 2013, our operations now consist of Carmela's Pizzeria’s, which presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Carmela’s has been noted in Dayton Daily News as one of “The Best Pizzerias” in Dayton.
Effective with the acquisition, Carmela’s is treated as the continuing reporting entity that acquired the Company. The quarterly and annual reports filed after the transaction, beginning with this report, have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company.
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RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
We had a net loss of $520,850 for the year ended December 31, 2013 as compared to a loss of $183,019 for the year ended December 31, 2012. Our gross sales in 2013 were $1,189,471 with cost of goods sold of $955,848 for a gross profit of $233,631. This compared to gross revenues of $1,339,660, costs of goods sold of $1,207,109 and gross profit of $132,551 for the year ended December 31, 2012. Our sales in the 2013 period decreased $150,181, or approximately 11% in 2013 versus 2012 as a result of Carmela’s relocating the Eaton store to Centerville and two months of lost sales associated with that relocation. However, the cost of goods sold decreased by approximately 21% so the gross profit as a percentage of total sales increased to just under 20% in 2013 from approximately 10% in 2012. This resulted in large part from increased attention by Carmela’s to shift management and employee overhead along with measures to reduce food costs associated with waste at its buffet restaurants.
Total operating expenses were $455,426 for the year ended December 31, 2013 versus $315,078 for the year ended December 31, 2012 resulting in loss from operations of $221,795 and $182,527 in the 2013 and 2012 periods, respectively. The single most significant factor for the increase in operating expenses was the consolidation of the operations of Carmela’s with that of the Company and the costs of operating a publicly traded entity. This included $10,000 in stock based compensation and a roughly $60,000 increase in legal, accounting and professional fees that are primarily related to the Carmela’s acquisition.
Other expenses were $299,055 for the year ended December 31, 2013 as compared to $492 for the year ended December 31, 2012. This significant increase is due to the addition of convertible promissory notes in the 2013 period with the combination of Carmela’s and the Company, as Carmela’s had no convertible debt prior to the transaction in October 2013. The primary expense for the corresponding derivative liability includes derivative expense of $193,079, and amortization expense on discount of debt of $29,314 along with loss on conversion of debt of $130,642. This expense will continue in future periods as the Company continues to issue convertible notes and those notes experience changes in derivative liabilities with changes in the market price of the Company’s common stock; and those notes are converted at discounts to market causing losses on conversion.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Overall, we had a net loss of $520,850 for the year ended December 31, 2013 as compared to $183,019 for the year ended December 31, 2012. During the year ended December 31, 2013, we had cash flow used by operations of $117,546, net cash used in investing activities of $28,233, and cash flows provided by financing activities of $146,712. At December 31, 2013, our cash balance was $5,022.
For the year ended December 31, 2012, we had a net loss of $183,019 with cash flow used by operations of $148,831, net cash provided by investing activities of $0, and cash flows provided by financing activities of $151,728. At December 31, 2012, our cash balance was $4,089.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash flow used in operating activities was $117,546 which was primarily attributable to our net loss of $520,850, offset by non-cash adjustments to derivative liabilities from convertible notes payable totaling $219,475 as well as $10,000 in expense for stock issued for services and $130,642 for loss on conversion of debt. The adjustments to reconcile the net loss to net cash for the period ended December 31, 2013 also included depreciation expense of $18,093.
CASH FLOWS FROM INVESTING ACTIVITIES. For the year ended December 31, 2013, cash flows used in investing activities was $28,233 primarily from $22,985 in equipment purchases for our restaurant locations.
CASH FLOWS FROM FINANCING ACTIVITIES. For the year ended December 31, 2013, cash flows from financing activities were $146,712, which consisted of proceeds from issuance of notes and convertible notes payable totaling 183,882 that was offset by distribution payments to the members of COHP prior to the transaction between the Company and Carmela’s of $31,500 as well as payments on capital leases of $5,670.
For the year ended December 31, 2012, we had cash used in operating activities of $148,831 including $17,725 in depreciation expense along with a total of $16,463 from changes in assets and liabilities.
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Cash flows from financing activities provided $151,728 primarily from proceeds from various notes payable from related parties totaling $164,172.
EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2014 as we look to secure additional funds to both stabilize and grow our business operations and work on franchising efforts for Carmela’s. Our management will review any financing options at their disposal and will judge each potential source of funds on its individual merits. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to or if we can, that the terms of such financing will be favorable to us or our existing shareholders. Additionally, we will most likely need to rely on debt financing that is convertible into shares of our common stock that will result in significant dilution to our stockholders due to the conversion of that debt at significant discounts to the market price of our common stock.
INFLATION. Our management believes that inflation has not had a material effect on our results of operations, and does not expect that it will in fiscal year 2014.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. We do not enter into derivatives or other financial instruments for trading or speculative purposes, however we do issue convertible notes that are subject to changes in the market price of our common stock for conversions to equity. Accordingly, as of December 31, 2013, we had $204,871 face value of convertible debentures bearing an interest rate of 8%. All of this fixed rate debt is due on demand or within twelve months from issuance. We have limited exposure to market risks related to changes in interest rates. We do not currently invest in equity instruments of public or private companies for business or strategic purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NOTES TO FINANCIAL STATEMENTS
The financial statements and related information required to be filed are indexed and begin on page F-1 and are incorporated herein.
CONTROLS AND PROCEDURES
CEO and CFO Certifications
Attached to this annual report, as Exhibits 31.1 and 32.1, are certain certifications of the CEO and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a- 14(a)/15d-14(a) Certifications"). This section of the annual report contains the information concerning the Evaluation referred to in the Rule 13a- 14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a- 14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.
Evaluation of Disclosure Controls and Procedures
A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO /CFO has concluded that as of December 31, 2013, disclosure controls and procedures, were not effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in the application of SEC rules and forms.
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Management’s Report on Internal Controls over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, 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.
Our CEO/CFO has evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to the extent possible given the limited personnel resources and technological infrastructure in place to perform the evaluation. Based upon our management’s discussions with our auditors and other advisors, our CEO/CFO believe that, during the period covered by this report, such internal controls and procedures were not effective as described below.
Due to the small size and limited financial resources, we have inadequate segregation of duties within accounting functions and results in an overall lack of internal control. As a result, there is no segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of one individual. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
None.
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a)(b)(c) Identification of directors and executive officers
The following table sets forth the name, age, position and office term of each executive officer and director of the Company.
| NAME | AGE | POSITION | SINCE | |||
| Ronald Heineman | 57 | Chief Executive Officer, Principal Executive Officer and Director | October 2013 | |||
| Henry Fong | 78 | Chief Financial Officer, Principal Executive Officer, Principal Accounting Officer and Director | June 2012 |
In June 2012, our then Chief Executive Officer and Director Mr. Larry Moore, our Vice President Mrs. Donna Moore, and each of our then directors Messrs. Walker, Thompson, Killman and Vuncannon resigned their positions as officers or directors of the Company.
Significant employees
| NAME | AGE | POSITION | SINCE | |||
| Darren Dulsky | 55 | President and Chief Operating Officer of Carmela’s Pizzeria | October 2013 |
Family relationships
None.
Business experience
RONALD HEINEMAN
Mr. Heineman became the CEO and a director of the Company in January 2013. Mr. Heineman was the managing member and the CEO of COHP, LLC and the CEO of Carmela’s since their inception in July 2011. Since October 2010 Mr. Heineman has been Managing Director of Diversified Capital, a Venture Capital that holds majority positions in human resources outsourcing, restaurants, sports franchises and real eastete including Wendy’s and Frisch's Big Boy franchises. Mr. Heineman is experienced as a CEO, CRO and board member of public companies. In addition he is experienced in M&A and capital markets. Prior to his current Venture initiatives, Mr. Heineman, was employed for 23 years as Vice President of HR & Training with Frisch's Restaurants Inc, a public AMEX company operating Big Boy, Golden Coral, hotels and specialty restaurants including company owned and franchise restaurants in the Midwest. Mr. Heineman was the CEO and Chief Restructuring Officer of General Employment enterprises, a [publicy traded human resources company, from October 2008 to November 2009. Mr. Heineman was also the CEO and CRO of Generation Entertainment, a publicy traded entertainment company from January 2012 to June 2013. Mr. Heineman has earned bachelors and masters degrees and is an adjunct professor teaching Entrepreneurship and Entrepreneurial Finance at Cedarville University.
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HENRY FONG
Mr. Fong was president of the Company from June 2012 to October 2013 when he became our CFO; and has been a director of the Company since June 2012. Mr. Fong has been CEO and a director of AlumiFuel Power Corporation, an alternative energy company, since May 2005. Mr. Fong has been a director of FastFunds Financial Corporation, a publicly traded holding company, since June 2004. Mr. Fong has been a Director of SurgLine International, Inc. (f/k/a China Nuvo Solar Energy, Inc.) since March 2002 and was its president from March 2002 through September 1, 2011 and was re-appointed its CEO in January 2014. SurgLine is a publicly traded company that sources and distributes high quality FDA approved medical and surgical products at discount prices. Mr. Fong was the Chief Executive Officer of Techs Loanstar, Inc. (and its predecessor companies), a publicly traded Company that provides software technology solutions to the healthcare market, from April 2008 to July 2011. Since July 2009 Mr. Fong has been the sole director, President and Chief Financial Officer of PB Capital International, Inc. (“PBIC”), a blank check shell company that filed Form 10 registration statement which went effective in October 2009. Since July 2010 to September 2013, Mr. Fong was President and a director of Green Energy TV, Inc., a privately-held owner of "green" websites, most notably greenenergytv.com. Since December 2008, Mr. Fong has been President and a director of Carbon Capture Corporation, a privately held owner of certain carbon based intellectual property. From 1959 to 1982 Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon. In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream Team."
DARREN DULSKY
Darren Dulsky, President and Chief Operating Officer of Carmela's, has been in restaurant industry since 1976. Mr. Dulsky worked for Friendly Ice Cream for 15 years as Manager, Training Coordinator and District Manager. He then joined Sbarro, Inc., a publicly traded company, in 1991. Mr. Dulsky held several operations positions during the 13 years prior to being named Sr. VP Operations where he had management oversight for over 130 units covering 17 states. Mr. Dulsky developed the Carmela’s concept and opened the first location in 2004. Mr. Dulsky attended Sinclair Community College.
Our Bylaws provide that we shall have that number of directors determined by the majority vote of the board of directors. Currently we have two directors. Each director will serve until our next annual shareholder meeting. Directors are elected for one-year terms. Our Board of Directors elects our officers at the regular annual meeting of the Board of Directors following the annual meeting of shareholders. Vacancies may be filled by a majority vote of the remaining directors then in office. Our directors and executive officers are as follows:
Audit committee financial expert
Identification of the audit committee
We do not have a separately designated standing audit committee. Pursuant to Section 3(a) (58) (B) of the Exchange Act, the entire Board of Directors acts as an audit committee for the purpose of overseeing the accounting and financial reporting processes, and audits of our financial statements. The Commission recently adopted new regulations relating to audit committee composition and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these new requirements, our Board of Directors examined the Commission's definition of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an expert. We have had minimal operations for the past two (2) years. We believe our current director would meet the qualifications of an "audit committee financial expert" were he not an officer of the Company.
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Code of Ethics
We have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is being designed with the intent to deter wrongdoing, and to promote the following:
| · | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships |
| · | Full, fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by the small business issuer |
| · | Compliance with applicable governmental laws, rules and regulations |
| · | The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code |
| · | Accountability for adherence to the code |
The following table and the accompanying notes provide summary information for each of the last three fiscal years concerning cash and non-cash compensation paid or accrued.
General
We currently have two executive officers, our Chief Executive Officer, Mr. Ronald Heineman, who is also our Principal Executive Officer and Mr. Henry Fong, who is our Chief Financial Officer and also our principal financial officer.
Compensation discussion and analysis
Our executive compensation is determined by our Board of Directors, and no compensation is currently accruing by our executive officers.
Summary Compensation Table
SUMMARY COMPENSATION TABLE(1)
| Name and principal position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Nonqualified Deferred Compensation Earnings ($) (h) | All Other Compensation ($) (i) | Total ($) (j) | |||||||||||||||||||
| Ronald Heineman | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
| CEO | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Henry Fong | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
| CFO | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
| (1) | Unless stated otherwise, the business address for each person named is c/o Greenfield Farms Food, Inc. As a result of the acquisition of Carmela’s effective October 1, 2013 and Carmela’s being considered the accounting acquirer for purposes of the Company’s financial reporting, the compensation presented herein reflects that of Carmela’s Pizzeria operations for 2012 and 2013 with the addition of the Company’s compensation for the period from October 1, 2013 to December 1, 2013. |
We have not entered into any other employment agreements with our employees, Officers or Directors.
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Stock Option Plan
We have not implemented a stock option plan at this time and since inception, have issued no stock options, SARs or other compensation. We may decide, at a later date, and reserve the right to, initiate such a plan as deemed necessary by the Board.
Compensation of directors
No compensation is paid to the Company’s directors for their services as a director of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS
Security ownership of certain beneficial owners.
Security ownership of management.
The following table contains certain information as of March 31, 2014 as to the number of shares of Common Stock beneficially owned by (i) each person known by the Company to own beneficially more than 5% of the Company’s Common Stock, (ii) each person who is a Director of the Company, (iii) all persons as a group who are Directors and Officers of the Company, and as to the percentage of the outstanding shares held by them on such dates and as adjusted to give effect to this Offering.
Name of Beneficial Owner | Number of Shares Beneficially Owned(1) | Preferred Stock(2) | Warrants | Total Shares Beneficially Owned | Percent of Class | |||||||||||||||
| Darren Dulsky (3) | 24,883,823 | 0 | 25,633,821 | 50,520,644 | 8.2 | % | ||||||||||||||
| Ronald Heineman (3)(4) | 24,883,823 | 0 | 25,633,821 | 50,520,644 | 8.2 | % | ||||||||||||||
| Chief Executive Officer | ||||||||||||||||||||
| Henry Fong (2)(5) | 0 | 70,715 | 0 | 0 | % | |||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||
All Executive Officers and Directors as a Group (2 persons) (2)(3)(4)(5) | 24,883,823 | 70,715 | 25,633,821 | 50,520,644 | 8.2 | % | ||||||||||||||
__________
| (1) | As of March 31, 2014, 587,460,867 shares of our common stock were outstanding. Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of the record date are deemed outstanding for computing the beneficial ownership percentage of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Except as indicated by footnote, the persons named in the table above have the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. |
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| (2) | In March 2011, the Company authorized the issuance of up to 100,000 shares of $0.001 par value Series A Convertible Voting Preferred Stock (the "Series A Preferred") of which there were 96,623 shares outstanding as of December 31, 2013. Each share of Series A Preferred is convertible into 70 shares of common stock. If all shares of Series A Preferred were to be converted to shares of common stock as of December 31, 2013, a total of 6,763,610 shares would be issued to the holders of the Series B Preferred including 4,950,050 that would be beneficially owned by Mr. Fong through his wife. The Series A Preferred also carries voting rights on an "as if converted" basis. |
| (3) | Includes warrants exercisable until October 2018 at the following exercise prices: 8,544,607 at $0.015; 8,544,607 at $0.02; and 8,544,607 at $0.025. |
| (4) | Includes 24,883,823 shares held by a trust owned by Mr. Heineman’s spouse. |
| (5) | Includes 70,715 shares of Series A Preferred Stock owned by a company controlled by Mr. Fong's spouse. |
The directors, executive officers, their affiliates, and related parties own, directly or indirectly, beneficially and in the aggregate, the majority of the voting power of the outstanding capital of the Company. Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital and the dissolution, merger or sale of the Company's assets.
Changes in control
The shares issued in the acquisition of Carmela’s resulted in a change-in-control of the Company in October 2013. We are currently not aware of any other arrangements that could result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with Related Persons
Entities controlled by the members have loaned monies to COHP for working capital purposes. The loans are non-interest bearing and have no specific terms of repayment. A related party loan from KB Air is secured by all the assets of the Company.
The activity for the years ended December 31, 2013 and 2012 is as follows:
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| Beginning balance | $ | 471,578 | $ | 307,406 | ||||
| Advances, net | 173,882 | 164,172 | ||||||
| Notes assumed in recapitalization | 31,200 | - | ||||||
| Assumed by member of COHP | (575,972 | ) | - | |||||
| $ | 100,688 | $ | 471,578 | |||||
Review, approval or ratification of transactions with related persons
Our entire board of directors is responsible for the review, approval or ratification of transactions with related persons. The board routinely reviews material related party transactions to ensure such transactions are reasonable, appropriate, and in the best interests of the Corporation. We have no written policies with respect to the review and approval of related party transactions and records of such reviews are contained in the minutes and/or reports of the board of directors as appropriate.
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Director Independence
Our board of directors has two directors and has no standing sub-committees at this time due to the associated expenses and the small size of our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent and have no members of our board considered “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that our board has chosen to use for the purposes of the determining independence.
In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company’s independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.
We do not currently have a standing compensation committee or non-employee directors. When we have non-employee directors on our board, those non-employee directors consider executive officer compensation, and our entire board participates in the consideration of director compensation. Non-employee board members would oversee would compensation policies, plans and programs. Our non-employee board members would further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.
Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.
Fees Billed For Audit and Non-Audit Services
The following table represents the aggregate fees billed for professional audit services rendered to the independent auditor, Silberstein Ungar, PLLC for our audit of the annual financial statements for the years ended December 31, 2013 and 2012. Audit fees and other fees of auditors are listed as follows:
| Year Ended December 31 | 2013 (2) | 2012 (2) | ||||||
Audit Fees (1) | $ | 22,800 | $ | 21,750 | ||||
Audit-Related Fees (3) | - | - | ||||||
Tax Fees (4) | - | - | ||||||
All Other Fees (5) | - | - | ||||||
| Total Accounting Fees and Services | $ | 22,800 | $ | 21,750 | ||||
| (1) | Audit Fees. These are fees for professional services for the audit of our annual financial statements, and for services that are normally provided in connection with statutory and regulatory filings or engagements including review of our quarterly financial statements. | |
| (2) | The amounts shown in 2012 and 2013 relate to (i) the audit of our annual financial statements for the fiscal years ended December 31, 2012 and 2013 and (ii) reviews of our quarterly financial statements and include fees for the audit of Carmela’s in 2012 in addition to that of the Company. | |
(3) | Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of our financial statements. | |
| (4) | Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning. | |
| (5) | All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees. |
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Pre-Approval Policy for Audit and Non-Audit Services
We do not have a standing audit committee, and the full Board performs all functions of an audit committee, including the pre-approval of all audit and non-audit services before we engage an accountant. All of the services rendered to us by Silberstein Ungar, PLLC were pre-approved by our Board of Directors.
The new policies and procedures will be detailed as to the particular service, will require that the Board or an audit committee thereof be informed of each service, and will prohibit the delegation of pre-approval responsibilities to management. It is currently anticipated that our new policy will provide (i) for an annual pre-approval, by the Board or audit committee, of all audit, audit-related and non-audit services proposed to be rendered by the independent auditor for the fiscal year, as specifically described in the auditor's engagement letter, and (ii) that additional engagements of the auditor, which were not approved in the annual pre-approval process, and engagements that are anticipated to exceed previously approved thresholds, will be presented on a case-by-case basis, by the President or Controller, for pre-approval by the Board or audit committee, before management engages the auditors for any such purposes. The new policy and procedures may authorize the Board or audit committee to delegate, to one or more of its members, the authority to pre-approve certain permitted services, provided that the estimated fee for any such service does not exceed a specified dollar amount (to be determined). All pre-approvals shall be contingent on a finding, by the Board, audit committee, or delegate, as the case may be, that the provision of the proposed services is compatible with the maintenance of the auditor's independence in the conduct of its auditing functions. In no event shall any non-audit related service be approved that would result in the independent auditor no longer being considered independent under the applicable rules and regulations of the Securities and Exchange Commission.
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PART IV
ITEM 15. EXHIBITS
Exhibits
| Exhibit Number | Description | |
| 3.1 | Articles of Incorporation (Incorporated by reference from Exhibit No. 3.1 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009) | |
| 3.2 | Bylaws (Incorporated by reference from Exhibit No. 3.2 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009) | |
| 3.3 | Certificate of Amendment to Articles of Incorporation (Incorporated by reference from Exhibit No. 3.1 of the Registrant's Current Report on Form 8-K filed on April 5, 2011) | |
| 4.1 | Certificate of Designation for Series A Preferred Stock (Incorporated by reference from Exhibit No. 4.1 of the Registrant's Current Report on Form 8-K filed on April 5, 2011) | |
| 4.2 | Certificate of Designation of Series B Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 filed on November 14, 2013) | |
| 4.3 | Certificate of Designation of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on November 4, 2013) | |
| 10.1 | Debt Settlement and Release Agreement with Larry C. Moore and Donna Moore dated July 18, 2012 (Incorporated by reference from Exhibit No. 10.3 of the Registrant's Current Report on Form 8-K filed on April 5, 2011) | |
| 10.2 | Asset Purchase Agreement (the “Agreement”) by and among COHP, LLC, an Ohio limited liability corporation (“COHP”); and Carmela’s Pizzeria CO, Inc., a Colorado corporation (“Carmela’s CO”), and its parent Greenfield Farms Food, Inc., a Nevada corporation (“Greenfield”) dated October 29, 2013 (Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on November 4, 2013) | |
| 14.1 | Code of Ethics (Incorporated by reference from Exhibit No. 14.1 of the Registrant's Registration Statement on Form S-1 filed on February 12, 2009) | |
| 31.1 | Certification of Principal Executive Officer Sec. 302 (Filed herewith) | |
| 31.2 | Certification of Principal Financial Officer Sec. 302 (Filed herewith) | |
| 32.1 | Certification of Chief Executive Officer Sec. 906 (Filed herewith) | |
| 32.1 | Certification of Chief Financial Officer Sec. 906 (Filed herewith) | |
| 101.INS ** | XBRL Instance Document (Filed herewith) | |
| 101.SCH ** | XBRL Schema Document (Filed herewith) | |
| 101.CAL ** | XBRL Calculation Linkbase Document (Filed herewith) | |
| 101.DEF ** | XBRL Definition Linkbase Document (Filed herewith) | |
| 101.LAB ** | XBRL Label Linkbase Document (Filed herewith) | |
| 101.PRE ** | XBRL Presentation Linkbase Document (Filed herewith) |
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
21
SIGNATURES
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.
| GREENFIELD FARMS FOOD, INC. | |||
| (Registrant) | |||
Date: June 16, 2014 | By: | /s/ Ronald Heineman | |
| Ronald Heineman | |||
Chief Executive Officer and Principal Executive Officer | |||
| By: | /s/ Henry Fong | ||
| Henry Fong | |||
Chief Financial Officer and Principal Financial Officer | |||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 16, 2014 | By: | /s/ Ronald Heineman | |
| Ronald Heineman | |||
| Director | |||
| By: | /s/ Henry Fong | ||
| Henry Fong | |||
| Director |
22
GREENFIELD FARMS FOOD, INC.
Index to Consolidated Financial Statements
| Page | ||||
| Report of Independent Registered Public Accounting Firm | F-1 | |||
| Consolidated Balance Sheets at December 31, 2013 and 2012 | F-2 | |||
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 | F-3 | |||
| Consolidated Statement of Shareholders' Deficit as of December 31, 2013 | F-4 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012 | F-5 | |||
| Notes to Consolidated Financial Statements | F-6 – F-17 | |||
23
| Silberstein Ungar, PLLC CPAs and Business Advisors | |
Phone (248) 203-0080 Fax (248) 281-0940 30600 Telegraph Road, Suite 2175 Bingham Farms, MI 48025-4586 www.sucpas.com |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Greenfield Farms Food, Inc.
West Palm Beach, Florida
We have audited the accompanying consolidated balance sheets of Greenfield Farms Food, Inc. (the “Company”) as of December 31, 2013 and 2012 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Greenfield Farms Food, Inc. as of December 31, 2013 and 2012 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the consolidated financial statements, the Company has incurred losses from operations, has negative working capital, and is in need of additional capital in order to grow its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 12. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
June 12, 2014
F-1
| CONSOLIDATED BALANCE SHEETS |
December 31, 2013 | December 31, 2012 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 5,022 | 4,089 | |||||
| Prepaid expense | 3,691 | 704 | ||||||
| Credit card receivables | 4,918 | 2,391 | ||||||
| Inventory | 8,486 | 8,472 | ||||||
| Deferred charges | 4,361 | - | ||||||
| Total Current Assets | 26,478 | 15,656 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Equipment, computer hardware and software | 148,390 | 120,179 | ||||||
| Accumulated depreciation | (72,806 | ) | (51,294 | ) | ||||
| Property and equipment, net | 75,584 | 68,885 | ||||||
| Other Assets | ||||||||
| Security deposits | 5,603 | 2,200 | ||||||
| Total Assets | $ | 107,665 | $ | 86,741 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Checks written in excess of bank balance | $ | 13,555 | $ | - | ||||
| Accounts payable | 99,009 | 39,905 | ||||||
| Accrued wages and payroll expenses | 23,753 | 25,706 | ||||||
| Accrued interest | 9,742 | - | ||||||
| Accrued interest – related parties | 9,641 | - | ||||||
| Accrued interest – convertible notes payable | 19,290 | - | ||||||
| Current portion of capital lease payable | - | 5,670 | ||||||
| Derivative liability | 251,137 | - | ||||||
| Notes payable | 50,000 | - | ||||||
| Notes payable – related parties | 100,687 | 471,578 | ||||||
| Convertible notes payable, net of debt discount | 204,871 | - | ||||||
| Total Liabilities | 781,685 | 542,859 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, par value $.001 | ||||||||
| 50,000,000 shares authorized; | ||||||||
| 96,623 series A convertible shares issued and outstanding (2013) | 97 | - | ||||||
| 44,000 series B convertible shares issued and outstanding (2013) | 44 | - | ||||||
| Common stock, par value $.001 | ||||||||
| 950,000,000 shares authorized; | ||||||||
| 145,732,680 and 0 shares issued and outstanding, respectively | 145,733 | - | ||||||
| Warrants | 507,280 | - | ||||||
| Additional paid-in capital | - | - | ||||||
| Accumulated deficit | (1,327,174 | ) | (456,118 | ) | ||||
| Total Stockholders' Deficit | (674,020 | ) | (456,118 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 107,665 | $ | 86,741 | ||||
The accompanying notes are an integral part of these financial statements.
F-2
| GREENFIELD FARMS FOOD, INC. | ||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| Year ended | Year ended | |||||||
| December 31, | December 31, | |||||||
| 2013 | 2012 | |||||||
| Sales | ||||||||
| Food and beverage | $ | 1,184,841 | $ | 1,322,847 | ||||
| Vending receipts | 4,638 | 16,813 | ||||||
| Total sales | 1,189,479 | 1,339,660 | ||||||
| Cost of Goods Sold | 955,848 | 1,207,109 | ||||||
| Gross Profit | 233,631 | 132,551 | ||||||
| Operating Expenses | ||||||||
| Telephone and utilities | 92,408 | 71,299 | ||||||
| Legal, accounting and professional fees | 62,768 | 2,806 | ||||||
| Rent | 64,895 | 72,096 | ||||||
| Advertising | 49,323 | 31,243 | ||||||
| Repairs and maintenance | 27,533 | 50,273 | ||||||
| Bank and credit card processing charges | 24,481 | 21,286 | ||||||
| Wages and taxes | 33,043 | - | ||||||
| Stock based compensation | 10,000 | - | ||||||
| Depreciation | 18,093 | 17,725 | ||||||
| Other | 72,882 | 48,350 | ||||||
| Total Operating Expenses | 455,426 | 315,078 | ||||||
| Loss From Operations | (221,795 | ) | (182,527 | ) | ||||
| Other Expenses (Income) | ||||||||
| Interest expense | (2,801 | ) | 492 | |||||
| Derivative expense | 193,079 | - | ||||||
| Change in Derivative Liability | (51,179 | ) | - | |||||
| Loss on Conversion of Debt | 130,642 | - | ||||||
| Amortization expense on discount of debt | 29,314 | - | ||||||
| Total Other Expenses (Income) | 299,055 | 492 | ||||||
| Net Loss | $ | (520,850 | ) | $ | (183,019 | ) | ||
| Weighted Average Number of Shares Outstanding: | ||||||||
| Basic and Diluted | 22,773,789 | 53,965,942 | ||||||
| Net Loss per Share: | ||||||||
| Basic and Diluted | $ | (0.02 | ) | $ | (0.00 | ) | ||
The accompanying notes are an integral part of these financial statements.
F-3
| GREENFIELD FARMS FOOD, INC. | ||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||||||
| FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2013 |
| Preferred stock | Common stock | Additional paid-in | Accumulated | Total stockholders' | |||||||||||||||||||||
| Shares | Par value | Shares | Par value | Warrants | capital | deficit | deficit | ||||||||||||||||||
| Inception | - | $ | - | 0 | $ | - | $ | $ | 0 | $ | - | $ | - | ||||||||||||
| Balance at January 1, 2012 | - | - | - | (268,094 | ) | (268,094 | ) | ||||||||||||||||||
| Distributions | (5,005 | ) | (5,005 | ) | |||||||||||||||||||||
| Net loss for year ended December 31, 2012 | - | - | - | - | - | - | (183,019 | ) | (183,019 | ) | |||||||||||||||
| Balance at December 31, 2012 | - | - | - | - | (456,118 | ) | (456,118 | ) | |||||||||||||||||
| Distributions | (31,500 | ) | (31,500 | ) | |||||||||||||||||||||
| Liability assumed by member of COHP, LLC | 575,973 | 575,973 | |||||||||||||||||||||||
| Issuance of conv Pref C shs & warrants to acquire COHP | |||||||||||||||||||||||||
| membership interests | 1,000 | 1 | 507,280 | 1,079,318 | 1,586,599 | ||||||||||||||||||||
| Conversion of Pref C shs to common stock to accomplish | |||||||||||||||||||||||||
| change in control | (1,000 | ) | (1 | ) | 53,965,942 | 53,966 | 53,965 | ||||||||||||||||||
| Recapitalization/Merger | 140,623 | 141 | 9,498,413 | 9,498 | (1,184,663 | ) | (894,679 | ) | (2,069,703 | ) | |||||||||||||||
| October 2013 common stock issued for services | - | - | 500,000 | 500 | 9,500 | - | 10,000 | ||||||||||||||||||
| October through December 2013, issuance of common | |||||||||||||||||||||||||
| stock to convertible noteholders | - | - | 81,768,325 | 81,768 | 95,845 | - | 177,613 | ||||||||||||||||||
| Net loss | - | - | - | - | - | - | (520,850 | ) | (520,850 | ) | |||||||||||||||
| Balance at December 31, 2013 | 140,623 | $ | 141 | 145,732,680 | $ | 145,733 | $ | 507,280 | $ | - | $ | (1,327,174 | ) | $ | (674,020 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
F-4
| GREENFIELD FARMS FOOD, INC. | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| Year ended | Year ended | |||||||
| December 31, | December 31, | |||||||
| 2013 | 2012 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss for the period | $ | (520,850 | ) | $ | (183,019 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | 18,093 | 17,725 | ||||||
| Amortization of deferred financing costs | 3,261 | - | ||||||
| Amortization of discount on debt | 29,314 | - | ||||||
| Change in Derivative Liability | (51,179 | ) | - | |||||
| Initial derivative liability expense | 193,079 | - | ||||||
| Loss on Conversion of Debt | 130,642 | - | ||||||
| Convertible note issued for services | 45,000 | - | ||||||
| Stock baesd compensation | 10,000 | - | ||||||
| Changes in Assets and Liabilities | ||||||||
| Decrease in prepaid expense | 1,163 | 158 | ||||||
| (Increase) in inventory | (14 | ) | (1,897 | ) | ||||
| (Increase) in credit card receivable | (2,527 | ) | (2,391 | ) | ||||
| Decease in security deposits | 2,200 | - | ||||||
| Increase in checks written in excess of cash balance | 13,555 | - | ||||||
| Increase in accounts payable | 14,761 | 392 | ||||||
| (Decrease) increase in accrued wages and payroll expenses | (1,953 | ) | 20,201 | |||||
| Increase in accrued interest | 1,008 | - | ||||||
| Increase in accrued interest – related parties | 630 | - | ||||||
| Increase in accrued interest – convertible notes payable | (3,728 | ) | - | |||||
| Net Cash used in Operating Activities | (117,545 | ) | (148,831 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | (22,986 | ) | - | |||||
| Payment of security deposit | (5,300 | ) | - | |||||
| Cash received in merger | 52 | - | ||||||
| Net Cash Provided by (Used in) Investing Activities | (28,234 | ) | - | |||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from notes payable - related parties, net | 173,882 | 164,172 | ||||||
| Payments on capital leases | (5,670 | ) | (7,439 | ) | ||||
| Payment of distributions to members | (31,500 | ) | (5,005 | ) | ||||
| Proceeds from convertible notes payable | 10,000 | - | ||||||
| Net Cash Provided by Financing Activities | 146,712 | 151,728 | ||||||
| Net Increase in Cash and Cash Equivalents | 933 | 2,897 | ||||||
| Cash and Cash Equivalents – Beginning | 4,089 | 1,192 | ||||||
| Cash at End of Period | $ | 5,022 | $ | 4,089 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | 337 | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Accrued interest | $ | (6,800 | ) | $ | - | |||
| Convertible notes | $ | (143,500 | ) | $ | - | |||
| Common stock issued for covertible notes and accrued interest | $ | 46,970 | $ | - | ||||
| Accounts payable cancelled in exchange for convertible note | $ | 9,300 | $ | - | ||||
| Convertible notes | $ | 18,000 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
F-5
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
NOTE 1 – NATURE OF BUSINESS
Greenfield Farms Food, Inc. (“GRAS” or the "Company") was incorporated under the laws of the State of Nevada on June 2, 2008. In October 2013, the Company entered into an Asset Purchase Agreement (the “Agreement”) with COHP, LLC (”COHP”) through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela’s Pizzeria (“Carmela’s”) through a newly formed wholly-owned subsidiary Carmela’s Pizzeria CO, Inc. Carmela's Pizzeria presently has four Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores.
The Carmela’s Pizzeria assets and liabilities were acquired in exchange for 1,000 shares of the Company’s Series C Convertible Preferred Stock (“Series C”) that converted on October 31, 2013 into 53,965,942 shares of the Company’s common stock upon the effective date of a 1 for 100 reverse split. In addition, COHP and its assigns received warrants to purchase a total of 53,965,942 shares of the Company’s common stock for a period of five years in the amounts and exercise prices as follows: 17,988,648 at $0.015; 17,988,647 at $0.02; and 17,988,647 at $0.025.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements for the year ending December 31, 2013 include the accounts of Carmela’s for the full year and the Company from October 1, 2013 through December 31, 2013. For the year ended December 31, 2012 the consolidated financial statements includes only Carmela’s. All of the intercompany accounts have been eliminated in consolidation. Certain reclassifications to amounts reported in the December 31, 2012 consolidated financial statements have been made to conform to the December 31, 2013 presentation. The balance sheet as of December 31, 2012 is derived from Carmela’s audited financial statements.
For SEC reporting purposes, Carmela’s is treated as the continuing reporting entity that acquired GRAS. The reports filed after the transaction have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company pursuant to FASB ASC 805-40-45-1.
COHP, LLC was formed on May 1, 2011, under the laws of the State of Ohio.
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.
F-6
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.
The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments.
The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.
Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).
Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.
The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The three hierarchy levels are defined as follows:
Level 1 – Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The Company has determined that its derivative liabilities comprised of convertible notes payable fall under Level 2.
Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap market.
F-7
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the three to five year estimated useful lives of the assets.
Revenue Recognition
The Company records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product/service is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products/services.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. As of December 31, 2013, the Company has not issued any stock-based payments to its employees.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of December 31, 2012 and 2013 there were warrants outstanding to purchase 53,965,942 shares of common stock.
F-8
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
Derivative financial instruments
The Company follows ASC 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity. The Company’s convertible debt has conversion provisions based on a discount of the market price of the Company’s common stock.
The Company had derivative liabilities resulting from the issuance of convertible debt, which were measured at fair value on a recurring basis using an option pricing model. Consequently, the Company has adjusted the fair value of the derivative liabilities at December 31, 2013 and recorded a loss related to the change in the value of the derivative liability of $25,166 in the statement of operations that were attributable to the change in unrealized gains or losses relating to the derivative liabilities still held at the reporting date for the year ended December 31, 2013.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $49,323 and $31,423 during the years ended December 31, 2013 and 2012, respectively.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current US GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. We do not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on our present or future consolidated financial statements.
NOTE 3 – INVENTORIES
Inventories consist of food and beverages, and are stated at the lower of cost, or market.
F-9
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and consisted of the following at December 31:
| 2013 | 2012 | |||||||
| Carmela’s Equipment | $ | 144,108 | $ | 120,179 | ||||
| GRAS Equipment | 4,282 | - | ||||||
| Less: Accumulated depreciation | (72,806) | (51,294) | ||||||
| Property and equipment, net | $ | 75,584 | $ | 68,885 | ||||
Depreciation expense was $18,093 and $17,725 for the periods ended December 31, 2013 and 2012.
NOTE 5 – NOTE PAYABLE
In October 2013, COHP assumed a promissory note issued by GRAS for $50,000 as part of the recapitalization. The note is secured by the Company’s common stock, bears 8% interest, and was due on January 26, 2012. The note is currently in default. Total interest expense was $1,000 for the year ended December 31, 2013.
NOTE 6 – NOTES PAYABLE – RELATED PARTIES
Entities controlled by the members have loaned monies to COHP for working capital purposes. The loans are non-interest bearing and have no specific terms of repayment. A related party loan from KB Air is secured by all the assets of the Company.
The activity for the years ended December 31, 2013 and 2012 is as follows:
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| Beginning balance | $ | 471,578 | $ | 307,406 | ||||
| Advances, net | 173,882 | 164,172 | ||||||
| Notes assumed in recapitalization | 31,200 | - | ||||||
| Assumed by member of COHP | (575,973 | ) | - | |||||
| $ | 100,687 | $ | 471,578 | |||||
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Effective with the Share Exchange at October 1, 2013, the outstanding convertible debt of GRAS was assumed by Carmela’s, the accounting acquirer, incorporating the following notes and transactions:
On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion. During the quarter ended December 31, 2013 Asher Enterprises issued notices of conversion to convert $20,600 on the June 2012 note for 39,603,024 shares at a price of $0.0005 per share. The remaining balance of the note at December 31, 2013 was $6,350. An $87,148 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
F-10
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
On August 12, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion.
On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $53,000 with an interest rate of 8% per annum due on October 30, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion.
On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $15,500 with an interest rate of 8% per annum due on November 15, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion.
On May 14, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on February 13, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion.
On June 24, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $7,500 with an interest rate of 8% per annum due on March 19, 2014. The note is convertible by the holder 180 days at 45% of the lowest trading price in the thirty trading days before the conversion.
On September 19, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on June 12, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. This note was not yet convertible as of December 31, 2013.
On August 21, 2012, the Company issued a convertible promissory note in the amount of $1,500. The note is unsecured, due on demand and bears interest at 8% per annum. The note is convertible into shares of common stock at the market price. During the nine month period ended September 30, 2013 an additional $20,900 was loaned and $5,664 was repaid on these notes. In addition, $4,000 of these notes were converted to 4,000 shares of our Series B preferred stock
As of October 1, 2013 there was a total of $12,736 due to an unaffiliated Trust in convertible notes payable that were convertible at market price of the Company’s common stock at the date of conversion. During the quarter ended December 31, 2013, the conversion terms were amended on these notes making them convertible at 45% of the lowest trading price in the thirty trading days before the conversion creating a derivative liability. During that same period, 6,604 in principal on these notes were converted to 13,340,909 shares of common stock at a price of $0.0005. The remaining balance of the note after the conversions was $6,133. A $14,013 decrease in the derivative liability on these notes was recorded for the converted shares.
At October 1, 2013, an $18,000 unsecured demand promissory note with an interest rate of 8% convertible to common stock at market was outstanding. In October 2013, the conversion terms of this note was changed making it convertible at 45% of the lowest trading price in the thirty trading days before the conversion, creating a derivative liability. The entire principal balance of this note was outstanding at December 31, 2013.
At October 1, 2013, the Company had an outstanding convertible promissory note to CareBourn Capital in the principal amount of $6,000 with an interest rate of 8% per annum due on December 19, 2013. The note is convertible by the holder at any time at 35% of the average of the three lowest trading prices in the ten trading days before the conversion. During the quarter ended December 31, 2013, CareBourn Capital converted $3,990 on this note for 7,976,868 shares at a price of $0.0005 per share. The remaining balance of the note after the conversions was $2,010. A $45,495 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.
F-11
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
At October 1, 2013, the Company had an outstanding a convertible promissory note to CareBourn Capital in the principal amount of $15,000 with an interest rate of 8% per annum due on November 3, 2013. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. During the quarter ended December 31, 2013, CareBourn Capital converted the $15,000 balance on this note along with $777 in accrued interest for 20,847,524 shares at a price of $0.0008 per share. A $16,500 decrease in the derivative liability on these notes was recorded upon the conversion of shares.
On October 1, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $9,300 with an interest rate of 8% per annum due on June 1, 2014 upon the conversion of $9,300 in accounts payable to Cresthill. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issuance date.
On October 29, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $25,000 with an interest rate of 8% per annum due on October 29, 2014 in payment of a $25,000 fee for work performed to complete the acquisition of the assets of Carmela’s Pizzeria. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issue date.
On November 10, 2013, the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $22,500 with an interest rate of 8% per annum due on August 27, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion.
On December 9, 2013, the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $5,000 with an interest rate of 8% per annum due on June 9, 2014. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion.
In December 2013, the Company issued two convertible promissory notes to Gulfstream 1998 Trust in the aggregate principal amount of $5,000 with an interest rate of 8% per annum due on demand. These notes are convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion.
Total interest expense on these notes was $5,316 for the year ended December 31, 2013.
A summary of debentures payable as of December 31, 2013 is as follows:
| Face Value | Balances 10/1/13 | Issuance of new convertible notes | Amortization of discount on convertible Notes | Debenture conversions three months ended 12/31/13 | Balances 12/31/13 | |||||||||||||||
| Assumed notes | $ | 239,687 | - | - | $ | (46,193 | ) | $ | 193,494 | |||||||||||
| 2013 Notes | - | 66,800 | - | - | 66,800 | |||||||||||||||
| Note discount | $ | (4,000 | ) | (80,737 | ) | $ | 29,314 | - | (55,423 | ) | ||||||||||
| Total | $ | 235,687 | $ | (13,937 | ) | $ | 29,314 | $ | (46,193 | ) | $ | 204,871 | ||||||||
F-12
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
NOTE 8 – DERIVATIVE LIABILITY
The Company has determined that the conversion features of certain of its convertible notes represent an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, they are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the notes. Such discount will be accreted from the commencing date of conversion period to the maturity date of the notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet.
The beneficial conversion feature included in notes resulted in initial debt discounts of $193,500 and an initial loss on the valuation of the derivative liabilities of $168,950 based on the initial fair value of the derivative liabilities of $362,450. The fair value of the embedded derivative liabilities were calculated at the conversion commencement dates utilizing the following assumptions:
| Note convertible date | 10/27/13 | 10/28/13 | 11/10/13 | 12/9/13 | 12/21/13 | 12/23/13 | 12/27/13 | |||||||||||||||||||||
| Note amount | $ | 12,737 | $ | 18,000 | $ | 32,500 | $ | 5,000 | $ | 7,500 | $ | 2,500 | $ | 2,500 | ||||||||||||||
| Stock price at convertible date | $ | .0005 | $ | .0045 | $ | .0023 | $ | .0006 | $ | .00045 | $ | .0005 | $ | .00048 | ||||||||||||||
| Expected life (years) | .5 | .44 | 0.23 | .5 | .24 | .75 | .75 | |||||||||||||||||||||
| Risk free interest rate | .10 | % | .10 | % | .08 | % | .10 | % | .07 | % | .10 | % | .10 | % | ||||||||||||||
| Volatility | 295.0 | % | 276.59 | % | 285.8 | % | 259.7 | % | 410.1 | % | 319.1 | % | 319.1 | % | ||||||||||||||
| Initial derivative value | $ | 27,027 | $ | 107,083 | $ | 50,016 | $ | 9,204 | $ | 50,040 | $ | 17,783 | $ | 12,663 | ||||||||||||||
At December 31, 2013, the following notes remained convertible and not fully converted or in default. All convertible notes in default were no longer valued for the derivative liability and a loss on the conversion of stock will be recorded at the time of any future conversion. The fair value of the embedded derivative liabilities on the remaining convertible notes was calculated at December 31, 2013 utilizing the following assumptions:
| Note convertible date | 10/27/13 | 10/28/13 | 11/10/13 | 12/9/13 | 12/21/13 | 12/23/13 | 12/27/13 | |||||||||||||||||||||
| Note amount | $ | 6,133 | $ | 18,000 | $ | 32,500 | $ | 5,000 | $ | 7,500 | $ | 2,500 | $ | 2,500 | ||||||||||||||
| Stock price at convertible date | $ | .00048 | $ | .0048 | $ | .0023 | $ | .00065 | $ | .00045 | $ | .00053 | $ | .00048 | ||||||||||||||
| Expected life (years) | .32 | .26 | 0.09 | .44 | .24 | .73 | .73 | |||||||||||||||||||||
| Risk free interest rate | .09 | % | .09 | % | .07 | % | .09 | % | .07 | % | .09 | % | .09 | % | ||||||||||||||
| Volatility | 351.6 | % | 397.8 | % | 463.4 | % | 329.7 | % | 426.8 | % | 361.6 | % | 361.6 | % | ||||||||||||||
| 12/31/13 derivative value | $ | 20,962 | $ | 61,473 | $ | 111,209 | $ | 12,416 | $ | 27,314 | $ | 8,438 | $ | 9,325 | ||||||||||||||
NOTE 9 – CAPITAL STOCK
Common Stock
The Company has authorized 950,000,000 common shares with a par value of $0.001 per share.
On October 31, 2013, the Company effected a 1 for 100 reverse split of its common stock whereby the 949,839,719 pre-split shares of common stock outstanding became 9,498,413 shares post-split. There was no change in authorized shares of the Company.
All share information presented in these financial statements and accompanying footnotes has been presented showing the historical changes in stockholders’ deficit of Carmela’s, the accounting acquirer in the Share Exchange, and including that of the Company with the Share Exchange as of October 31, 2013.
F-13
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
2013 Common Stock Issuances
In October 2013, we issued 53,965,942 shares of common stock to the members of COHP, LLC upon the conversion of 1,000 shares of our Series C preferred stock. These shares were valued at $1,079,319 or $0.02 per share, the market value of the shares on the date of issuance.
In October 2013, we issued 500,000 shares of common stock to a consultant for services valued at $10,000, or $0.02 per share, the market value of the shares on the date of issuance.
During the year ended December 31, 2013, the Company issued 81,768,325 shares of common stock upon conversion of $65,771 in convertible notes and interest payable representing a value of $0.0008 per share.
Preferred Stock
The Company has authorized 50,000,000 shares of preferred stock par value $0.001.
The Company authorized 100,000 Series A preferred shares and issued 96,623 Series A shares. The Series A shares have immediate voting rights equivalent to 7,000 shares of common stock for each Series A share and may be converted after a minimum one-year hold at the same rate. This gives effective control of the Company to the holders of the Series A preferred shares. The terms called for no conversion or Series A shares coming into the market from these sources until March 28, 2012 at the earliest. As of December 31, 2013 no conversion has taken place.
On July 15, 2013, the board of directors of the Company authorized the creation of the Series B Convertible Preferred Stock, which consists of up to 100,000 shares of preferred stock with par value of $0.001 per share and a stated value of $1.00 per share. A total of 44,000 shares of Series B Preferred Stock were issued on the conversion of debt payable by the Company, including $40,000 to the Company's then Chief Financial Officer, Henry Fong. The Series B Convertible Preferred is convertible to common stock at 100% of the stated value divided by 45% of the lowest trading price of the Company's common stock for the 90 trading days immediately preceding the Conversion Date. The Series B Preferred Stock has voting rights on an as if converted basis on the date of any vote to come before the Company's shareholders.
On October 24, 2013 the Company filed a Certificate of Designation for its Series C Convertible Preferred Stock which consisted of 1,000 authorized shares with a par value of $0.001 per share. The 1,000 shares were issued to the members of COHP, LLC in connection with the acquisition of the Carmela’s Pizzeria assets. The Series C shares were convertible, on a pro-rata basis, into that number of fully paid and non-assessable shares of Corporation’s common stock on terms that would equal 67% of the total issued and outstanding shares of the Corporation's common stock on a fully-diluted basis (the “Conversion Shares”) immediately upon approval by the Corporation’s stockholders and effectiveness of an increase in the number of authorized shares of Common Stock sufficient to issue the Conversion Shares, which occurred on October 31, 2013. Accordingly, the Series C preferred was converted into 53,965,942 shares of the Company’s common stock on October 31, 2013.
Warrants
In connection with the acquisition of the assets of Carmela’s Pizzeria, COHP, LLC and its assigns received warrants to purchase a total of 53,965,942 shares of the Company’s common stock for a period of five years in the amounts and exercise prices as follows: 17,988,648 at $0.015; 17,988,647 at $0.02; and 17,988,647 at $0.025. These warrants were valued utilizing the Black-Scholes pricing model for a total fair market value at issuance of $507,280.
F-14
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
A summary of the activity of the Company’s outstanding warrants at December 31, 2012 and December 31, 2013 is as follows:
| Warrants | Weighted-average exercise price | Weighted-average grant date fair value | ||||||||||
| Outstanding and exercisable at December 31, 2012 | - | $ | - | $ | - | |||||||
| Granted | 53,965,942 | 0.0183 | 0.0094 | |||||||||
| Expired/Cancelled | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Outstanding and exercisable at December 31, 2013 | 53,965,942 | $ | 0.0183 | $ | 0.0094 | |||||||
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31, 2013:
| Exercise price range | Number of options outstanding | Weighted-average exercise price | Weighted-average remaining life | ||||||||
| $ | 0.01 | 17,988,648 | 0.01 | 4.8 years | |||||||
| $ | 0.02 | 17,988,647 | 0.02 | 4.8 years | |||||||
| $ | 0.025 | 17,988,647 | 0.025 | 4.8 years | |||||||
| 53,964,942 | $ | 0.0183 | 4.8 years | ||||||||
NOTE 10 – COMMITMENTS
The Company leases its restaurant facilities under certain leases with varied expiration dates. Certain leases provide for the payment of taxes and operating costs, such as insurance and maintenance in addition to the base rental payments.
Aggregate minimum annual rental payments under the non-cancelable operating leases are as follows:
| Year ended December 31, 2014 | $ | 64,500 | ||
| 2015 | 61,500 | |||
| 2016 | 60,800 | |||
| 2017 | 35,250 | |||
| Total | $ | 222,050 |
Rent expense was $64,895 and $72,096 for the year ended December 31, 2013 and 2012.
F-15
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
NOTE 11 – RELATED PARTY TRANSACTIONS
As more fully disclosed in Note 5 – Notes Payable Related Parties, certain officers, directors and stockholders have loaned the Company funds from time-to-time. Information regarding these loans can be found in Note 6.
NOTE 12 – GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not yet realized significant revenues from operations, recognized a significant loss in 2013 and is in need of working capital in order to grow its operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans from directors and or private placements of common stock and by obtaining extended payment terms from certain vendors.
NOTE 13 – INCOME TAXES
As of December 31, 2013 and 2012 the Company had net operating loss carry-forwards of approximately $1,030,515 and $700,012, respectively, which will expire beginning in 2031. This represents the historical net operating loss carry-forwards of the Company for 2012; and the Company for the fiscal year ended December 31, 2013 along with and Carmela’s for the period from October 1, 2013 through December 31, 2013, as reverse merger accounting does not affect accounting issues related to taxation. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income. A reconciliation of the benefit for income taxes with amounts determined by applying the statutory federal income rate of (34%) to the loss before income taxes is as follows:
| 2013 | 2012 | |||||||
| Net Operating Loss | $ | (873,025) | $ | (535,290) | ||||
| Benefit for income taxes computed using the statutory rate of 34% | 296,828 | 182,000 | ||||||
| Permanent Differences | (184,457) | (66,139) | ||||||
| Change in valuation allowance | (112,371) | (115,861) | ||||||
| Provision for income taxes | $ | - | $ | - | ||||
Significant components of the Company's deferred tax liabilities and assets at December 31, 2013 and 2012 are as follows:
| 2013 | 2012 | |||||||
| Total deferred tax assets | $ | 350,375 | $ | 238,004 | ||||
| Valuation allowance | (350,375) | (238,004) | ||||||
| $ | - | $ | - | |||||
F-16
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
NOTE 14 – SUBSEQUENT EVENTS
During the quarter ended March 31, 2014, a total of 442,228,187 shares of common stock were issued upon the conversion of $183,994 in principal and interest due on certain of the Company’s convertible promissory notes. This represents an average conversion price of $0.0004 per share. In addition, the Company issued new convertible promissory notes totaling $122,600 in face value. These notes are convertible at 45%-50% of the market price of the Company’s common stock, bear interest at 8% per annum, and are due six to nine months from issuance.
In February of 2014 the Company closed its smaller concept location in Centerville, Ohio as its lease expired.
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those disclosed above.
F-17