Baristas Coffee Company Inc.
The notes are an integral part of these consolidated financial statements.
Baristas Coffee Company Inc.
Notes to Interim Consolidated Financial Statements
September 30, 2015
(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Baristas Coffee Company, Inc. ("Baristas" "The Company") is a Nevada C Corporation that was originally formed as InfoSpi.com on October 18, 1996. On December 22, 2009, it acquired greater than a 60% interest in Pangea Networks, Inc. ("Pangea")/ DBA Baristas and Inc., and it acquired for cash, stock, and other consideration, numerous coffee stands in the greater Seattle area through the acquisition of Pangea; In May of 2010, the Company changed its name to Baristas Coffee Company, Inc. The Company’s fiscal year end is December 31.
Baristas operates specialty drive-through beverage retailers with attractive female theme-costumed models as servers. Baristas provides its customers the ability of drive up and order their choice of a custom-blended espresso drink, freshly brewed coffee, or other beverages. We generate revenue by offering our patrons the finest hot and cold beverages, specializing in specialty coffees, blended teas and other custom drinks. In addition, we offer smoothies, fresh-baked pastries and other confections.
Basis of Presentation
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2015 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the year ended December 31, 2014.
Principles of Consolidation
The consolidated financial statements reflect the financial position and operating results of Baristas and include our 51% investee, Barista Coffee Company of Florida, LLC, as of January 1, 2014. Intercompany transactions and balances have been eliminated.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation for comparative purposes.
Estimates and Assumptions
Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include, but are not limited to, estimates for asset and goodwill impairments, stock-based compensation forfeiture rates, future asset retirement obligations, and inventory reserves; assumptions underlying self-insurance reserves and income from unredeemed stored value cards; and the potential outcome of future tax consequences of events that have been recognized in the financial statements. Actual results and outcomes may differ from these estimates and assumptions.
Financial Instruments
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2015 and December 31, 2014, the Company had $12,577 and $21,471, respectively.
Accounts Receivables
The Company's accounts receivable consists of trade receivables from franchisee and other trade receivables.
Franchisee Receivable
Franchise fee revenue from an individual franchise sale is recognized, with an appropriate provision for estimated uncollectible amounts, when all material services or conditions relating to the sale have been substantially performed or satisfied by the Company. Continuing franchise fees are reported as revenue as the fees are earned and become receivable from the franchisee.
Allowance for Doubtful Accounts
The Company evaluates the collectability of its accounts receivables on an on-going basis and writes off the amount when it is considered to be uncollectible. At September 30, 2015 and December 31, 2014, the Company does not have an allowance for doubtful accounts.
Marketable Securities
The Company's marketable equity securities have been classified and accounted for as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date. The Company classifies its marketable equity securities as either short-term or long-term based on the nature of each security and its availability for use in current operations. The Company's marketable equity securities are carried at fair value, with the unrealized gains or losses reported as a component of shareholder's equity except impairment.
Adjustments resulting from the change in fair value, included in accumulated other comprehensive income in shareholder's equity, were an impairment loss of $1,620,230, an unrealized loss of $42,986 and a realized loss of $37,600 for the nine months ended September 30, 2015 and an unrealized gain of $58,371 for the nine months ended September 30, 2014, respectively.
Fair Value of Financial Instruments
The carrying amount of the Company's cash, accounts receivables, accounts payables and accrued liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments.
The Company has adopted a single definition of fair value, a framework for measuring fair value, and providing expanded disclosures concerning fair value whereby estimated fair value is the price to be paid for an asset or the amount to settle a liability in an orderly transaction between market participants at the measurement date. Accordingly, fair value is a market-based measurement and not an entity-specific measurement.
The Company utilizes the following hierarchy in fair value measurements:
Level 1 – Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 – Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.
|
As at September 30, 2015
Fair Value Measuring Using
|
|
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Investments in Marketable Securities, available-for-sale
|
|
$
|
34,433
|
|
|
$
|
34,433
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
34,433
|
|
Total
|
|
$
|
34,433
|
|
|
$
|
34,433
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
34,433
|
|
|
As at December 31, 2014
Fair Value Measuring Using
|
|
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Investments in Marketable Securities, available-for-sale
|
|
$
|
82,084
|
|
|
$
|
82,084
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
82,084
|
|
Total
|
|
$
|
82,084
|
|
|
$
|
82,084
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
82,084
|
|
Impairment
The Company assesses at the end of each reporting period whether there is objective evidence that financial assets are impaired. A financial asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset that has a negative impact on the estimated future cash flows of the financial asset that can be reliably estimated. The Company recognized $1,620,230 and $0 impairment loss on marketable securities during the periods ended September 30, 2015 and 2014, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed using weighted average cost, which approximates actual cost, on a first-in, first-out basis. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete or in excess of future needs. Items determined to be obsolete are reserved for. The Company provides for the possible inability to sell its inventories by providing an excess inventory reserve. As at September 30, 2015 and December 31, 2014 the Company determined that no reserve was required.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Cost includes all direct costs necessary to acquire and prepare assets for use, including internal labor and overhead in some cases. Depreciation of property, plant and equipment, which includes assets under capital leases, is provided on the straight-line method over estimated useful lives, generally ranging from 3 to 5 years for equipment and 5 years for buildings. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease life, generally 5 years. For leases with renewal periods at our option, we generally use the original lease term, excluding renewal option periods, to determine estimated useful lives. If failure to exercise a renewal option imposes an economic penalty to us, we may determine at the inception of the lease that renewal is reasonably assured and include the renewal option period in the determination of the appropriate estimated useful lives. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset cost and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.
Goodwill
We test goodwill for impairment on an annual basis, or more frequently if circumstances, such as material deterioration in performance or a significant number of store closures, indicate reporting unit carrying values may exceed their fair values. When evaluating goodwill for impairment, we may first perform a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than its carrying amount. If we do not perform a qualitative assessment or if the fair value of the reporting unit is not more likely than not greater than its carrying amount, we calculate the implied estimated fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value. There were no goodwill impairment charges recorded during the periods ended September 30, 2015 and 2014.
Other Intangible Assets
Definite-lived intangible assets, which mainly consist of acquired rights, trade secrets, trademarks and copyrights, are amortized over their estimated useful lives, and are tested for impairment when facts and circumstances indicate that the carrying values may not be recoverable. There were no other intangible asset impairment charges recorded during the periods ended September 30, 2015 and 2014.
Long-lived Assets
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
Revenue Recognition
The Company’s revenues consist of sales by Company-operated coffee stores and fees from franchised coffee stores operated by conventional franchisees.
Consolidated revenues are presented net of intercompany eliminations for investees controlled by us. Additionally, consolidated revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and rebates. Company-operated stores revenues are recognized when payment is tendered at the point of sale. Company-operated store revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities. All revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the service or sale is completed; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured.
Revenues from conventional franchised restaurants include initial fees and royalties based on a percent of sales. Initial fees are recognized upon opening of a restaurant or granting of a new franchise term, which is when the Company has performed substantially all initial services required by the franchise arrangement. Royalties are recognized in the period earned.
The Company recognized $0 initial franchise fees, during the period ended September 30, 2015 and 2014. The Company recognized $1,547 and $0 franchise royalties, during the period ended September 30, 2015 and 2014, respectively.
Marketing & Advertising
Advertising costs are expensed as incurred. Advertising costs totaled $31,069 and $15,156 for the period ended September 30, 2015 and 2014, respectively.
Stock-based Compensation
The Company accounts for employee stock-based compensation to employees, including grants of employee stock options, based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
Stock options and warrants issued to consultants and other non-employees are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.
Stock-based expenses to employees and consultants for general and administration services totaled $226,350 and $35,000, for period ended September 30, 2015 and 2014, respectively.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets, liabilities, the carry forward of operating losses and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Earnings per Share
Basic earnings per common share equal net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. The Company incurred a net loss for periods ended September 30, 2015 and 2014, respectively and therefore, basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be anti-dilutive.
As at September 30, 2015, convertible shareholder loans of $563,431, convertible notes payable of $240,350 and 27,328,358 shares of preferred stock were considered to be anti-dilutive.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued guidance codified in Accounting Standards Codification ("ASC") 606, "Revenue Recognition - Revenue from Contracts with Customers," which amends the guidance in ASC 605, "Revenue Recognition," and becomes effective beginning January 1, 2017. The Company is currently evaluating the impact of the provisions of ASC 606.
Accounting standards that have been issued by the FASB or other standards setting bodies that do not require adoption until a future date are being evaluated by the Company to determine whether adoption will have a material impact on the Company's financial statements.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As at September 30, 2015, the Company has a loss from operations of $2,707,974 and an accumulated deficit of $10,657,416. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2015.
The ability of the Company to fully commence its operations is dependent upon, among other things, obtaining additional financing to continue operations, and execution of its business plan. In response to these concerns, management intends to raise additional funds through public or private placement offerings and through loans from officers and directors.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management's plan will be successful.
NOTE 3 – INVENTORY
Inventories were comprised of:
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
Coffee and merchandise held for sale
|
|
$
|
29,153
|
|
|
$
|
29,281
|
|
NOTE 4 – MARKETABLE SECURITIES
The following tables show the Company's marketable security as of September 30, 2015 and December 31, 2014. The fair value for Reeltime Rentals, Inc ("RLTR") is based on closing market price, less a marketability discount of 0% and 15% as at September 30, 2015 and December 31, 2014, respectively. The fair value of Business Continuity Systems, Inc. (BUCS) is based on a 100% valuation allowance to the market price due to limited information and activity.
During the six months ended June 30, 2015, the Company recognized an impairment loss of $1,620,230 on RLTR shares based on the highest price of $0.018 per share, during April 1, 2013 to March 31, 2015.
During the nine months ended September 30, 2015, the Company sold 2,350,000 RLTR shares for $3,459 and realized a loss of $38,841. Accordingly, $37,600 previous unrealized loss was recognized. During the nine months ended September 30, 2015 and 2014, the Company recognized an unrealized loss of $42,986 and $58,371 unrealized gain, respectively.
September 30, 2015
|
|
|
|
Other than Temporary
|
|
|
|
|
|
|
|
|
|
|
Impairment and
|
|
|
|
|
|
|
Cost
|
|
Realized Losses
|
|
Unrealized Losses
|
|
Fair Value
|
|
RLTR - 19,110,000 common shares
|
|
$
|
2,001,810
|
|
|
$
|
1,657,830
|
|
|
$
|
309,582
|
|
|
$
|
34,398
|
|
BUCS - 2,576,389 common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dreyfus
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35
|
|
Total
|
|
$
|
2,001,845
|
|
|
$
|
1,657,830
|
|
|
$
|
309,582
|
|
|
$
|
34,433
|
|
December 31, 2014
|
|
Cost
|
|
|
Realized Losses
|
|
|
Unrealized Losses
|
|
|
Fair Value
|
|
RLTR – 21,460,000 common shares
|
|
$
|
2,006,510
|
|
|
$
|
-
|
|
|
$
|
1,924,426
|
|
|
$
|
82,084
|
|
BUCS – 2,576,389 common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
2,006,510
|
|
|
$
|
-
|
|
|
$
|
1,924,426
|
|
|
$
|
82,084
|
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
Buildings and leaseholds
|
|
$
|
402,963
|
|
|
$
|
402,963
|
|
Machinery and equipment
|
|
|
219,353
|
|
|
|
215,000
|
|
Computer equipment
|
|
|
17,382
|
|
|
|
17,382
|
|
Furniture and fixtures
|
|
|
19,065
|
|
|
|
19,065
|
|
Property, plant and equipment, gross
|
|
|
658,763
|
|
|
|
654,410
|
|
Less accumulated depreciation
|
|
|
(469,351
|
)
|
|
|
(387,342
|
)
|
Property, plant and equipment, net
|
|
$
|
189,412
|
|
|
$
|
267,068
|
|
The Company recorded $82,009 and $82,601 depreciation for the periods ended September 30, 2015 and 2014, respectively.
NOTE 6 – INTANGIBLE ASSETS
Indefinite-Lived Intangible Assets
The following table summarizes information related to indefinite-lived intangible assets:
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
Goodwill
|
|
$
|
2,770,651
|
|
|
$
|
2,770,651
|
|
Goodwill
The intangible assets were purchased along with the hard assets, in December 2009, for $3.5 million in our common stock. After the assets and intangible assets were identified, the remaining $2,770,651 was recorded as goodwill. The Company does not amortize goodwill. Instead, the Company evaluates goodwill annually in the fourth quarter and whenever events or changes in circumstances indicate that it is more likely than not that an impairment loss has been incurred.
As at September 30, 2015 and December 31, 2014, the Company determined that no such impairment existed based on the following financial and non-financial considerations:
·
|
As at December 31, 2014 the company's market capitalization was approximately $11,000,000 and has historically exceeded goodwill.
|
·
|
Management has been actively building brand awareness through obtaining a brand patent, establishing multiple locations, periphery product branding, and development of a pilot TV episode.
|
·
|
The Company has signed a franchising agreement that is currently adding additional locations.
|
·
|
The Company is expanding into additional product lines and actively developing additional sources of revenues.
|
Definite-Lived Intangible Assets
The following table summarizes information related to definite-lived intangible assets:
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
Trademarks
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
Logo
|
|
|
80,000
|
|
|
|
80,000
|
|
Website
|
|
|
27,500
|
|
|
|
27,500
|
|
Policies and procedures
|
|
|
10,000
|
|
|
|
10,000
|
|
Ice cream intangibles
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
|
342,500
|
|
|
|
342,500
|
|
Accumulated amortization
|
|
|
(184,833
|
)
|
|
|
(153,958
|
)
|
Definite-lived intangibles, net
|
|
$
|
157,667
|
|
|
$
|
188,542
|
|
Total amortization expense for intangible assets subject to amortization was $30,875 and $33,375 for the periods ended September 30, 2015 and 2014, respectively.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The Company’s accounts payable and accrued liabilities consist of the followings:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Accounts payable
|
|
$
|
125,912
|
|
|
$
|
73,456
|
|
Accrued liabilities
|
|
|
919,360
|
|
|
|
2,453,646
|
|
Prepaid gift card
|
|
|
21,961
|
|
|
|
20,324
|
|
Taxes payable
|
|
|
314,040
|
|
|
|
347,657
|
|
|
|
$
|
1,381,273
|
|
|
$
|
2,895,083
|
|
NOTE 8 – RELATED PARTY TRANSACTIONS
Accounts Payable
During the three months ended September 30, 2015, these 60,000,000 shares were issued to these two officers for acrued liabilities. During the nine months ended September 30, 2015, the Company granted 7,500,000 shares to two officers of the Company (3,750,000 shares each) for their services with a value of $190,000. These shares were not yet issued as at September 30, 2015 and the amounts due to these officers were recorded as accrued liabilities.
On April 28, 2015, the Company repurchased 4,000,000 common shares from two officers of the Company (2,000,000 common shares each officer) and returned those shares to treasury. The Company promised to issue 8,000,000 common shares back these two officers (4,000,000 common shares each officer) once the increase in authorized shares is approved. The value of the 4,000,000 common shares repurchased from the officers was $162,000 and recorded as accrued liabilities. The value of the additional 4,000,000 common shares which will be issued to the officers was $162,000 and recorded as interest expenses.
On June 15, 2015, the Company repurchased 10,000,000 common shares from one of our officers. The Company promised to reissue 10,000,000 common shares to the officer once the increase in authorized shares is approved. The value of the 10,000,000 common shares repurchased from the officer was $284,000 and recorded as accrued liabilities.
Loan Receivable
The Company has a receivable from a related party for services in prior years. Balance of this loan receivable was $300,000 as at September 30, 2015 and December 31, 2014. The Company will evaluate the collectability of the loan quarterly.
Shareholder loans
The Company has issued a number of notes with various maturities dates to related parties for advances. These notes are convertible either at a fixed dollar amount or 50% of market price and accrue interest at an average rate of 8% per annum. Due to the short-term nature of these loans they are recorded as current liabilities. The outstanding balances at September 30, 2015 and December 31, 2014 were $563,431 and $564,115, respectively. The Company plans to pay the loans back as cash flows become available.
During the periods ended September 30, 2015, and 2014, the Company recognized $105,316 and $0 beneficial conversion fee on convertible shareholder loans respectively.
NOTE 9 – NOTE PAYABLE
The Company has issued a number of notes with various maturities dates to unrelated parties. These notes are convertible at a fixed dollar amount and accrue interest at 8% per annum. Due to the short-term nature of these loans they are recorded as current liabilities. The outstanding balances at September 30, 2015 and December 31, 2014 and were $240,350 and $286,432, respectively. During the periods ended September 30, 2015 and 2014, the Company recognized a $164,453 and $0 beneficial conversion fee on convertible loans from un-related parties respectively.
NOTE 10 – STOCKHOLDER’S EQUITY
Preferred Stock
The Company has authorized 30,000,000 preferred shares with a par value of $0.001 per share. Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. The entire 30,000,000 shares of preferred stock were designated to be Series A Convertible Preferred Stock in 2014.
During the year ended December 31, 2014, the Company issued the following shares of Series A Convertible Preferred Stock:
·
|
300,000 shares to a non-affiliated investor for cash of $15,000.
|
·
|
7,965,000 shares to officers and directors for cash of $186,800.
|
·
|
11,750,000 shares to officers and director to replace 11,750,000 shares of common stock, which were cancelled.
|
No preferred shares were issued during the nine months ended September 30, 2015.
As at September 30, 2015 and December 31, 2014, there were 27,328,358 shares of Series A Convertible Preferred Stock issued and outstanding.
Common Stock
The Company has authorized 600,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought. Holders have equal ratable rights to dividends from funds legally available and are entitled to share in assets available for distribution upon liquidation. Holders do not have preemptive, subscriptive, conversion or cumulative voting rights, and there are no redemption or sinking find provisions or rights. Holders of common stock have the right to approve any amendment of the Articles of Incorporation, elect directors, approve any plan of merger and approve a plan for the sale, lease or exchange of all of the Company's assets as proposed by the Board of Directors. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
During the year ended December 31, 2014, the Company issued the following shares of common stock:
|
· |
2,650,000 shares in exchange for services and prepaid valued at $147,000. |
|
· |
1,650,000 shares in exchange for advertising and promotion valued at $135,975. |
|
· |
9,307,953 shares in exchange for debt and accrued interest valued at $200,856. |
|
· |
11,750,000 shares of common stock were retired and replaced by 11,750,000 shares of Series A convertible preferred stock. |
During the nine months ended September 30, 2015, the Company issued the following shares of common stock:
|
· |
10,797,781 shares in exchange for debt of $137,095 and accrued interest of $9,934. |
|
· |
61,000,000 shares in exchange for accrued liabilities to related parties valued at $2,342,400. |
|
· |
14,000,000 shares were returned to treasury and 14,000,000 shares were re-issued from treasury. |
There were 368,889,039 and 297,091,258 common shares issued and outstanding as at September 30, 2015 and December 31, 2014, respectively.
Treasury Stock
Following our Board of Directors authorization, on April 28, 2015, the Company repurchased 4,000,000 common shares from two officers of the Company for an aggregate purchase price of $162,000 and on June 15, 2015, the Company repurchased 10,000,000 common shares from one of our officers for an aggregate purchase price of $284,000. Repurchased shares become a part of treasury stock.
During the nine months ended September 30, 2015, the Company reissued the following common shares from treasury:
|
· |
13,500,000 shares in exchange for debt of $171,405 and accrued interest of $12,420. |
|
· |
500,000 shares in exchange for services valued at $19,200. |
At September 30, 2015 and 2014, treasury stock balance was zero.
Minority Interest
Certain unrelated third parties hold 49% of Baristas Coffee Company of Florida, LLC, a consolidated subsidiary. During the period ended September 30, 2015, the minority interest recognized $42,189 in losses from the operations. During the period ended September 30, 2014, the minority interest contributed $115,000 in equipment and expenses and recognized $65,768 in losses from the operations.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net earnings and other comprehensive income (loss). Accumulated other comprehensive loss reported on our balance sheets consists of unrealized losses on available-for-sale securities.
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
Accumulated other comprehensive loss – opening balance
|
|
$
|
(1,924,426
|
)
|
|
$
|
(1,964,556
|
)
|
Impairment loss on marketable securities
|
|
|
1,620,230
|
|
|
|
-
|
|
Net unrealized loss on available-for-sale securities
|
|
|
(42,986
|
)
|
|
|
40,130
|
|
Realized loss on sales of available-for-sale securities
|
|
|
37,600
|
|
|
|
-
|
|
Accumulated other comprehensive loss – ending balance
|
|
$
|
(309,582
|
)
|
|
$
|
(1,924,426
|
)
|
NOTE 11 – NET INCOME (LOSS) PER SHARE OF COMMON STOCK
The Company follows ASC 260, "Earnings per Share," ("EPS") which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented. As at September 30, 2015, the Company had $563,431 and $564,115 in convertible shareholder loans, respectively, $240,350 and $286,432 convertible notes payable respectively, 27,328,358 and 27,328,358 convertible preferred stock issued and outstanding, respectively, which have been omitted from diluted EPS.
The following table sets forth the computation of basic and diluted earnings per share, for the periods ended September 30, 2015 and 2014.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net loss
|
|
$
|
(227,191
|
)
|
|
$
|
(139,999
|
)
|
|
$
|
(2,707,974
|
)
|
|
$
|
(390,768
|
)
|
Weighted average common shares outstanding, basic and diluted
|
|
|
311,696,942
|
|
|
|
295,258,068
|
|
|
|
303,270,389
|
|
|
|
296,955,907
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Leases
Rental expense under operating lease agreements:
|
|
September 30,
2015
|
|
|
September 30,
2014
|
|
Total rentals
|
|
$
|
149,540
|
|
|
$
|
116,711
|
|
Minimum future rental payments under non-cancelable operating leases as of September 30, 2015:
Fiscal Year Ending
2015
|
|
$
|
32,395
|
|
2016
|
|
|
120,341
|
|
2017
|
|
|
93,131
|
|
2018
|
|
|
31,284
|
|
Thereafter
|
|
|
-
|
|
Total minimum lease payments
|
|
$
|
277,151
|
|
From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.
NOTE 13 – SUBSEQUENT EVENTS
Subsequent to September 30, 2015, the Company issued 2,111,506 shares of common stock in exchange for services valued at $10,000 and accrued interest of $558.
Management has evaluated subsequent events through the date the financial statements were issued and determined there are no additional items to disclose.
The Company has issued a number of notes with various maturity dates to unrelated parties. These notes are convertible at a fixed dollar amount and accrue interest at 8% per annum. During the periods ended September 30, 2015 and 2014, the Company recognized $52,353 and $0 beneficial conversion fee on convertible loans from un-related parties respectively.
During the three months ended September 30, 2015, 8,915,935 shares were issued, in exchange for debt of $116,603 and accrued interest of $8,710, result a $19,799 gain on settlement. During the period ended September 30, 2014, 7,231,992 shares were issued, in exchange for debt valued at $162,160, resulting in a $137,500 gain on settlement.
During the three months ended September 30, 2015, 2,373,730 shares were re-issued from treasury in exchange for debt of $21,251 and accrued interest of $2,486, resulting in a $10,444 loss on settlement that was reflected in additional paid in capital and retained earnings. During the three months ended September 30, 2014, no loans were settled by treasury stocks.
During the three months ended September 30, 2015, the Company sold 2,350,000 of Reeltime Rentals, Inc ("RLTR") shares for $3,459 and realized a loss of $38,841.
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
Revenue was $936,752 for the nine months ended September 30, 2015 compared to $912,095 for the nine months ended September 30, 2014, an increase of $24,657 or 2.7%. The increase was primarily due to increase advertising and promotion done by the Company.
The changes in our operating expenses are as follows:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
Direct costs
|
|
$
|
327,627
|
|
|
$
|
326,841
|
|
|
$
|
786
|
|
|
|
0.24
|
|
Compensation
|
|
|
435,280
|
|
|
|
465,055
|
|
|
|
(29,775
|
)
|
|
|
(6.40
|
)
|
Depreciation and amortization
|
|
|
112,884
|
|
|
|
115,976
|
|
|
|
(3,092
|
)
|
|
|
(2.67
|
)
|
General and administrative
|
|
|
328,020
|
|
|
|
255,286
|
|
|
|
72,734
|
|
|
|
28.49
|
|
Professional expenses
|
|
|
105,300
|
|
|
|
74,782
|
|
|
|
30,518
|
|
|
|
40.81
|
|
Stock-based compensation
|
|
|
226,350
|
|
|
|
35,000
|
|
|
|
191,350
|
|
|
|
546.71
|
|
Total Operating Expenses
|
|
$
|
1,535,461
|
|
|
$
|
1,272,940
|
|
|
$
|
262,521
|
|
|
|
20.62
|
|
Direct costs for generating sales was $327,627 for the nine months ended September 30, 2015 compared to $326,841in the nine months ended September 30, 2014, an increase of 786 or 0.24%. The increase in direct costs for the nine months ended September 30, 2015 was primarily the result of increases in purchases related to increased sales.
Compensation was $435,280 for the nine months ended September 30, 2015 compared to $465,055 for the nine months ended September 30, 2014, a decrease of 29,775 or 6.40%. The decrease in compensation for the nine months ended September 30, 2015 was primarily due to fewer staff compared to the nine months ended September 30, 2014.
Depreciation and amortization expenses for the nine months ended September 30, 2015 was $112,884, a decrease of $3,092 or 2.67%, compared to $115,976 in the nine months ended September 30, 2014.
General and administrative expenses consisted of expenses covering office, supplies, shipping, telephone, internet insurance, and other general operating costs related to our business. General and administrative expenses were $328,020 for the nine months ended September 30, 2015 compared to $255,286 for the nine months ended September 30, 2014, an increase of $72,734 or 28.49%. The increase was the result of increased business activity during the nine months ended September 30, 2015.
Professional expenses were $105,300 for the nine months ended September 30, 2015 compared to $74,782 for the nine months ended September 30, 2014, an increase of $30,518 or 40.81%. The Company’s professional expenses were primarily used to meet regulatory filing requirements.
Stock-based compensation consisted of $226,350 in stock issued / granted for compensation in the nine months ended September 30, 2015, compared to $35,000 in the three months ended September 30, 2014, an increase of $191,350 or 546.71%. The increase in stock-based compensation was primarily due to 7,500,000 shares granted to two officers of the Company (3,750,000 shares each) for their services with a value of $190,000.
The changes in our other (incomes) expenses are as follows:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
Beneficial conversion fee
|
|
$
|
269,769
|
|
|
$
|
-
|
|
|
$
|
269,769
|
|
|
|
100.00
|
|
Realized loss on impairment of marketable securities
|
|
|
1,620,230
|
|
|
|
-
|
|
|
|
1,620,230
|
|
|
|
100.00
|
|
Interest expense
|
|
|
214,907
|
|
|
|
167,423
|
|
|
|
47,484
|
|
|
|
28.36
|
|
Gain on loan settlement
|
|
|
(34,482
|
)
|
|
|
(137,500
|
)
|
|
|
103,018
|
|
|
|
(74.92
|
)
|
Realized loss on sales of marketable securities
|
|
|
38,841
|
|
|
|
-
|
|
|
|
38,841
|
|
|
|
100.00
|
|
Total Other Expenses
|
|
$
|
2,109,265
|
|
|
$
|
29,923
|
|
|
$
|
2,079,342
|
|
|
|
6,948.98
|
|
The Company has issued a number of notes with various maturity dates to related parties for advances. These notes are convertible either at a fixed dollar amount or 50% of market price and accrue interest at an average rate of 8% per annum. During the nine months ended September 30, 2015, and 2014, the Company recognized $105,316 and $0 beneficial conversion fee on convertible shareholder loans respectively.
The Company has issued a number of notes with various maturity dates to unrelated parties. These notes are convertible at a fixed dollar amount and accrue interest at 8% per annum. During the nine months ended September 30, 2015 and 2014, the Company recognized $164,453 and $0 beneficial conversion fee on convertible loans from un-related parties respectively.
During the nine months ended September 30, 2015, the Company recognized an impairment loss of $1,620,230 on marketable securities based on the highest price of $0.018 per share during April 1, 2013 to March 31, 2015.
During the nine months ended September 30, 2015, 10,797,781 shares were issued, in exchange for debt of $137,095 and accrued interest of $9,934, resulting in a $34,482 gain on settlement. During the nine months ended September 30, 2014, 7,231,992 shares were issued, in exchange for debt valued at $162,160, resulting in a $137,500 gain on settlement.
During the three months ended September 30, 2015, 13,500,000 shares were re-issued from treasury, in exchange for debt of $171,405 and accrued interest of $12,420, resulting in a $34,125 loss on settlement that was reflected in retained earnings. During the three months ended September 30, 2014, no loans were settled by treasury shares.