The accompanying notes are an integral
part of these consolidated financial statements
The accompanying notes are an integral part
of these consolidated financial statements
The accompanying notes are an integral part
of these consolidated financial statements
The accompanying notes are an integral part
of these consolidated financial statements
Notes to Consolidated Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
The Company was incorporated on December 3,
2010 (Date of Inception) under the laws of the State of California, as Dolce Bevuto, LLC. On February 8, 2013, the Company was
domiciled from a California limited liability company to a Nevada corporation. As a result of conversion from a limited liability
company to a corporation, the financial statements of the Company have been prepared retroactively as if the Company was a corporation
as December 3, 2010.
On April 1, 2013, we acquired 100% of the issued
and outstanding common stock of Dolce Bevuto, Inc. Under the share exchange agreement, Noho, Inc. issued 12,713,763 shares of its
common stock to various individuals and entities in exchange for 100% of Dolce Bevuto, Inc. Additionally, under the share exchange
agreement, the former officers and directors of Noho, Inc. agreed to cancel 19,760,000 shares of common stock. For accounting
purposes, the acquisition of the Dolce Bevuto, Inc. by Noho, Inc. has been accounted for as a recapitalization, similar to a reverse
acquisition except no goodwill is recorded, whereby the private company, Dolce Bevuto, Inc., in substance acquired a non-operational
public company (Noho, Inc.) with nominal assets and liabilities for the purpose of becoming a public company. Accordingly,
Dolce Bevuto, Inc. is considered the acquirer for accounting purposes and thus, the historical financials are primarily that of
Dolce Bevuto, Inc. As a result of this transaction, Noho, Inc. changed its business direction and is now a beverage business. Dolce
Bevuto, Inc. was incorporated on December 3, 2010 (Date of Inception) and accordingly, the accompanying financial statements are
from the Date of Inception of Dolce Bevuto, Inc. through ending reporting periods reflected.
The financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States of America, and are expressed in
U.S. dollars. The Company’s fiscal year end is December 31.
Nature of operations
Currently, the Company is focused on the production
and sale of NOHO, a beverage for hangover defense. The Company purchases raw materials and outsources the manufacturing to a third
party.
Use of estimates
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those
estimates.
Fair value of financial instruments
Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of December 31, 2013 and December 31, 2012.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash, prepaid expenses, accounts payable, accrued expense, and notes payable. Fair values were assumed to approximate
carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values
or they are payable on demand.
Level 1:
The preferred inputs to valuation
efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting
entity must have access to that market. Information at this level is based on direct observations of transactions involving the
same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical
assets, actually trade in active markets.
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Fair value of financial instruments (continued)
Level 2: FASB acknowledged that active markets
for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable
information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three
situations.
Level 3: If inputs from levels 1 and 2 are
not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes
Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to
the extent that observable inputs are not available.” This category allows “for situations in which there is little,
if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that
“observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect
assumptions made by market participants.
As of December 31, 2013:
|
|
Fair Value Measurements
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
132,498
|
|
|
$
|
132,498
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit – related party
|
|
|
—
|
|
|
|
205,500
|
|
|
|
—
|
|
|
|
205,500
|
|
Notes payable
|
|
|
—
|
|
|
|
189,500
|
|
|
|
—
|
|
|
|
189,500
|
|
Convertible notes payable
|
|
|
—
|
|
|
|
254,268
|
|
|
|
—
|
|
|
|
254,268
|
|
Totals
|
|
|
—
|
|
|
|
649,268
|
|
|
|
132,498
|
|
|
|
781,766
|
|
As of December 31, 2012:
|
|
Fair Value Measurements
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
148,235
|
|
|
$
|
148,235
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit – related party
|
|
|
—
|
|
|
|
165,000
|
|
|
|
—
|
|
|
|
165,000
|
|
Convertible notes payable
|
|
|
—
|
|
|
|
218,750
|
|
|
|
—
|
|
|
|
218,750
|
|
Totals
|
|
|
—
|
|
|
|
383,750
|
|
|
|
148,235
|
|
|
|
531,985
|
|
Cash and cash equivalents
For the purpose of the statements of cash flows,
all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying
value of these investments approximates fair value. As of December 31, 2013 and 2012, there are no cash equivalents.
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Accounts receivable
The Company uses the allowance method to account
for uncollectible accounts receivable. The allowance for doubtful accounts represents the Company’s best estimate of the
amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based
on specific customer information, historical write-off experience and current industry and economic data. Account balances are
charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management believes
that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that
the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could
change. Accounts receivable are presented net of an allowance for doubtful accounts of $0 and $0 at December 31, 2013 and 2012,
respectively.
Inventory
Inventories are stated at the lower of cost
(first-in, first-out basis) or market (net realizable value).
Fixed assets
The Company records all property and equipment
at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred.
Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever
is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department.
Depreciation periods are as follows:
Computer equipment 3 years
Furniture and fixtures 7 years
Intangible assets
ASC 350 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with
the provisions of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and reviewed for impairment. As of December 31, 2013 and
2012, the Company recorded $0 and $0 of impairment of its intangible assets.
The Company's intangible assets consist of
the costs of filing and acquiring various patents and trademarks. The trademarks are recorded at cost. The Company determined that
the trademarks have an estimated useful life of approximately 11 years and will be reviewed annually for impairment. Amortization
will be recorded over the estimated useful life of the assets using the straight-line method for financial statement purposes.
The Company commenced amortization during March 2011.
Stock-based compensation
The Company records stock-based compensation
in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value
of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic
value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the
cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments
issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions
reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated
fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for
consideration other than employee services is determined on the earliest of a performance commitment or completion of performance
by the provider of goods or services as defined by FASB ASC 505-50.
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Revenue recognition
The Company recognizes revenues from sale of
products when the items have shipped and title has transferred to the purchaser.
As of December 31, 2013, the Company had deferred
revenue of $0. The Company received deposits of $75,000 during 2012 on orders for products and shipped the products out during
the year ended December 31, 2013 and the revenue was earned during the year ended December 31, 2013.
Advertising costs
Advertising costs are anticipated to be expensed
as incurred. Advertising costs included in general and administrative expenses totaled $60,998 and $98,354 for the years ended
December 31, 2013 and 2012, respectively.
Income taxes
The Company is treated as a partnership for
federal income tax purposes and does not incur income taxes for the period from inception (December 3, 2010) to February 8, 2013,
when the Company was domiciled from a California limited liability company to a Nevada corporation. During the period from inception
(December 3, 2010) to February 8, 2013, its earnings and losses are allocated to and reported on the individual returns of the
shareholder’s tax returns. Accordingly, no provision for income tax is included in the financial statements as of December
31, 2012. The Company has no income tax provision for the period from February 8, 2013 to December 31, 2013 due to recurring net
losses.
Loss per common share
Net loss per share is provided in accordance
with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of the statements of
operations. Basic EPS is computed by dividing reported losses by the weighted average shares outstanding. Loss per common
share has been computed using the weighted average number of common shares outstanding during the year.
Presentation
Certain previous period financial information
has been revised to conform with current period presentation.
Recent pronouncements
The Company has evaluated the recent accounting
pronouncements through April 2014 and believes that none of them will have a material effect 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 recoverability of assets and the
satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in
financing activities and developing its business plan and marketing. As a result, the Company incurred accumulated net losses from
inception through the period ended December 31, 2013 of $5,840,251.
The ability of the Company to continue as a
going concern is dependent upon its ability to raise additional capital from the sale of common stock or through debt financing
and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result
from this uncertainty.
NOTE 3 – RESTATEMENT
As discussed in the Company’s explanatory
note to this amended Form 10-K/A, the Company’s independent auditors were not provided with nor were certain obligations
disclosed in the previously issued financial statements. Additionally, the Company’s auditor received revised inventory confirmations,
materially misstating the financial statements of the Company. A detail of the adjustments is as follows:
Balance Sheet:
|
|
Original
|
|
Adjustments
|
|
Restated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
18,804
|
|
|
|
—
|
|
|
$
|
18,804
|
|
Accounts receivable
|
|
|
50,392
|
|
|
|
—
|
|
|
|
50,392
|
|
Prepaid expenses
|
|
|
116,406
|
|
|
|
(54,823
|
)
|
|
|
61,583
|
|
Inventory
|
|
|
73,479
|
|
|
|
46,724
|
|
|
|
120,203
|
|
Total current assets
|
|
|
259,081
|
|
|
|
|
|
|
|
250,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net of accumulated depreciation
|
|
|
9,389
|
|
|
|
3,383
|
|
|
|
12,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net of accumulated amortization
|
|
|
132,498
|
|
|
|
—
|
|
|
|
132,498
|
|
Total assets
|
|
$
|
400,968
|
|
|
|
|
|
|
$
|
396,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
305,296
|
|
|
|
(33,043
|
)
|
|
$
|
272,253
|
|
Accounts payable - related party
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Accrued compensation - related party
|
|
|
831,643
|
|
|
|
(28,407
|
)
|
|
|
803,236
|
|
Deferred revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Accrued interest
|
|
|
15,123
|
|
|
|
31,189
|
|
|
|
46,312
|
|
Accrued interest - related party
|
|
|
27,949
|
|
|
|
(17,935
|
)
|
|
|
10,014
|
|
Line of credit - related party
|
|
|
205,500
|
|
|
|
—
|
|
|
|
205,500
|
|
Notes payable
|
|
|
125,000
|
|
|
|
64,500
|
|
|
|
189,500
|
|
Convertible notes payable, net of discounts
|
|
|
311,625
|
|
|
|
(57,357
|
)
|
|
|
254,268
|
|
Total current liabilities
|
|
|
1,822,136
|
|
|
|
|
|
|
|
1,781,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
16,552
|
|
|
|
368
|
|
|
|
16,920
|
|
Subscription payable
|
|
|
731,135
|
|
|
|
731,135
|
|
|
|
—
|
|
Additional paid in capital
|
|
|
3,633,450
|
|
|
|
805,050
|
|
|
|
4,438,500
|
|
Accumulated (deficit)
|
|
|
(5,802,305
|
)
|
|
|
(37,946
|
)
|
|
|
(5,840,251
|
)
|
Total stockholders' (deficit)
|
|
|
(1,421,168
|
)
|
|
|
1,498,607
|
|
|
|
(1,384,831
|
)
|
Total liabilities and stockholders' (deficit)
|
|
$
|
400,968
|
|
|
|
|
|
|
$
|
396,252
|
|
Statement of Operations:
|
|
Original
|
|
Adjustments
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, net
|
|
$
|
545,874
|
|
|
|
189,687
|
|
|
$
|
735,561
|
|
Cost of goods sold
|
|
|
531,131
|
|
|
|
(165,304
|
)
|
|
|
365,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,743
|
|
|
|
|
|
|
|
369,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
|
—
|
|
|
|
573,263
|
|
|
|
573,263
|
|
Compensation expense
|
|
|
1,412,299
|
|
|
|
(392,344
|
)
|
|
|
1,019,955
|
|
General and administrative
|
|
|
1,161,631
|
|
|
|
(533,532
|
)
|
|
|
628,099
|
|
Professional fees
|
|
|
—
|
|
|
|
142,905
|
|
|
|
142,905
|
|
Promotional and marketing
|
|
|
—
|
|
|
|
101,939
|
|
|
|
101,939
|
|
Selling expense
|
|
|
—
|
|
|
|
388,993
|
|
|
|
388,993
|
|
Total operating expenses
|
|
|
2,573,930
|
|
|
|
|
|
|
|
2,855,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
—
|
|
|
|
(63,742
|
)
|
|
|
(63,742
|
)
|
Interest expense - related party
|
|
|
(189,538
|
)
|
|
|
44,354
|
|
|
|
(145,184
|
)
|
Loss on settlement of debt
|
|
|
—
|
|
|
|
(92,325
|
)
|
|
|
(92,325
|
)
|
Total other income (expense)
|
|
|
(189,538
|
)
|
|
|
|
|
|
|
(301,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,748,725
|
)
|
|
|
|
|
|
$
|
(2,786,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
$
|
(0.21
|
)
|
Weighted average number of shares outstanding -
|
|
|
15,321,834
|
|
|
|
|
|
|
|
13,183,149
|
|
basic and fully diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 4 – INVENTORY
Inventories consist of the following at December
31, 2013 and 2012:
|
|
2013
|
|
2012
|
Raw materials
|
|
$
|
43,851
|
|
|
$
|
84,193
|
|
Finished goods
|
|
|
51,792
|
|
|
|
74,418
|
|
Inventory held by third parties
|
|
|
24,560
|
|
|
|
—
|
|
Total
|
|
$
|
120,203
|
|
|
$
|
158,611
|
|
NOTE 5 – FIXED ASSETS
Fixed assets consisted of the following at
December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
Computer equipment
|
|
$
|
9,270
|
|
|
$
|
7,807
|
|
Furniture and fixtures
|
|
|
9,769
|
|
|
|
5,279
|
|
Fixed assets, total
|
|
|
19,039
|
|
|
|
13,086
|
|
Less: accumulated depreciation
|
|
|
(6,267
|
)
|
|
|
(2,617
|
)
|
Fixed assets, net
|
|
$
|
12,772
|
|
|
$
|
10,469
|
|
Depreciation expense for the years ended December
31, 2013 and 2012 was $3,650 and $1,768, respectively.
Repairs and maintenance expense for the years
ended December 31, 2013 and 2012 was $5,526 and $3,448, respectively.
NOTE 6 – ASSET PURCHASE AGREEMENT
In March 2011, the Company purchased assets
from Dajomi Brands, LLC. The assets acquired included vehicles, inventory and intangible assets.
Amortization
expense for the years ended December 31, 2013 and 2012 was $11,803 and $11,803, respectively.
NOTE 7 – LINE OF CREDIT – RELATED
PARTY
On November 15, 2011, the Company executed
a revolving credit line with a related party for up to $150,000. The related party was an entity that is owned and controlled by
an officer of the Company. On November 15, 2012, the lender agreed to increase the credit line up to $200,000, extend the maturity
date to March 31, 2013 and to decrease the interest rate from 30% to 15% per annum. On April 1, 2013, the lender agreed to a further
increase up to $300,000 and to extend the maturity date to December 31, 2013 which was subsequently extended to March 31, 2015.
As of December 31, 2013, the Company has drawn down a total of $459,000 and repaid $253,500 leaving a principal balance owed of
$205,500. As of December 31, 2013 and 2012, the Company recorded interest expense of $30,891 and $41,180, respectively.
NOTE 8 – CONVERTIBLE NOTES AND NOTES
PAYABLE
Notes payable consisted of the following as
of
|
|
December 31, 2013
|
|
December 31, 2012
|
Debenture to an entity, unsecured, 0% interest, default interest at 18%, matured December 2013
|
|
$
|
—
|
|
|
$
|
100,000
|
|
Debenture to an individual, unsecured, 12% interest, default interest at 24%, matured April 2013
|
|
|
125,000
|
|
|
|
125,000
|
|
Debenture to an individual, unsecured, 12% interest, default interest at 24% matured July 2013
|
|
|
75,000
|
|
|
|
—
|
|
Debenture to an individual, unsecured, 24% interest, default interest at 24% matured October 2013
|
|
|
110,000
|
|
|
|
—
|
|
Debenture to an individual, unsecured, 12% interest, default interest at 24% matured September 2013
|
|
|
100,000
|
|
|
|
—
|
|
Debenture to an individual, unsecured, 12% imputed interest, due on demand
|
|
|
4,500
|
|
|
|
—
|
|
Convertible debenture to an entity, unsecured, 12% imputed interest, convertible at $2 per share, maturing May 2014
|
|
|
17,500
|
|
|
|
|
|
Convertible debenture to an individual, unsecured, interest due in 5,000 shares of common stock fair valued at $14,000, matured October 2013
|
|
|
13,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Debt discount
|
|
|
(1,232
|
)
|
|
|
(6,250
|
)
|
|
|
|
|
|
|
|
|
|
Total notes payable, net of discount
|
|
$
|
443,768
|
|
|
$
|
218,750
|
|
NOTE 9 – STOCKHOLDERS’ (DEFICIT)
On December 31, 2012, the Company effectuated
a 15.2 to 1 forward split of the Company’s common stock issued and unissued common stock as of January 16, 2013, the record
date. The number of $0.001 par value authorized shares increased from 50,000,000 to 760,000,000 common shares.
2013 Issuances
The Company authorized the issuance of 259,500
shares of common stock to various individuals and entities for services received by the Company and recorded compensation expense
of $466,452 and prepaid consulting fees of $46,923 based on the market value of the common stock at each measurement date. As of
December 31, 2013, 80,000 of these shares were unissued.
On August 18, 2013, the Company issued 50,000
shares of its common stock pursuant to a notice of conversion, whereby a note holder elected to convert a total of $100,000 of
principal into shares of the Company’s common stock at a conversion rate of $2 per share. Additionally, during the year ended
December 31, 2013, the Company authorized the issuance of 15,000 shares of its common stock in connection with its financing activities
valued at $49,200.
Pursuant to various subscription agreements,
the Company authorized the issuance of 779,153 shares of its common stock in exchange for cash proceeds totaling $1,441,011 or
an average price per share of $1.85. As of the balance sheet date 260,000 of these shares were subsequently issued on January 7,
2014 and 26,667 were issued on January 19, 2014.
On April 5, 2013, the Company issued a total
of 3,101,666 shares of its common stock in accordance with the April 1, 2013 closing of its Share Exchange Agreement with Dolce
Bevuto, Inc. as discussed in Note 1.
2012 Issuances
On December 17, 2012, the Company issued 1,300,000
shares of its common stock pursuant to a notice of conversion, whereby a note holder elected to convert a total of $500,000 of
principal into shares of the Company’s common stock at a conversion rate of $0.385 per share. Additionally, the Company authorized
the issuance of 12,500 shares of its common stock in connection with a $125,000 debenture agreement valued at $6,250.
NOTE 10 – RELATED PARTY TRANSACTIONS
Employment agreement with John Grdina
On December 20, 2010, the Company executed
a five year employment agreement with the Company’s chief executive officer, which has been subsequently superseded effective
January 1, 2014. In accordance with the terms of the original agreement, the Company recorded a base salary as compensation expense
in the amount of $350,000 and $300,000, respectively for each of the years ended December 31, 2013 and 2012. Additionally, the
agreement provided for an annual fringe allowance of $25,800 per year. Further, the agreement provides a provision for interest
to be accrued at a rate of 1% per month on any unpaid compensation. During the years ended December 31, 2013 and 2012, accrued
compensation totaled $708,730 and $445,952, respectively and the Company had accrued interest payable related to the accrued compensation
of $104,361 and $44,968, respectively.
Consulting agreement with Sean Stephenson
On June 1, 2011, the Company executed a consulting
agreement with Sean Stephenson, Chief Operation Officer, and effective June 1, 2011 through December 31, 2015. The annual base
salary is $100,000 with a bonus program that is yet to be determined. Additionally, Mr. Stephenson received 3,214,366 shares of
common stock, valued at $32,144. In the event, the consulting agreement is terminated during the term of the agreement; Mr. Stephenson
will forfeit 50% of the shares and return them to the Company.
On January 1, 2012, the Company issued 5,911,634
shares of common stock as a bonus to Mr. Stephenson as part of his employment agreement. The fair value of the shares was $59,116.
Consulting agreement with Steve Staehr
On September 24, 2013, the Company executed
a three month consulting agreement for 30,000 shares of common stock with an estimated fair value based on the market price on
the date of grant was $67,500 and has been recorded as compensation expense. As of December 31, 2013, the shares are unissued.
On January 1, 2014, the parties agreed to a subsequent term of three months and an additional issuance of 30,000 shares of common
stock.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
On May 2, 2012, the Company executed a lease
agreement for a period of 39 months with a monthly base rent of $750 plus estimated common area maintenance and HVAC charges of
$1,230. The Company was required to pay a security deposit of $2,186.
The future minimum lease payments are as follows:
|
Years Ended December 31,
|
|
|
|
|
|
|
2012
|
|
|
$
|
15,840
|
|
|
2013
|
|
|
|
23,760
|
|
|
2014
|
|
|
|
23,760
|
|
|
2015
|
|
|
|
13,860
|
|
|
Total
|
|
|
$
|
77,220
|
|
On April 17, 2013, the United States District
Court for the Eastern District of North Carolina entered an Order Entering Default Judgment against Dolce Bevuto, LLC, a wholly
owned subsidiary of the Company (“DB”), in favor of The Pantry, Inc. (the “Plaintiff”) in the matter of
The Pantry, Inc. v. Dolce Bevuto, LLC
, Civil Action No, 5:12-CV-00764. Plaintiff alleged that DB owed Plaintiff a total
of $92,325 for accounts to be paid under a funding agreement entered into by and between DB and the Plaintiff. The Company intends
to pursue all available remedies, at law and in equity, to appropriately respond to the Court’s order.
NOTE 12 – SUBSEQUENT EVENTS
On January 1, 2014, the Company executed a
three month consulting agreement for 30,000 shares of common stock with an officer of the Company.
On January 1, 2014, the Company executed a
five year employment agreement with John Grdina, Chief Executive Officer, and effective January 1, 2014 through December 31, 2018.
The annual base salary is as follows:
Years Ended December 31,
|
|
Annual Base Salary
|
Annual Equity Compensation
|
|
2014
|
|
|
$
|
240,000
|
|
450,000 shares
|
|
2015
|
|
|
|
300,000
|
|
500,000 shares
|
|
2016
|
|
|
|
375,000
|
|
575,000 shares
|
|
2017
|
|
|
|
450,000
|
|
700,000 shares
|
|
2018
|
|
|
|
550,000
|
|
850,000 shares
|
|
2018 and thereafter
|
|
|
|
20% more than base salary in the prior year
|
|
1,200,000 shares
|
In addition, Mr. Grdina has an automobile allowance
of $18,000 per year, a fuel allowance of $3,600 per year and a health insurance allowance of $4,200 per year.
Mr. Grdina can elect to extend his employment
agreement for additional one year terms with an annual increase in base salary of 20% per year.
The employment agreement also has bonuses based
on performance of the Company and the amounts are as follows:
Gross Sales Per Year
|
|
Bonus Amount
|
$1.0M - $2.0M
|
|
$
|
50,000
|
|
$2.0M - $4.0M
|
|
|
200,000
|
|
$4.0M - $6.0M
|
|
|
250,000
|
|
$6.0M - $10.0M
|
|
|
500,000
|
|
More than $20.0M
|
|
|
5% of Gross Sales
|
|
On January 1, 2014, the Company executed a
five year employment agreement with Sean Stephenson, President, and effective January 1, 2014 through December 31, 2018. The annual
base salary is as follows:
Years Ended December 31,
|
|
Annual Base Salary
|
Annual Equity Compensation
|
2014
|
|
$ 135,000
|
250,000 shares
|
2015
|
|
150,000
|
275,000 shares
|
2016
|
|
185,000
|
325,000 shares
|
2017
|
|
225,000
|
450,000 shares
|
2018
|
|
270,000
|
550,000 shares
|
2018 and thereafter
|
|
10% more than base salary in the prior year
|
|
On January 13, 2014, the Company agreed to
issue 6,000 shares of common stock related to an independent contractor agreement.
On February 6, 2014, the Company settled accounts
payable of $7,500 in exchange for 2,500 shares of common stock and cash of $5,000.
On February 28, 2014, the Company executed
a one year consulting agreement for 25,000 shares of common stock.
On March 4, 2014, the Company executed an unsecured
promissory note for $150,000. The loan is due in May 2014 and bears interest at 8% per annum. Additionally, the Company granted
52,500 warrants with an exercise price of $1 which are exercisable for a period of 5 years.
END NOTES TO FINANCIALS