Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark whether the registrant
has (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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. Yes
x
No
¨
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, 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.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x
The aggregate market value of the voting and
non-voting common equity held by non-affiliates as of May 18, 2016 was $1,092,719 (computed by reference to the price at which
the common equity was last sold ($0.0175), or the average bid and asked price of such common equity as of the last business day
of the registrant's most recently completed second fiscal quarter). For purposes of the foregoing calculation only, directors,
executive officers, and holders of 10% or more of the issuer’s common capital stock have been deemed affiliates.
The number of shares outstanding of the registrant’s
common stock as of May 18, 2016 was 167,847,598.
Throughout this Annual
Report on Form 10-K (the "Report”), the terms “we,” “us,” “our,” “FBEC,”
or the “Company” refers to FBEC Worldwide, Inc f/k/a Frontier Beverage Company, Inc., a Wyoming corporation.
When used in this Report,
the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,”
“intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect the Company’s
future plans of operations, business strategy, operating results and financial position. Such statements are not guarantees of
future performance and are subject to risks and uncertainties and actual results may differ materially from those included within
the forward-looking statements. Additional factors are described in the Company’s other public reports and filings with the
Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. The Company undertakes no obligation to publicly release the result of any revision
of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence
of unanticipated events.
This Report contains certain
estimates and plans related to us and the industry in which we operate, which assume certain events, trends and activities will
occur and the projected information based on those assumptions. We do not know that all of our assumptions are accurate. If our
assumptions are wrong about any events, trends and activities, then our estimates for future growth for our business may also be
wrong. There can be no assurance that any of our estimates as to our business growth will be achieved.
The following discussion
and analysis should be read in conjunction with our financial statements and the notes associated with them contained elsewhere
in this Report. This discussion should not be construed to imply that the results discussed in this Report will necessarily continue
into the future or that any conclusion reached in this Report will necessarily be indicative of actual operating results in the
future. The discussion represents only the best assessment of management.
PART I
ITEM 1. BUSINESS
Development of the Company
The Company was incorporated
under the laws of Nevada on November 18, 2002 under the name Assure Data, Inc. after which it commenced operations as a comprehensive
automated data backup and retrieval company for small and medium-sized businesses. Currently, the Company is engaged in the sale
of hemp based energy products.
On March 1, 2010, the Company
entered into a purchase agreement with Innovative Beverage Group Holdings, Inc., a Nevada corporation and a trademark assignment
for the purchase of the intellectual property rights of a beverage created and developed by Innovative known as “Unwind.”
The Company subsequently applied for and received a separate trademark featuring its new logo and the term Unwind Ultimate Relaxation
in 2010. The Company intends to reformulate the product.
On February 3, 2014, the
Company purchased 90% of Dance Broadcast Systems, Inc. for 10,000 Series A Preferred Stock with a par value of $.001. The preference
allows the holder to vote 66.67% of the available votes for all purposes regardless of the other votes outstanding as long as one
share of this series is outstanding. The designation for the Series A Preferred Stock was filed with the Secretary of State of
Nevada on January 24, 2014. This transaction was recorded as a reverse merger with January 13, 2014 now becoming the inception
date for accounting purposes. This transaction caused a change of control of the company to Vinyl Groove Productions, Inc.
Dance Broadcast System,
Inc. was incorporated in Delaware on January 13, 2014. The company was to set up an internet dance music broadcast station and
sponsor concerts for our other subsidiaries. Assets were to be purchased for this purpose but the purchase of equipment was not
concluded.
In May 2014, the Company
sold its 51% stake in Blue 22 Entertainment for the receipt of 50 million common shares of NX Global, Inc. stock. Because the stock
received does not have a current filing on Pink Sheets no value has been placed on the stock and no gain or loss has been recognized.
In June 2014, the Company
entered into an agreement to be the distributor at retail of a oil emulsification product used to separate oil from various waste
streams produced from oil wells, and oil storage or shipping. We will issue 5,000 preferred shares, when available, after filing
a designation which will be earned upon issuance.
On June 30, 2014, the Company
increased its authorized shares from 500,000,000 to 950,000,000.
On September 6, 2014, the
Company increased its authorized shares from 950,000,000 to 1,970,000,000.
All remaining entertainment
subsidiaries were sold on June 26, 2014. The company does not retain any rights nor any liabilities of the disposed of subsidiaries.
On October 16, 2014, the
Company increased its authorized shares from 1,970,000,000 to 2,970,000,000.
On October 28, 2014, the
Company was re-domiciled to the State of Wyoming and increased its authorized common shares to 5,000,000,000.
On December 8, 2014, the
Company changed its name to FBEC Worldwide, Inc.
On December 23, 2014, the
company effected 1:1000 reverse split. All share and per share amounts herein have been retroactively restated to reflect the split.
In
June 2015, the Company entered into an
Intellectual Property Purchase Agreement, Consulting
Agreement, and Royalty Agreement with G. Randall & Sons, Inc. These agreements provide for the asset purchase of the proprietary
hemp-based formula used in the Company’s beverage energy shot. G. Randall and Sons will provide ongoing consulting services
in blending new formula(s) and working directly with FBEC to improve and blend existing formulas. The Company purchased the asset
for $50,000. The purchase includes a $15,000 cash payment and $35,000 8% Convertible Note with a 6 month maturity date and conversion
features of 75% of the average closing price 20 days previous to conversion. This represents a 25% discount to the average closing
price 20 days previous to conversion.
On
November 12, 2015, FBEC Worldwide, Inc., (“FBEC”) entered into a joint venture agreement (the “JV Agreement”)
with CBD Globe Distributors Ltd (“CBD”). Pursuant to the JV Agreement FBEC and CBD will form a limited liability company
(the “LLC”), which shall be owned as follows: 50.1% by FBEC and 49.9% by CBD. The LLC shall create a strategic alliance
between the brands currently held by the parties, respectively in an effort to lend support in a multitude of areas and consolidate
businesses in the cannabis and hemp industry. FBEC will take on the role of online digital marketer in a wide variety of online
spaces as well as provide fulfillment support for the distribution of all brands at FBEC’s expense. To the extent set forth
in this Agreement, each of the Parties shall own an undivided fractional part in the LLC. Jason Spatafora and Patrick Folkes shall
be the managing members of the LLC (the “Managing Members”).
The
term of the JV Agreement shall be one year.
The JV Agreement may be terminated by either party in writing with thirty
(30) days’ notice.
FBEC,
through the operations of LLC, in connection with má products, an ultra-high grade certified CBD hemp oil product which
comes with a flavor cartridge, vapor pen, and 1ml of ma CBD oil, will perform the following tasks:
|
|
·
|
Handle all digital and social media marketing;
attempt to increase sales online and via wholesale channels utilizing SEO activities and Google Adword commitment.
|
|
|
·
|
Connect fulfillment centre to website
and coordinate sales GUI for wholesale ordering by sales team members.
|
|
|
·
|
Data collection on retailers, distributors
and wholesalers.
|
|
|
·
|
Identify, list and provide all free or
discounted banner groups available.
|
|
|
·
|
Implement logistical and distribution
manager to handle fulfillment needs by using inventory management software.
|
|
|
·
|
Create a tracking platform using available
technology to maintain accurate records of purchase orders, accounts receivable and all other expenditures related to day to day
business of má products.
|
|
|
·
|
Create marketing strategies to extend
the footprint of all brands associated with the LLC by both traditional marketing means, celebrity endorsement and product placement
with prior approval of strategy and marketing aims in unison with CBD as brand owners.
|
|
|
·
|
Seek funding commitments for both promotions
and conventions.
|
|
|
·
|
Provide its scientific advisory team to
propose ideas to CBD, test and create new products that CBD could deem unique and worth pursuing by unanimous consent of the Managing
Members.
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|
|
·
|
Seek approval from CBD in connection with
the marketing of any other competing product or proposition, without such approval FBEC would be prohibited from any further activity
in this respect.
|
|
|
·
|
Liaise with CBD on all proposed product
pricing issues, discounts, promotions, campaigns, PR, social media, advertising and all other marketing issues with the objective
of streamlining má brand and marketing campaigns worldwide.
|
|
|
·
|
Coordinate the payment to CBD of its profit
distribution, pursuant to the Operating Agreement, within 10 business days of each month end.
|
CBD,
through the operations of the LLC, will:
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·
|
Share any future distribution pipeline
opportunities with FBEC for the purpose of extending the má brand exposure in the cannabis and hemp space.
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·
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Design a website, and create a new e-Commerce
platforms.
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·
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Manage of all internet properties.
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·
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Direct all revenue and product flow related
to the má brand in the United States through the LLC and assist FBEC in its preparation of periodic financial reports as
to be filed with the Securities and Exchange Commission.
|
The
parties shall share the net profit realized by the LLC, if any, within 10 business days of each month end. All net profit is to
be disbursed 50% (Fifty percent) to each party. FBEC shall also issue CBD 6,000,000 shares of restricted common stock over the
coming year.
Prior
to the date of the JV Agreement, the parties thereto had no interaction other than the negotiation of the JV Agreement.
On November 30, 2015, FBEC
Worldwide, Inc., (“FBEC”) entered into a joint venture agreement (the “JV Agreement”) with DuBe Hemp Beverages
Inc. (“DUBE”). Pursuant to the JV Agreement FBEC and DUBE will form a limited liability company (the “LLC”),
which shall be owned as follows: 50.1% by FBEC and 49.9% by DUBE. The LLC shall create a strategic alliance between the brands
currently held by the parties, respectively in an effort to lend support in a multitude of areas and consolidate businesses in
the cannabis and hemp industry. FBEC will take on the role of online digital marketer in a wide variety of online spaces as well
as provide fulfillment support for the distribution of all brands at FBEC’s expense. To the extent set forth in this Agreement,
each of the Parties shall own an undivided fractional part in the LLC. Jason Spatafora and Phil Restifo shall be the managing members
of the LLC (the “Managing Members”).
The term of the JV Agreement
shall be one year.
The JV Agreement may be terminated by either party in writing with thirty (30) days’ notice.
FBEC, through the operations
of LLC, in connection with the products produced by DUBE, will perform the following tasks:
|
|
·
|
Handle all digital and social media marketing;
attempt to increase sales online and via wholesale channels utilizing SEO activities and Google Adword commitment.
|
|
|
·
|
Connect fulfillment centre to website
and coordinate sales GUI for wholesale ordering by sales team members.
|
|
|
·
|
Data collection on retailers, distributors
and wholesalers.
|
|
|
·
|
Identify, list and provide all free or
discounted banner groups available.
|
|
|
·
|
Implement logistical and distribution
manager to handle fulfillment needs by using inventory management software.
|
|
|
·
|
Create a tracking platform using available
technology to maintain accurate records of purchase orders, accounts receivable and all other expenditures related to day to day
business of má products.
|
|
|
·
|
Create marketing strategies to extend
the footprint of all brands associated with the LLC by both traditional marketing means, celebrity endorsement and product placement
with prior approval of strategy and marketing aims in unison with DUBE as brand owners.
|
|
|
·
|
Agree to a funding commitments for both
promotions and conventions.
|
|
|
·
|
Provide its scientific advisory team to
propose ideas to DUBE, test and create new products that DUBE could deem unique and worth pursuing.
|
|
|
·
|
Seek approval from DUBE in connection
with the marketing of any other competing product or proposition, without such approval FBEC would be prohibited from any further
activity in this respect.
|
|
|
·
|
Liaise with DUBE on all proposed product
pricing issues, discounts, promotions, campaigns, PR, social media, advertising and all other marketing issues with the objective
of streamlining má brand and marketing campaigns worldwide.
|
|
|
·
|
Coordinate the payment to DUBE of its
profit distribution, pursuant to the Operating Agreement, within 10 business days of each month end.
|
|
|
·
|
DUBE, through the operations of the LLC,
will:
|
|
|
·
|
Share distribution pipeline opportunities,
marketing, and public relations with FBEC for the purpose of extending DUBE products and FEBEC’s WolfShot (“WolfShot”)
brand footprints in the cannabis and hemp space.
|
|
|
·
|
Connect FBEC with all personnel currently
managing and overseeing the production, sales, distribution, packaging, and marketing of DUBE products.
|
|
|
·
|
Direct all revenue and product flow related
to the DUBE brand in the United States through the LLC and assist FBEC in its preparation of periodic financial reports as to be
filed with the Securities and Exchange Commission.
|
The parties shall share
the net profit realized by the LLC, if any, within 10 business days of each month end. 30% of all net profits related to DUBE products
shall be distributed to FBEC. 70% of all net profits related to DUBE products shall be distributed to DUBE. 30% of all net profits
related to WolfShot products to shall be distributed to DUBE. 70% of all net profits related to WolfShot products shall be distributed
to FBEC. 50% of all net profits related to co-branded products shall be distributed to both parties. FBEC shall also issue DUBE
6,000,000 shares of restricted common stock over the coming year.
Prior to the date of the
JV Agreement, the parties thereto had no interaction other than the negotiation of the JV Agreement.
All businesses or resale products acquired
on or before 2015 have ceased to be sold or utilized by the
Company.
In January 2016, the Company
resolved to reduce the authorized common shares to 2,200,000,000
effective March 18, 2016.
The Company's Common Stock is quoted on the
OTC Market Groups, Inc. OTCQB (the “OTCQB”)
under the symbol "FBEC."
Overview of Business
FBEC
Worldwide, Inc. operates a sales, distribution and marketing business for the promotion and sale of hemp based energy drinks.
Products
On March 1, 2010, we acquired
certain intellectual property rights for a proprietary relaxation beverage created and developed by Innovative Beverage Group Holdings,
Inc. known as
UnWind Ultimate Relaxation™
(“
UnWind
”)
. UnWind
is a light beverage designed
to relax the consumer's mind and body without the negative hang-over and side effects of alcohol and other substances. The Company
views
UnWind
as the polar opposite of mainstream energy drinks. Whereas energy drinks generally give the consumer a short
burst of energy,
UnWind
by contrast,
contains ingredients believed to calm and relax consumers.
Our proprietary and unique
UnWind
formulation uses natural ingredients generally known for their calming properties. The main ingredients of melatonin,
rose hips, valerian root, and passion flower are combined with the powerful
antioxidants
of Goji and Acai. Most of the principle
ingredients of
UnWind
are generally regarded as safe (GRAS) by the Food and Drug Administration (“FDA”), meaning
that most of the contents in
UnWind
are
generally recognized, among qualified experts, as having been adequately
shown to be safe under the conditions of its intended use. However, some of the ingredients are considered dietary ingredients
and have not been evaluated by the FDA for safety, effectiveness, or purity. As a product that contains dietary ingredients,
UnWind
is considered a dietary supplement as defined by the Dietary Supplement Health and Education Act (DSHEA) of 1994.
The chemical, Kruud Kleen™,
has a primary function to separate oil and water to recycle the water for use in fracking, pumping down oil and gas wells to increase
pressure or for agricultural irrigation. The separated oil is then available for sale on the spot market. We are looking for other
products relative the oil patch to distribute as well so that we might be able to fulfill all the needs of the oil service companies
in recovering as much oil as possible from the water and from other mud/slurry derived from pumping the well(s).
The product was in the
process of being sold by the formula’s owners with potential customers before our involvement. This is an exclusive U.S.
retail distribution agreement so all contacts by our supplier have been forwarded to us. These potential customers began product
delivery during August 2014 which has been limited.
The owner of the product
formula has used it in various wells and tested it on frack water, sludge from oil tanks and mud from wells over the last couple
of years. Every test on this formula has been successful in separating the oil from the water in two to three days depending on
the material being separated. The savings comes from reducing the cost of other chemicals used, reduction in the use of machinery
plus reduced power and labor.
In June 2015, the Company
purchased the formula for its first hemp based energy shot Wolf Shot™ and began distribution in the fourth quarter of 2015.
In November 2015, the Company
entered into two joint venture agreements to market, distribute and promote two additional lines of hemp based energy drink products.
The Company has ceased
offering any products or services acquired or represented prior to June of 2015.
Overview of Industry
The energy drink market
is quite diverse in its products ranging from caffeine based through “all natural” products derived from organic compounds.
There are few products distributed nationally that are hemp based for energy production.
Competition and Buying Trends
The energy drink industry
is highly competitive. Competition in the category exists based on price, packaging, flavors, consumer acceptance of products,
shelf space and new product development. In order to compete effectively in the industry, we believe that we must produce products
that stand out from the competition through taste, visual appearance, price, and product quality. We believe that our principal
strength is our product quality and that we will face competition from companies who focus on price as opposed to quality.
Our products are expected
to compete with a wide variety of energy drinks produced by companies that have substantially greater financial, marketing and
distribution resources. Competition in the industry could have a material adverse effect on our products and business results if
we are unable to gain the market share required for us to attain profitability.
Our products also compete
with all other liquid refreshments, including those produced by large internationally known companies, all of which have greater
financial and marketing resources.
Although
we believe that our products currently compete favorably with respect to such factors, we cannot provide any assurance that we
can maintain our competitive position against current and potential competitors, especially those with significantly greater brand
recognition, or financial, marketing, support, technical and other resources.
Manufacturing
We do not manufacture our
own products, but rely on third-party contract packers ("Co-packers") to produce and package our products on an “as
needed” basis. We have no long term agreement in place for the services and we intend to evaluate and potentially make arrangements
with additional Co-packers to manufacture our products.
Governmental Regulations
The production and marketing
of our beverages and snack products are subject to the rules and regulations of various federal, state and local health agencies,
including in particular the U.S. Food and Drug Administration (“FDA”). The FDA also regulates labeling of our products.
We have no regulatory notifications or actions pending at this time.
The production, distribution
and sale of our products in the United States is subject to various federal and state regulations, including but not limited to:
the Federal Food, Drug and Cosmetic Act; the Dietary Supplement Health and Education Act of 1994; the Occupational Safety and Health
Act; various environmental statutes; and various other federal, state and local statutes and regulations applicable to the production,
transportation, sale, safety, advertising, labeling and ingredients of such products.
Compliance with applicable
federal and state regulations is crucial to the Company’s success. Although we believe that we are in compliance with applicable
regulations, should the FDA or any state in which we operate amend its guidelines or impose more stringent interpretations of current
laws or regulations, we may not be able to comply with these new guidelines. Such regulations could require the reformulation of
certain products to meet new standards, market withdrawal or discontinuation of certain products we are unable to reformulate,
imposition of additional record keeping requirements, expanded documentation regarding the properties of certain products, expanded
or different labeling and/or additional scientific substantiation. Failure to comply with applicable requirements could result
in sanctions being imposed on the Company or the manufacturers of any of our products, including but not limited to fines, injunctions,
product recalls, seizures and criminal prosecution.
Compliance with Environmental Laws
We currently outsource
the production and distribution of our products and do not own or operate our own manufacturing facilities. As such, we do not
believe that we are subject to any federal, state and local environmental laws and regulations which would have a material adverse
effect upon our capital expenditures, net income or competitive position. We have not expended any capital resources on compliance
with federal, state or local environmental laws since entering the beverage and snack product industry.
Intellectual Property
On March 1, 2010, the Company
entered into a Purchase Agreement with Innovative Beverage Group Holdings, Inc., a Nevada corporation, for the purchase of the
intellectual property rights for
UnWind
, which was created and developed by Innovative. In conjunction with the Purchase
Agreement, the parties executed a Trademark Assignment which was filed with the United States Patent and Trademark Office (the
“USPTO”) assigning us rights to trademarks for “Unwind Extreme Relaxation” and “Unwind.” Under
the terms of the Purchase Agreement, we purchased (i) all rights to the
UnWind
flavor, including all rights to the proprietary
formula used to manufacture
UnWind
, (ii) the
UnWind
name and trademark, and all other trademarks, service marks,
copyrights, patents and other intellectual property associated therewith, and (iii) all documentation used in and/or necessary
for the manufacture and marketing of the
UnWind
beverage, including but not limited to manufacturing instructions, ingredient
lists, and marketing literature or similar material created for
UnWind
(the "Purchased Property"). As consideration
for the Purchased Property, we agreed to pay Innovative or its assigns: (i) sixty cents ($0.60) for every twenty-four (24) cans
or bottles (or such other beverage container in which Frontier chooses to sell the
UnWind
product) of the
UnWind
flavor brand, and (ii) twelve cents ($0.12) per 12-pack box of any additional delivery system of the
UnWind
flavor brand
(and/or any beverages developed using any of the intellectual property rights included in the Purchased Property) that the Company
sells during each fiscal quarter (the "Royalty Payments").
The Company's obligation
to pay the Royalty Payments to Innovative is perpetual. The Company is obligated to provide a detailed breakdown of product sold
during each quarter with Royalty Payments due and payable within thirty (30) days of the end of each fiscal quarter. In the event
that
UnWind
is sold to a third party, the Company's obligation to make Royalty Payments shall cease. Royalty Payments will
not be paid to Innovative on samples or slotting product or product used in lieu of money.
Under terms of the Purchase
Agreement, the Company has the right to sell, transfer or convey the Purchased Property to a third-party purchaser (a "Future
Sale"). Upon such a Future Sale, the Company is obligated to pay Innovative three and one-half percent (3.5%) of the sales
price it receives from such sale of the Purchased Property and/or the sale of any right thereof. Such payment will be due and payable
to Innovative within ten (10) days of the closing of any such Future Sale. If the consideration that the Company agrees to receive
through a proposed Future Sale involves anything but a lump sum payment of cash, then the Company must allocate three and one-half
percent (3.5%) of any consideration received directly to Innovative. Upon completion of a Future Sale transaction, the Company's
obligations to Innovative will cease.
We also have rights to
a trademark for “Unwind Ultimate Relaxation.”
In
June 2015, the Company entered into an
Intellectual Property Purchase Agreement, Consulting
Agreement, and Royalty Agreement with G. Randall & Sons, Inc. These agreements provide for the asset purchase of the proprietary
hemp-based formula used in the Company’s beverage energy shot. G. Randall and Sons will provide ongoing consulting services
in blending new formula(s) and working directly with FBEC to improve and blend existing formulas.
Research and Development
During 2015, the Company
dedicated no funds to research and development. However, in light of our operational focus, we anticipate that we will allocate
little funds, to the extent available, for future research and development of energy drink products.
Employees
We currently employ one
full-time employee and from time to time we also use independent contractors on an as-needed basis for our operations.
Additional Information
Our Internet website is
located at http://www.fbecworldwide.com. Reference to our Internet website herein does not constitute incorporation by reference
in this Annual Report of the information contained on or hyperlinked from our Internet website and such information should not
be considered part of this Annual Report.
We are required to file
annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain
material events in a current report on Form 8-K. The public may read and copy any materials that we file with the SEC at the Public
Reference Room at the SEC located at 100 F Street NE, Washington, DC 20549, on official business days during the hours of 10 a.m.
to 3 p.m. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC at http://www.sec.gov.
ITEM 1A.
RISK FACTORS
The Company is a “smaller
reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information
required under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
We need to discuss the
issue with prior director if it is unresolved
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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 - ORGANIZATION AND BUSINESS AND GOING CONCERN
Organization and Business
FBEC Worldwide, Inc., f/k/a
Frontier Beverage Company, Inc. (the "Company", “FBEC”, “we”, “us” or “our”)
is a Wyoming corporation that was formed in November 2002 and commenced operations in April 2003. The Company was originally formed
to provide fully automated remote data backup services for small to medium sized businesses. Currently, the Company is engaged
in developing additional beverage products.
On March 1, 2010, the Company
entered into a purchase agreement with Innovative Beverage Group Holdings, Inc., a Nevada corporation and a trademark assignment
for the purchase of the intellectual property rights of a beverage created and developed by Innovative known as “Unwind.”
The Company subsequently applied for and received a separate trademark featuring its new logo and the term Unwind Ultimate Relaxation
in 2010. The Company intends to reformulate the product.
On February 3, 2014, the
Company purchased 90% of Dance Broadcast Systems, Inc. for 10,000 Series A Preferred Stock with a stated value of $1,000,000 and
a par value of $.001. The preference allows the holder to vote 66.67% of the available votes for all purposes regardless of the
other votes outstanding as long as one share of this series is outstanding. The designation for the Series A Preferred Stock was
filed with the Secretary of State of Nevada on January 24, 2014. This transaction was recorded as a reverse merger with January
13, 2014 now becoming the inception date for accounting purposes. This transaction caused a change of control of the company to
Vinyl Groove Productions, Inc.
In May 2014, the Company
sold its 51% stake in Blue 22 Entertainment for the receipt of 50 million common shares of NX Global, Inc. stock. Because the stock
received does not have a current filing on Pink Sheets and no active market exists for the shares, no value has been placed on
the stock received. The subsidiary had no assets or liabilities on the date of disposal and no consideration was received.
In June 2014, the Company
entered into an agreement to be the distributor at retail of a oil emulsification product used to separate oil from various waste
streams produced from oil wells, and oil storage or shipping. The Company agreed to issue 5,000 Series C preferred shares, when
available, after filing a designation which will be earned upon issuance. As of the date of this report, the Series C Preferred
Stock designation has not been filed nor have any preferred shares been issued under the agreement. The product is no longer marketed
by the Company.
On June 30, 2014, the Company
increased its authorized common shares from 500,000,000 to 950,000,000.
On September 6, 2014, the
Company increased its authorized common shares from 950,000,000 to 1,970,000,000.
All remaining entertainment
subsidiaries were disposed on June 26, 2014. The company does not retain any rights nor any liabilities of the disposed of subsidiaries.
The disposal resulted in a gain on the sale of $53,329 (see Note 4).
On October 16, 2014, the
Company increased its authorized common shares from 1,970,000,000 to 2,970,000,000.
On October 28, 2014, the
Company was re-domiciled to the State of Wyoming and increased its authorized common shares to 5,000,000,000.
On December 8, 2014, the
Company changed its name to FBEC Worldwide, Inc.
On December 23, 2014, the
company effected 1:1,000 reverse split on the outstanding shares. All share and per share amounts herein have been retroactively
restated to reflect the split.
On
June 29, 2015, the Company entered into an
Intellectual Property Purchase Agreement, Consulting
Agreement, and Royalty Agreement with G. Randall & Sons, Inc. These agreements provide for the asset purchase of the proprietary
hemp-based formula used in the Company’s beverage energy shot. G. Randall and Sons will provide ongoing consulting services
in blending new formula(s) and working directly with FBEC to improve and blend existing formulas. The Company purchased the asset
for $50,000. The purchase includes a $15,000 cash payment and a $35,000 8% Convertible Note with a 6 month maturity date and conversion
features of 75% of the average closing price 20 days previous to conversion.
On
November 12, 2015, the Company entered into a joint venture agreement operating as FBEC CBD Globe LLC. The joint venture provides
the Company with a product pipeline and revenue stream from the products of CBD Globe Distributors Ltd. The Company is responsible
to provide various services for the venture. All revenue from the CBD Globe product line are to be received by the venture. The
venture is for one year and may be terminated by either party with 30 day written notice as long as all conditions in the contract
have been met (see Form 8-K filed with the Securities and Exchange Commission on November 17, 2015).
On
November 30, 2015, the Company entered into a joint venture agreement operating as FBEC Dube Group LLC. The joint venture provides
the Company with a product pipeline and revenue stream from the products of Dube Hemp Beverages, Inc. The Company is responsible
to provide various services for the venture. All revenue from the Dube product line are to be received by the venture. The venture
is for one year and may be terminated by either party with 30 day written notice as long as all conditions in the contract have
been met (see Form 8-K filed with the Securities and Exchange Commission on November 30, 2015).
Going Concern
The accompanying consolidated
financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America
(“GAAP”), which contemplates continuation of the Company as a going concern, which is dependent upon the Company's
ability to establish itself as a profitable business. At December 31, 2015, the Company has an accumulated deficit of $5,314,920,
and for the year ended December 31, 2015 incurred net loss of $4,058,028. These factors raise substantial doubt about the Company's
ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result
from the outcome of these uncertainties, nor do they include adjustments relating to the recoverability and realization of assets
and classification of liabilities that might be necessary should the Company be unable to continue in operation.
The Company’s ability
to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations. However, there can
be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers amounts
held by financial institutions and short-term investments with an original maturity of 90 days or less to be cash and cash equivalents.
In the future, the Company may periodically make deposits with financial institutions in excess of the maximum federal insurance
limits (FDIC) of $250,000 per bank. As of December 31, 2015, the Company had $45,309 cash or cash equivalents.
Principles of Consolidation
The accompanying consolidated
financial statements include the accounts of wholly-owned subsidiaries Blue 22 Entertainment, Inc. and 22 Social Club, Inc. and
90% owned Dance Broadcast System, Inc. All intercompany accounts and transactions have been eliminated. All subsidiaries had been
sold or disposed of at December 31, 2014. There were no activities of the joint ventures entered into in 2015.
Stock-based Compensation
The Company accounts for
stock-based compensation to employees in accordance with FASB ASC 718 and accounts for stock-based compensation to non-employees
in accordance with FASB ASC 505. The fair value of option awards is estimated on the date of grant based on the Black-Scholes options-pricing
model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The
assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these
estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company
uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.
Net Loss per Share
The Company calculates
earnings per share (“EPS”) based on the weighted average number of shares of Common Stock outstanding during the period.
Diluted EPS is computed based on the weighted average number of shares of Common Stock outstanding plus all potentially dilutive
shares of Common Stock outstanding during the period. Such potential dilutive shares of Common Stock consist of stock options,
non-vested shares (restricted stock), shares underlying convertible debt and warrants. During the year ended December 31, 2015,
all shares underlying the convertible debt were excluded as their impact would have been anti-dilutive.
Income Taxes
Potential benefits of income
tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB ASC 740 “Accounting
for Income Taxes” as of its inception which requires an asset and liability approach to calculating deferred income taxes.
Pursuant to FASB ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential
benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it
is more likely than not it will utilize the net operating losses carried forward in future years.
Use of Estimates
The preparation of financial
statements in conformity with US GAAP 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 revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related
to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s
estimates. To the extent there are material differences between the estimates and the actual results, future results of operations
will be affected.
Notes Payable
Direct
costs incurred with the issuance of notes payable are deferred and amortized over the life of the loan. For the year ended December
31, 2015, the Company incurred amortization expense of $51,703 associated with debt discounts related to derivative liabilities.
Fair Value of Financial Instruments
The Company assessed the
classification of its derivative financial instruments as of December 31, 2015, which consist of convertible instruments and rights
to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification
under ASC 815.
ASC 815 generally provides
three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them
as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of
the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not
re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported
in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered
a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument
is deemed to be conventional, as described.
The Company calculates
the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional
information in the notes to the financial statements when the fair value is different than the carrying value of those financial
instruments. The estimated fair value of cash, accounts receivable and accounts payable approximate their carrying amounts due
to the short maturity of these instruments. At December 31, 2014 and 2015, the Company did not have any other financial instruments.
ASC
820 Fair Value Measurements and Disclosures defines fair value as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between
(1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2)
an entity’s own assumptions about market participant assumptions developed based on the best information available in the
circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). The three levels of the fair value hierarchy are described below:
|
|
·
|
Level 1 - Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or liabilities.
|
|
|
·
|
Level 2 - Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than
quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from
or corroborated by observable market data by correlation or other means.
|
|
|
·
|
Level 3 - Inputs that are both significant to the fair value measurement
and unobservable.
|
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term
nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued
compensation and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that
would be available for debt of similar terms which is not significantly different from its stated value.
The Company evaluates and
accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting
for Derivative Instruments and Hedging Activities”.
Professional standards
generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and
account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair
value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument
would be considered a derivative instrument. Professional standards also provide an exception to this rule when the
host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional
Convertible Debt Instrument”.
The Company accounts for
convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments)
in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,”
as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when
necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective
conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt
to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion
options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40 provides that,
among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then
the contract shall be classified as an asset or a liability.
The Company uses Level
3 inputs to estimate the fair value of its derivative liabilities.
At December 31, 2015, the
Company financial instruments consist of the derivative liabilities related to convertible notes which were valued using the Black-Scholes
Pricing model, a level 3 input.
|
Recurring Fair Value Measure
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Liabilities
|
|
|
|
|
|
Derivative liabilities as of December 31, 2015
|
–
|
–
|
$ 993,070
|
$ 993,070
|
Commitments and Contingencies
The
Company follows ASC 450-20
, Loss Contingencies
, to report accounting for contingencies. Liabilities for loss contingencies
arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability
has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of
December 31, 2015.
Recent Accounting Pronouncements
The Company has implemented
all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements
unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of operations.
NOTE 3 – REVERSE MERGER
On February 3, 2014, the
Company purchased 90% of Dance Broadcast Systems, Inc. for 10,000 Series A Preferred Stock. The preferred stock allows the holder
to vote 66.67% of the available votes for all purposes regardless of the other votes outstanding as long as one share of this series
is outstanding. The designation for the Series A Preferred Stock was filed with the Secretary of State of Nevada on January 24,
2014. This transaction was recorded as a reverse merger where Dance Broadcast Systems, Inc. is deemed the accounting acquirer and
is the surviving entity, with January 13, 2014 now becoming the inception date for accounting purposes. This transaction caused
a change of control of the company to Vinyl Groove Productions, Inc. As of the reverse merger date, the total net liabilities of
FBEC were $1,093,332 with 138,781 outstanding common shares.
The net liabilities of
FBEC consisted of the following as of the date of the merger:
|
Accounts payable
|
|
$
|
69,090
|
|
|
Accrued liabilities
|
|
|
120,500
|
|
|
Advances
|
|
|
22,675
|
|
|
Convertible notes payable
|
|
|
280,340
|
|
|
Derivative liabilities
|
|
|
600,727
|
|
|
Net liabilities
|
|
$
|
1,093,332
|
|
NOTE 4 – DISPOSAL OF SUBSIDIARIES
In May 2014, the Company
sold its 51% stake in Blue 22 Entertainment for the receipt of 50 million common shares of NX Global, Inc. stock. Because the stock
received does not have a current filing on Pink Sheets and no active market exists for the shares, no value has been placed on
the stock received. The subsidiary had no assets or liabilities on the date of disposal.
On June 26, 2014, the Company
sold its holdings in Dance Broadcast System, Inc. and 22 Social Club, Inc. The buyer waived a remaining payment of $10,000 owed
by the Company under a consulting contract and assumed the remaining liabilities of 22 Social Club totaling $43,329. Dance Broadcast
had no assets or liabilities on the date of disposal. The disposal of 22 Social Club resulted in a gain of $53,329 as follows:
|
Accrued wages
|
|
$
|
43,329
|
|
|
Total liabilities
|
|
|
43,329
|
|
|
|
|
|
|
|
|
Forgiveness of FBEC payable
|
|
|
10,000
|
|
|
Total gain on disposal of subsidiary
|
|
$
|
53,329
|
|
NOTE 5 – RELATED PARTY TRANSACTIONS
In March 2014, the Company
issued to officers and directors, and a prior officer a total of 25,750 common shares for the settlement of $93,500 of liabilities
resulting in a loss on the extinguishment of liabilities of $12,000 for the period from January 13, 2014 (date of inception) through
December 31, 2014.
As of June 26, 2014, the
Company owed $43,000 in accrued salary to a former officer and director which was disposed along with the disposal of the subsidiary
and recorded as a gain on sale of subsidiary.
During 2014, liabilities
owed to a former affiliate of the Company, of $9,767 and an entity controlled a former affiliate of the company of $16,858 were
converted to notes payable totaling $26,625. The notes are unsecured, due on demand and bear no interest.
As of December 31, 2015,
the Company has outstanding advances to former officers and directors aggregating $22,675. The advances are unsecured, due on demand
and bear no interest.
On April 28, 2015 Vinyl
Groove Productions sold controlling interest of the Company to S & L Capital LLC.
On May 1, 2015 S&L
Capital LLC converted 8,999 Series A preferred shares to 53,406,528 restricted common shares. The Company issued 150,000,000 restricted
common shares to Robert Sand as required by his employment contract.
On September 12, 2015,
Midam Ventures LLC bought controlling interest of the Company by purchasing 1,000 Preferred Series A shares from S&L Capital
LLC. One share of the Series A Preferred Stock was canceled.
NOTE 6 – STOCKHOLDERS’ DEFICIT
At December 31, 2015, the
Company had 5,000,000,000 authorized shares of Common Stock and 20,000,000 authorized shares of Preferred Stock, both with a par
value of $0.001 per share.
Preferred Stock
At December 31, 2015, the
Company had 1,000 share of its Series A Preferred Stock issued and outstanding. The shares were issued to founders at inception
on January 13, 2014. We are authorized to issue up to 20,000,000 shares of Preferred Stock with designations, rights and preferences
determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting
power or other rights of the holders of the Common Stock. In the event of issuance, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. If the Company issues
shares of Preferred Stock and we are subsequently liquidated or dissolved, the preferred shareholders would have preferential rights
to receive a liquidating distribution for their shares prior to any distribution to common shareholders.
Common Stock
At December 31, 2015, the
Company had 268,847,666 shares of its Common Stock issued and outstanding. Holders of Common Stock are entitled to one vote per
share and are to receive dividends or other distributions when and if declared by the Company's Board of Directors.
In February 2014, the Company
issued 5,000 common shares for services with a value of $19,000.
In March 2014, the Company
issued 1,250 common shares for services with a value of $5,000.
In March 2014, the Company
issued 15,000 common shares held in escrow to secure an outstanding convertible note.
In March 2014, the Company
issued to officers and directors, and a prior officer a total of 25,750 common shares for the settlement of $93,500 of liabilities
resulting in a loss on the extinguishment of liabilities of $12,000.
In March 2014, the Company
issued 1,000 common shares for the extinguishment of accounts payable of $1,500. The shares were valued at $4,100 resulting in
a loss on the extinguishment of liabilities of $2,600.
In April 2014, the Company
issued 8,000 common shares for services valued at $17,600.
In May 2014, the Company
issued 5,000 common shares for services valued at $12,500.
In 2014, the Company issued
an aggregate of 2,044,632 common shares for the conversion of $302,244 of convertible debt. The Company recognized an additional
loss of $625 due to the over conversion of one convertible note.
In May 2015, the Company
issued 15,500,000 common shares for the conversion of $16,500 of debt.
In June 2015, agreements
were reached to issue 10,000,000 restricted common shares for services which partially issued in June and completed in July with
a value of $927,000.
In August 2015, the Company issued 10,007,499
common shares for debt conversion with a value of $13,057.
In September 2015, the
Company issued 4,000,000 restricted common shares for services with a value of $81,600 . 6,250,000 restricted common shares were
issued for debt conversion with a value of $12,500. The Company entered into an agreement to issue 2,000,000 restricted common
shares per an officer employment contract with a value of $189,200. These employment shares are included in this filing but have
not been issued.
In October 2015, the Company
issued 3,100,000 common shares for $310 in debt conversion.
In November 2015, the Company
issued 2,000,000 restricted common shares for services with a value of $62,000.
In December 2015, the Company
entered into an agreement to issue 5,000,000 restricted common shares for services no value has been assigned as services had not
been performed prior to December 31, 2015. The value these shares have been included common shares with an offset to additional
paid in capital in these financial statements but were not issued as of its filing.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
At December 31, 2015 convertible
notes payable consisted of the following:
|
|
|
December 31,
2015
|
|
|
Convertible notes payable
|
|
$
|
951,465
|
|
|
Unamortized debt discounts
|
|
|
(234,020
|
)
|
|
Total
|
|
$
|
717,445
|
|
Certain of the Company’s
outstanding convertible notes are secured by 15,000 common shares of the Company which were issued and held in escrow as of December
31, 2015. Still hold as of the date of filing.
Note outstanding as of February 3, 2014:
At the date of the reverse
merger, February 3, 2014, the Company had an outstanding balance of convertible notes payable of $280,339 which were convertible
into common stock at a 50% discount to the lowest bid of stock’s market price during the last 20 days prior to conversion
date. The notes are unsecured, due on demand and bear no interest.
The Company
identified embedded derivatives related to the convertible notes outstanding as of February 3, 2014. These embedded
derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires
that the Company record the fair value of the derivatives as of the inception date of the convertible note and to adjust the
fair value as of each subsequent balance sheet date. As of February 3, 2014, the Company determined a fair value of
$600,727 of the embedded derivatives. The fair value of the embedded derivatives was determined using the Black Scholes
Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
maximum
|
|
|
Market value of common stock
|
|
|
$ 3.00
|
|
|
Risk free rate:
|
|
|
0.05
|
%
|
The fair value of all
outstanding embedded derivatives was determined to be $902,551 at December 31, 2014 using the Black Scholes Option Pricing Model
with the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
maximum
|
|
|
Market value of common stock
|
|
|
$ 0.0103
|
|
|
Risk free rate:
|
|
|
0.03
|
%
|
During 2014 and 2015, the
Company adjusted the recorded fair value of the derivative liability on the dates of conversion of these notes. The aggregate fair
value of these embedded derivative liabilities on the dates of conversion was determined to be $399,953 and this amount was reclassified
to equity on the date of resolution of these derivative liabilities. The fair value was estimated using the Black Scholes Option
Pricing Model with the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
maximum
|
|
|
Market value of common stock
|
|
|
$0.0013 - $1.60
|
|
|
Risk free rate:
|
|
|
0.03% - 0.05
|
%
|
The aggregate loss associated
with these derivative liabilities was $701,777 for the period from January 13, 2014 (date of inception) through ended December
31, 2015 due to the change in fair value.
Note issued on March 10, 2014:
On March 10, 2014, a convertible
note agreement was entered into for a total of $50,000 due on January 5, 2015 with an interest of 8% per annum. A cash draw against
that note was received of $10,000. The additional $40,000 resulted from accounts payable converted to convertible debt. The agreement
allows conversion into shares of common stock at 50% discount to the average of the three lowest intraday trading prices during
the 15 days prior to conversion date.
The Company identified
embedded derivatives related to the Convertible Promissory Note entered into on March 10, 2014. These embedded derivatives
included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company
record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value
as of each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company
determined a fair value of $107,668 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $107,668 was allocated as a debt discount up to the face value of the note ($50,000) with the
remaining $57,668 recognized as a loss on derivative liabilities. The debt discount was fully amortized to interest expense during
2014.
During the period from
January 13, 2014 (date of inception) through December 31, 2014, the $50,000 note payable was fully converted into 567,600 shares
of common stock. The aggregate fair value of these embedded derivative liabilities on the dates of conversion was determined to
be $97,156 and this amount was reclassified to equity on the date of resolution of these derivative liabilities.
The fair value of the embedded
derivatives under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
267%-570
|
%
|
|
Market value of common stock
|
|
|
$0.1 - $3.4.
|
|
|
Risk free rate:
|
|
|
0.01% -0.12
|
%
|
The aggregate loss associated
with these derivative liabilities was $47,156 for the period from January 13, 2014 (date of inception) through ended December 31,
2014 due to the change in fair value.
Note issued on June 4, 2014:
On June 4, 2014, a convertible
note agreement was entered into for a total of $103,344 with an interest of 0% per annum. The $103,344 represents the conversion
of accounts payable to convertible debt. The agreement allows conversion into shares of common stock at 50% discount to the lowest
intraday trading prices during the 15 days prior to conversion date. The note was converted in full at December 31, 2014.
The Company identified
embedded derivatives related to the Convertible Promissory Note entered into on June 4, 2014. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $215,674 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $215,674 was allocated as a debt discount up to the face value of the note ($103,344) with the
remaining $112,330 recognized as a loss on derivative liabilities. The debt discount was fully amortized to interest expense during
2014.
During the period of January
13, 2014 (period of inception) through December 31, 2014, the Company issued 339,872 common shares for the conversion of the principal
amount of $103,344. The Company adjusted the recorded fair value of the derivative liability on the dates of conversion and determined
the aggregate fair value to be $264,475 and this amount was reclassified to equity on the date of resolution of these derivative
liabilities.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
maximum
|
|
|
Market value of common stock
|
|
|
$0.2 - $2.4.
|
|
|
Risk free rate:
|
|
|
0.05
|
%
|
The aggregate loss associated with these derivative
liabilities was $161,131 for the period from January 13, 2014 (date of inception) through ended December 31, 2014 due to the change
in fair value.
Note issued on May 15, 2015 with
a maturity date of November 15, 2015:
On May 15, 2015, a convertible
note agreement was entered into for a total of $37,500 with an interest of 0% per annum. The agreement allows conversion into shares
of common stock at 38% discount to the lowest intraday trading prices during the 20 days prior to conversion date. The note became
convertible at its maturity on November 15, 2015. No conversions have been made and the note is in default which triggers 10% interest
per annum until paid on the face value of the note beginning on the maturity date.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $62,556 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $62,556 was allocated as a debt discount up to the face value of the note ($37,500) with the
remaining $25,056 recognized as a loss on derivative liabilities. The debt discount of $4,687 was amortized to derivative expense
during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
429 to 526%
|
|
|
Market value of common stock
|
|
|
$0.027 - $.034
|
|
|
Risk free rate:
|
|
|
0.50
|
%
|
The aggregate loss associated
with these derivative liabilities was $121,487 for the year ended December 31, 2015 due to the change in fair value.
Note issued on May 29, 2015:
On May 29, 2015, a convertible
note agreement was entered into for a total of $25,000 with an interest of 8% per annum. The agreement allows conversion into shares
of common stock at the lower of $0.01 or 50% discount to the lowest intraday trading prices during the 20 days prior to conversion
date. The note was immediately convertible and $12,500 of the note has been converted. The note is in default.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $422,306 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $422,306 was allocated as a debt discount up to the face value of the note ($25,000) with the
remaining $397,306 recognized as a loss on derivative liabilities. The debt discount was fully amortized to derivative expense
during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
562 to 605%
|
|
|
Market value of common stock
|
|
|
$0.027 - $.051
|
|
|
Risk free rate:
|
|
|
0.49
|
%
|
The aggregate loss associated
with these derivative liabilities was $581, 203 for the year ended December 31, 2015 due to the change in fair value and loss
on conversion.
Note issued on June 11, 2015
with a maturity date of December 11, 2015:
On June 11, 2015, a convertible
note agreement was entered into for a total of $75,000 with an interest of 0% per annum. The agreement allows conversion into shares
of common stock at 37.5% discount to the lowest intraday trading prices during the 15 days prior to conversion date. The note became
convertible at its maturity on December 11, 2015. No conversions have been made and the note is in default which triggers 12% interest
per annum until paid on the face value of the note beginning on the maturity date.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $99,047 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $99,047 was allocated as a debt discount up to the face value of the note ($75,000) with the
remaining $24,047 recognized as a loss on derivative liabilities. The debt discount of $2,260 was amortized to derivative expense
during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
426 to 560%
|
|
|
Market value of common stock
|
|
|
$0.027 - $.031
|
|
|
Risk free rate:
|
|
|
0.68
|
%
|
The aggregate loss associated
with these derivative liabilities was $216,037 for the year ended December 31, 2015 due to the change in fair value.
Note issued on June 17, 2015
with a maturity date of December 17, 2015:
On June 17, 2015, a convertible
note agreement was entered into for a total of $75,000 with an interest of 0% per annum. The agreement allows conversion into shares
of common stock at 37.5% discount to the lowest intraday trading prices during the 15 days prior to conversion date. The note became
convertible at its maturity on December 11, 2015. No conversions have been made and the note is in default which triggers 12% interest
per annum until paid on the face value of the note beginning on the maturity date.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $118,368 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $118,368 was allocated as a debt discount up to the face value of the note ($75,000) with the
remaining $43,368 recognized as a loss on derivative liabilities. The debt discount of $1,663 was amortized to derivative expense
during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
426 to 560%
|
|
|
Market value of common stock
|
|
|
$0.027 - $.031
|
|
|
Risk free rate:
|
|
|
0.68
|
%
|
The aggregate loss associated
with these derivative liabilities was $216,037 for the year ended December 31, 2015 due to the change in fair value.
Note issued on August 26, 2015:
On August 26, 2015, a convertible
note agreement was entered into for a total of $30,000 with an interest of 8% per annum. The agreement allows conversion into shares
of common stock at 50% discount to the lowest intraday trading prices during the 10 days prior to conversion date.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $77,517 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $77,517 was allocated as a debt discount up to the face value of the note ($30,000) with the
remaining $47,517 recognized as a loss on derivative liabilities. The debt discount of $35,509 was fully amortized to derivative
expense during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
142 to 605%
|
|
|
Market value of common stock
|
|
|
$0.027 - $.056
|
|
|
Risk free rate:
|
|
|
0.49
|
%
|
The aggregate loss associated
with these derivative liabilities was $83,611 for the year ended December 31, 2015 due to the change in fair value.
Note issued on August 26, 2015:
On August 26, 2015, a convertible
note agreement was entered into for a total of $26,625 with an interest of 0% per annum. The agreement allows conversion into shares
of common stock at 50% discount to the lowest intraday trading prices during the 20 days prior to conversion date. The note was
immediately convertible and has been fully converted as of August 31, 2015.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $68,875 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $68,875 was allocated as a debt discount up to the face value of the note ($26,625) with the
remaining $42,250 recognized as a loss on derivative liabilities. The debt discount was fully amortized to derivative expense during
2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
608 to 611%
|
|
|
Market value of common stock
|
|
|
$0.024 - $.056
|
|
|
Risk free rate:
|
|
|
0.03
|
%
|
The aggregate loss associated
with these derivative liabilities was $500,810 for the year ended December 31, 2015 due to the change in fair value and loss on
conversion.
Note issued on December 24, 2015:
On December 24, 2015, a
convertible note agreement was entered into for a total of $50,000 with an interest of 10% per annum. The agreement allows conversion
into shares of common stock 50% discount to the lowest intraday trading prices during the 15 days prior to conversion date with
a ceiling of $0.003.
The Company identified
embedded derivatives related to the Convertible Promissory Note as of its maturity date. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each conversion date and subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined
a fair value of $418,331 of the embedded derivative.
The initial fair value
of the embedded debt derivative of $418,331 was allocated as a debt discount up to the face value of the note ($50,000) with the
remaining $366,831 recognized as a loss on derivative liabilities. The debt discount of $479 was amortized to derivative expense
during 2015.
The fair value of the embedded
derivative under this note was determined using the Black Scholes Option Pricing Model based on the following assumptions:
|
Dividend yield:
|
|
|
-0-
|
%
|
|
Expected volatility
|
|
|
493 to 605%
|
|
|
Market value of common stock
|
|
|
$.025 to $.027
|
|
|
Risk free rate:
|
|
|
0.07
|
%
|
The aggregate loss associated
with these derivative liabilities was $818,262 for the year ended December 31, 2015 due to the change in fair value.
NOTE 8 – INCOME TAXES
Income taxes are accounted
for in accordance with FASB ASC 740, which requires the recognition of deferred tax assets and liabilities to reflect the future
tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred
items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax
bases of the Company's assets and liabilities result in a deferred tax asset, the guidance requires an evaluation of the probability
of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is
recorded when it is more likely than not that some or the entire deferred tax asset will not be realized.
The Company has net operating
losses at December 31, 2015 of $5,314,920 expiring through 2034. Utilization of these losses may be limited by the "change
of ownership" rules as set forth in section 382 of the Internal Revenue Code.
The difference between
the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the federal statutory rate of
35% is as follows:
|
|
|
For the period
from
January 13, 2014
(date of inception) through
December 31,
2015
|
|
|
|
|
|
|
|
|
Expected income tax benefit (loss) at statutory rate of 35%
|
|
$
|
1,860,222
|
|
|
Change in valuation account
|
|
|
(1,860,222
|
)
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
-0-
|
|
Deferred tax assets and
liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting
purposes. Temporary differences, which give rise to a net deferred tax asset, are as follows:
|
|
|
|
|
|
Deferred Tax Assets:
|
|
2015
|
|
|
|
|
|
|
|
|
Tax Benefit of net operating loss carry-forward
|
|
$
|
1,860,222
|
|
|
Less: valuation allowance
|
|
|
(1,860,222
|
)
|
|
Deferred tax assets
|
|
|
-0-
|
|
|
Deferred tax liabilities
|
|
|
-0-
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-0-
|
|
The provisions of ASC 740
require companies to recognize in their financial statements the impact of a tax position if that position is more likely than
not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on
a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods
and disclosure.
Management does not believe
that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions
of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial
statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
If sales of Unwind Ultimate
Relaxation continue future payments will be required to Innovative Beverage Group Holdings, Inc. These payments are $0.60 for each
24-pack, $0.12 for each 12-pack sold. If the formula is sold 3.5% of the sale price would be due.
NOTE 10 – SUBSEQUENT EVENTS
On February 23, 2016, the
Company received from its majority shareholder 100,000,000 restricted common shares for immediate cancellation. There was no consideration
to the majority shareholder.
In March 2016, the Company
entered into a convertible debt agreements with total principal amount of $25,000 and 10% simple interest per annum. The note is
convertible at a 70% discount to the lowest market price of the 20 days preceding the conversion request. The note is due September
21, 2016.
On March 18, 2016, the
Company amended its Articles of Incorporation reducing the authorized common shares from 5,000,000,000 downward to 2,200,000,000.
On April 4, 2016, Jason
Spatafora resigned from all positions. The Company entered into an employment agreement with Jeffrey Greene to become the Chief
Executive Officer. The term of the agreement is one year with a base salary of $10,000 per month. Mr. Greene is to receive 50,000,000
restricted common shares and 150 Series A Preferred shares are to be transferred from their current holder. An additional bonus
of 10,000,000 common shares will be due for each $500,000 in revenue up to $1,000,000 the Company receives during the term of the
agreement.
