NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 1 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Business
Fresh Promise Foods, Inc., formally
Stakool, Inc., was incorporated in the State of Delaware under the name, PLR, Inc. in 1993, and went through a series of name
changes and reorganizations. In November 1997, PLR, Inc. changed its name to Integrated Carbonics Corp. and moved its domicile
to the State of Nevada. On July 23, 1999, Integrated Carbonics Corp. changed its name to Urbana.ca, Inc. (“URBA”).
On April 11, 2003, URBA changed its name to PSPP Holdings, Inc. On August 11, 2008, PSPP Holdings, Inc. changed its name to Cynosure
Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation with the State of Nevada. On August 21, 2008,
the Company changed its name to Hybid Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
On June 16, 2011, Stakool entered
into a Letter of Intent of Sale and Purchase with Anthus Life Corp., a privately held Nevada corporation (“Anthus Life”).
On July 20, 2011, Stakool and
Anthus Life executed an Agreement of Sale and Purchase whereby Anthus Life received 77,588,470 shares of 79,388,470 issued and
outstanding shares of Stakool common stock, as well as 10,000,000 Preferred Shares of Stakool in exchange for scheduled payments,
totaling $350,000 and 1,300,000 shares of Stakool common stock the “Agreement of Sale and Purchase”). The parties
amended the Agreement of Purchase and Sale as of January 19, 2012, providing, among other things, for the issuance of an additional
2,650,000 shares of Stakool common stock to certain parties. All stock has been issued under the Agreement of Sale and Purchase
and, as of December 31, 2012, $355,000 has been paid.
Anthus Life Corp. was incorporated
in Nevada on June 4, 2009. Anthus was a developer and manufacturer of natural and organic food products packaged for consumer
consumption. The Company had one product line in the natural food category. In 2013 the Company terminated its production of products
due to a lack of working capital.
On March 15, 2013 all officers
and directors resigned from the Company and Mr. Joseph C. Canouse was appointed President, Chief Executive Officer, and Director.
On April 17, 2013 Mr. Kevin P.
Quirk joined the Company and was appointed President, Chief Executive Officer. Mr. Canouse, who continued as a Director, assumed
the title of Chief Financial Officer.
Effective August 5, 2013 the Company
completed a 1 for 100 reverse stock split, which reduced the number of issued and outstanding common shares from 2,903,888,889
to approximately 29,039,066. Fractional shares produced as a result of this reverse stock split were rounded up to the next whole
share. The consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.
On September 26, 2013 the name
of the Company was changed to Fresh Promise Foods, Inc. and the Company also reduced the number of authorized shares of common
stock from four billion (4,000,000,000) to four hundred seventy five million (475,000,000).
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 1 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING BASIS
The Company uses the accrual basis
of accounting and accounting principles generally accepted in the United States of America (“GAAP accounting”). The
Company has adopted a December 31 fiscal year end.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements
include the financial statements of the Fresh Promise Foods Inc., Inc. and its wholly-owned subsidiaries Anthus Life Corporation
and Harvest Soul Inc. Harvest Soul Inc. was formed January 21, 2014 as a Georgia corporation. It will retain all intangible assets
of the Company including trademarkes, patents, and copyrights. It will have no employees.
All significant inter-company
balances and transactions within the Company and subsidiary have been eliminated upon consolidation.
CASH AND CASH EQUIVALENTS
Fresh Promise Foods Inc. considers
all highly liquid investments with maturities of three months or less to be cash equivalents. At March 31, 2014 and 2013, the
Company had $42,055 and $20 cash, respectively.
CASH FLOWS REPORTING
The Company follows ASC 230, Statement
of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating,
investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect
method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting
net loss to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating
cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are
included in net income that do not affect operating cash receipts and payments.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial
instruments are carried at the approximate fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these consolidated financial statements.
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 the financial statements
and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 1 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE MEASUREMENTS
The Company has adopted the guidance
under ASC Topic 820 for financial instruments measured on a fair value on a recurring basis. ASC Topic 820 establishes a fair
value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and
requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further authoritative
accounting guidance (ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price
in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using
one or more of the techniques provided for in this update.
The standard describes a fair
value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that
may be used to measure fair value, which are the following:
Level
1 – Quoted prices in active markets for identical assets and liabilities.
Level
2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the asset or liabilities.
Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities.
Our assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset
or liability.
The Company analyzes all financial
instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and
ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end,
with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the over- all fair value
of the financial instruments. In addition, the fair value of free standing derivative instruments such as warrant and option derivatives
are valued using the Black-Scholes modes.
The Company uses Level 3 inputs
for its valuation methodology for the embedded conversion option liabilities as their fair value were determined by using the
Black Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect
fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments
to fair value of derivatives.
The following table sets forth
the liabilities at March 31, 2014, which is recorded on the balance sheet at fair value on a recurring basis by level within the
fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value
measurement:
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 1 – FAIR VALUE MEASUREMENTS (CONTINUED)
|
|
|
|
|
Fair Value Measurements at Reporting Date
Using
|
|
|
|
|
|
Quoted prices in
|
|
|
Significant Other
|
|
Significant
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
Inputs
|
Description
|
|
March 31, 2014
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
(Level 3)
|
Convertible promissory notes with embedded conversion option
|
|
$
|
301,741
|
|
|
|
-0-
|
|
|
-0-
|
|
$
|
301,741
|
Total
|
|
$
|
301,741
|
|
|
|
-0-
|
|
|
-0-
|
|
$
|
301,741
|
The following table sets forth
a summary of change in fair value of our derivative liabilities for the three months ended March 31, 2013:
Beginning
balance
|
|
$
|
156,549
|
|
Change in fair value
of embedded conversion features of convertible promissory notes and warrants included in earnings
|
|
$
|
(164,146
|
)
|
Embedded conversion
option & warrant liability recorded in connection with the issuance of convertible promissory notes
|
|
$
|
357,003
|
|
Change in fair
value of embedded conversion features of convertible promissory notes due to conversion
|
|
$
|
(47,665
|
)
|
Ending balance
|
|
$
|
301,741
|
|
INVENTORIES
Inventories previously consisted
of natural and organic food products, wrappers and boxes, and were stated at the lower of cost or market. Cost was determined
on the average cost method. Inventories are reviewed and reconciled periodically. As of March 31, 2014 and 2013, the Company maintained
no inventory.
ACCOUNTS RECEIVABLE
The Company’s receivables
had consisted of billings to customers for products invoiced and shipped and one temporary cash advance to a related party. The
Company charges off receivables if they determine that the amount is no longer collectible. The allowance for doubtful accounts
was zero at March 31, 2014 and 2013. Bad debt expense related to customer receivables for the year ended March 31, 2014 and March
31, 2013 was zero and zero respectively.
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
PROPERTY AND EQUIPMENT
Currently the company has no capital
assets. Previously assets were depreciated over their estimated useful lives, three to seven years using the straight-line method
of depreciation for book purposes.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is
calculated in accordance with FASB ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding
during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the
weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional
common shares assumed to be exercised.
Basic net income (loss) per common
share is based on the weighted average number of shares of common stock outstanding at March 31, 2014 and 2013. Diluted earnings
per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average
number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted for any potentially dilutive debt or equity. At March 31, 2014 and 2013, the Company had convertible
notes and warrants outstanding that could be converted into approximately 98,861,626 common shares based up the closing bid price
of the company’s common stock at March 31, 2014.
REVENUE RECOGNITION
The Company derives revenue from
the sale of its products. The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue
recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized
or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the
product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and
(iv) collectability is reasonably assured.
SHARE-BASED EXPENSE
ASC 718, Compensation –
Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services
are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments
such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee
stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is
recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite
service period (usually the vesting period).
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 1 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
The Company accounts for stock-based
compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments
to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is
more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based
payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the three
months ended March 31, 2014 and 2013 totaled $2,950 and $29,570, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive
releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting
Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and
applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have
a material impact on the Company’s present or future financial statements.
RECLASSIFICATION of FINANCIAL STATEMENT ACCOUNTS
Certain amounts in the December
31, 2013 consolidated financial statements have been reclassified to confirm to the presentation in the March 31, 2014 consolidated
financial statements.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment is recorded
at cost. The Company depreciates the equipment using the straight-line method over the useful lives of the equipment. The useful
lives are estimated to be between 3 and 7 years. Depreciation expense was zero and $100 for the quarters ended March 31, 2014
and 2013, respectively. Property and equipment consisted of the following at March 31, 2014 and December 31, 2013:
|
|
March
31, 2014
|
|
|
December
31, 2013
|
|
Furniture and
fixtures
|
|
$
|
-0-
|
|
|
$
|
1,192
|
|
Office equipment
|
|
|
-0-
|
|
|
|
649
|
|
Total property and equipment
|
|
|
-0-
|
|
|
|
1,841
|
|
Less: Accumulated
depreciation
|
|
|
-0-
|
|
|
|
(1,013
|
)
|
Property and equipment,
net.
|
|
$
|
-0-
|
|
|
$
|
828
|
|
Impairment expense
|
|
|
-0-
|
|
|
|
(828
|
)
|
Property and equipment,
net.
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 3 – RELATED PARTY TRANSACTIONS
At the time of his appointment
Mr. Canouse received the 1 share of convertible Preferred B stock previously issued to a director. Also, during the three months
ended March 31, 2013, the Company issued 1 additional shares of convertible preferred B stock to Mr. Quirk when he joined the
Company. The stock has no par value and is not traded publicly.
During the three months ended
March 31, 2014 the Company converted $11,000 of a $22,000 convertible note to 3,666,667 common shares from Jahoco LLC, a related
party. Jahoco LLC is owned by James Canouse, brother of Joseph Canouse. The note had been purchased from a former officer of the
Company.
NOTE 4 – STOCK PAYABLE
On April 26, 2012, The Company
entered into an agreement with Ironridge Global to settle $284,917 in liabilities. Pursuant to an order approving stipulation
for settlement of claims between Ironridge and the Company, Ironridge is entitled to receive 1 million common shares plus that
number of shares with an aggregate value equal to $332,748, divided by 70% of the following: the volume weighted average price
of the issuer’s common stock over that number of consecutive trading days following the date of receipt required for the
aggregate trading volume to exceed $1.75 million, not to exceed the arithmetic average of the individual daily volume weighted
average prices of any five trading days during such period.
Ironridge is prohibited from receiving
any shares of common stock that would cause it to be deemed to beneficially own more than 9.99% of the Company’s total outstanding
shares at any one time. Ironridge received an initial issuance of 97,150 shares, and may be required to return or be entitled
to receive shares, based on the calculation summarized in the prior paragraph. For purposes of calculating the percent of class,
the initial issuance to Ironridge was based upon a total of 875,491 shares of common stock outstanding immediately prior to the
issuance of shares to Ironridge, such that 97,150 shares issued would represent approximately 9.99% of the outstanding common
stock after such issuance.
For the three months ended March
31, 2014 and 2013, Ironridge received 8,000,000 and 3,000,000 shares respectively, which were recorded at $56,000 and $21,000
respectively. For the same periods the company recorded a gain of $16,000 on the shares issued in 2014 and a loss of $9,000 on
the shares issued in 2013. At March 31, 2014 the balance of shares due Ironridge Global was 16,378,310. At December 31, 2013 the
balance of shares due Ironridge Global was and 24,378,310. The recorded value of these shares at March 31, 2014 and December 31,
2013 was $114,648 and $234,200, respectively. Carrying value of amounts due under this agreement are computed by multiplying the
percentage of total shares due issued to Ironridge times the initial value of the obligation recorded in 2012. In connection with
the transaction, Ironridge agreed not to hold any short position in the issuer’s common stock, and not to engage in or affect,
directly or indirectly, any short sale until at least 180 days after the end of the calculation period.
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE
NOTES PAYABLE
Convertible notes payable consist
of the following at March 31, 2014 and December 31, 2013:
All common share data in this table
have been adjusted for the reverse stock split.
|
|
Balance Due at
|
|
|
|
March
31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
On January
16, 2012 the Company executed a promissory note for $50,000. The note bears interest at 10 % and is secured by common stock
of the Company. The note is convertible into common stock of the Company at $0.05 per share. In 2012, $30,000 of the note
was converted to 2,639,237 shares of common stock of the Company. In 2013 the note maturity date was extended to September
30, 2014. Due to the features in this note, the Company could not determine if sufficient shares in the Company stock would
be available to fullfill all conversion obligations .Accordingly a derivative liability was recorded for this note using the
Black Scholes Method to value the derivative liability with the following assumptions:
Risk Free Interest rate of .0013,
volatility of 597%, and an assumed dividend rate of 0%.
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
On March 5, 2013 the
Company executed a promissory note for $45,000. In 2014 the note was modified into three notes of $15,000 each. The notes
bear interest at 8 % are unsecured. The notes matured March 5, 2014 but were extended to June 30, 2014. One of the notes was
sold to a third party and amended. Due to the amended features the Company has recorded a derivative liability for this note
using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of
.0013, volatility of 536 %, and an assumed dividend rate of 20%. The remaining two $15,000 notes are also convertible into
common stock at the market price but no derivative liability was recorded. In February 2014, the third party converted $5,000
of note into 2,543,235 shares of common stock of the Company.
|
|
$
|
40,000
|
|
|
$
|
45,000
|
|
|
|
|
|
|
|
|
|
|
On March 13, 2013 the
Company executed three promissory notes for services provided totaling $109,500. The notes are payable upon demand and bear
interest at 12 % and can be converted into common stock of the company at the average five day closing bid price multiplied
by three. Note Amount Converted / (Average price x 3)
|
|
$
|
74,500
|
|
|
$
|
109,500
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
(CONTINUED)
On June
04, 2013 the Company executed a promissory note for $15,000. The note bears interest at 8% and is secured by common stock
of the Company. The note can be converted into common stock at a discount of 30% of the conversion price. The conversion price
is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues
stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower price. The
Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability
with the following assumptions: Risk Free Interest rate of .0014, volatility of 517%, and an assumed dividend rate of 0%.
During the three months ended March 31, 2014 the note plus accrued interest of $663 was converted into 7,260,813 shares of
common stock of the Company.
|
|
$
|
-
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
On September 11, 2013
the Company executed a promissory note for $15,000 as payment to a service provider. The note is convertible into common stock
of the Company at a discount of 35% off the average one day bid price the day prior to conversion. Due to the discount feature
we have recorded a liability of $8,077, or put premium, as part of the carrying value of this note. The note is convertible
at any time prior to maturity and bears interest at 6% per annum.
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
In 2013 the Company
executed a consulting agreement with a a former officer. The agreement provided for payment of consulting fees during the
transition period when new management obtained control of the Company. The agreement allowed any unpaid amounts due under
the agreement to be memoralized in a promissory note. At December 31, 2013 the Company owed the former officer $44,000. This
amount was converted to a note of $22,000. The former officer sold the note to a related party of the Company. The Company
recorded income of $22,000 as debt forgiveness. The remaining $22,000 note was amended providing for conversion to common
stock of the Company at a discount of 50% of the average closing bid price on the day of conversion. Due to the discount feature
we have recorded a liability of $22,000, or put premium, as part of the carrying value of this note. The note is convertible
at any time. On February 12, 2014 the related party converted $11,000 of the face amount of the note into 3,666,667 shares
of common stock of the Company.
|
|
$
|
11,000
|
|
|
$
|
-
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
(CONTINUED)
On July
23, 2013 the Company executed a promissory note for $15,500. The note bears interest at 8 % and is secured by common stock
of the Company. The note can be converted into common stock 180 days after issuance at a discount of 45% off the conversion
price. The conversion price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless
the Company sells or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced
to that lower price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value
the derivative liability with the following assumptions: Risk Free Interest rate of .0012, volatility of 580%, and an assumed
dividend rate of 0%. During the three months ended March 31, 2014 this note and accrued interest of $686 was converted to
8,060,000 shares of common stock of the Company.
|
|
$
|
-
|
|
|
$
|
15,500
|
|
|
|
|
|
|
|
|
|
|
On October 29, 2013
the Company executed a promissory note for $2,500. The note bears interest at 6% and is secured by common stock of the Company.
The loan matures April 29, 2014. The note is convertible at the lower of a discount of 35% off the prior day’s closing
bid price or $0.01. The note also provided for purchase of 133,334 shares by execution of a warrant agreement. The agreement
expires two years from the date of the note. Under this agreement shares can be purchased for $0.02 unless the Company sells
stock at a price below that level. Should this occur, the warrant purchase price shall be reduced to the lower selling price.
The Company has recorded a derivative liability due to this provision. The Company used the Black Scholes Method to value
the derivative liability with the following assumptions: Risk Free Interest rate of .0011, volatility of 599%, and an assumed
dividend rate of 0%.
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
|
|
|
|
|
|
|
|
On December 12, 2013
the Company executed a promissory note for $53,000. The note bears interest at 8 % and is secured by common stock of the Company.
The note can be converted into common stock 180 days after issuance at a discount of 45% off the conversion price. The conversion
price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells
or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower
price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative
liability with the following assumptions: Risk Free Interest rate of .0012, volatility of 586%, and an assumed dividend rate
of 0%.
|
|
$
|
53,000
|
|
|
$
|
53,000
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
(CONTINUED)
On January
01, 2014 the Company executed a promissory note for $20,000 as payment to a service provider. The note is convertible into
common stock of the Company at a discount of 35% off the average one day bid price the day prior to conversion. Due to the
discount feature we have recorded a liability of $10,769, or put premium, as part of the carrying value of this note. The
note is convertible at any time prior to maturity and bears interest at 6% per annum.
|
|
$
|
20,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
In February 2014, one
of these notes with a face value of $35,000 was sold to a third party. The accrued interest on the note of $4,710 was added
to the principal amount purchased. The note was amended and the Company has recorded a derivative liability based upon the
amended features. The Company used the Black Scholes Method to value the derivative liability with the following assumptions:
Risk Free Interest rate of .0013%, volatility of 526 %, and an assumed dividend rate of 0%.
|
|
$
|
39,710
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On January 23, 2014
the Company executed a promissory note for $6,000. The note bears interest at 9.875 % and is secured by common stock of the
Company. The note can be converted into common stock at a discount of 30% off the conversion price. The conversion price is
the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. The Company
has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the
following assumptions: Risk Free Interest rate of .0013, volatility of 536%, and an assumed dividend rate of 0%.
|
|
$
|
6,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On February 04, 2014
the Company executed a promissory note for $53,000. The note bears interest at 8 % and is secured by common stock of the Company.
The note can be converted into common stock 180 days after issuance at a discount of 45% off the conversion price. The conversion
price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells
or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower
price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative
liability with the following assumptions: Risk Free Interest rate of .0013, volatility of 536%, and an assumed dividend rate
of 0%.
|
|
$
|
53,000
|
|
|
$
|
-
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
(CONTINUED)
On March
17, 2014 the Company executed a promissory note for $25,000. The note bears interest at 12 % and is secured by common stock
of the Company. The note can be converted into common stock at a discount of 40% off the conversion price. The conversion
price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells
or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower
price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative
liability with the following assumptions:
Risk Free Interest rate of .0013, volatility of 536%, and an assumed dividend
rate of 0%.
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Premium liability
|
|
$
|
29,846
|
|
|
$
|
8,077
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt
discount on derivative liabilities
|
|
$
|
(116,672
|
)
|
|
$
|
(54,962
|
)
|
|
|
|
|
|
|
|
|
|
Total convertible
notes outstanding, net of unamortized discounts
|
|
$
|
272,884
|
|
|
$
|
228,615
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 –
NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)
The Company
recorded derivative liabilities as follows:
|
|
|
|
|
Ending Liability
|
|
Financial
Agreement
|
|
Date
of Agreement
|
|
|
at
March 31, 2014
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note
|
|
|
January
6, 2012
|
|
|
$
|
1,322
|
|
Warrant agreement
|
|
|
September
26, 2013
|
|
|
$
|
15,964
|
|
Warrant agreement
|
|
|
October
21, 2013
|
|
|
$
|
1,597
|
|
Convertible Promissory
Note
|
|
|
October
29, 2013
|
|
|
$
|
1,743
|
|
Warrant agreement
|
|
|
October
29, 2013
|
|
|
$
|
533
|
|
Convertible Promissory
Note
|
|
|
December
12, 2013
|
|
|
$
|
82,352
|
|
Convertible Promissory
Note
|
|
|
January
23, 2014
|
|
|
$
|
11,487
|
|
Convertible Promissory
Note
|
|
|
February
4, 2014
|
|
|
$
|
78,422
|
|
Convertible Promissory
Note
|
|
|
February
10, 2014
|
|
|
$
|
70,986
|
|
Convertible Promissory
Note
|
|
|
March
17, 2014
|
|
|
$
|
37,335
|
|
|
|
|
Balance
at March 31, 2014
|
|
|
$
|
301,741
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE
(CONTINUED)
The Company recorded put premium liability expense
during the three months ended March 31, 2014 as follows:
Balance at December 31, 2013
|
|
|
|
|
|
$
|
8,077
|
|
Convertible Promissory Note
|
|
|
January
28, 2014
|
|
|
$
|
22,000
|
|
Convertible Promissory Note
|
|
|
January
1, 2014
|
|
|
$
|
10,769
|
|
Adjustment for Note conversion
|
|
|
January
28, 2014
|
|
|
$
|
(11,000
|
)
|
Balance at March 31, 2014
|
|
|
|
|
|
$
|
29,846
|
|
The Company recorded debt discount expense during the
three months ended March 31, 2014 as follows:
Unamortized debt discount at December 31, 2013
|
|
$
|
(54,962
|
)
|
Amortization of debt discount three months ended March 31, 2014
|
|
$
|
62,000
|
|
Debt discount on notes issued during three months ended March 31, 2013
|
|
$
|
(123,710
|
)
|
Unamortized debt discount at March 31, 2014
|
|
$
|
(116,672
|
)
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)
The authorized common stock of
the Company consist of 475,000,000 shares with a par value $0.00001. The Company also has 100,000,000 shares of par value $0.00001
Preferred C stock authorized and 10 shares of par value $0.00001 Preferred B stock authorized and 30,000,000 par value $0.00001
par value Preferred C stock authorized.
During the three months ended
March 31, 2014, the Company converted notes payable from non-related parties along with the accrued interest for a total of $36,848
into 17,864,048 shares of its common stock.
The Company also issued 500,000
shares of common stock to a service provider which was recorded at fair market value of $2,950.
During the three months ended
March 31, 2014, the Company issued 8,000,000 shares of common stock in conjunction with the settlement agreement with Ironridge
Global, previous discussed. The stock was recorded at $56,000 but had a fair market value of 80,000. The Company recorded a loss
on this issuance of $24,000. This was exempt from registration under rule 144.
The Company also converted $11,000
of a $22,000 convertible note to 3,666,667 common shares from a related party. The note had been purchased from a former officer
of the Company.
The following table sets forth
common share purchase warrants outstanding as of March 31, 2014:
|
|
|
|
|
Weighted Average
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
Outstanding warrants December 31, 2013
|
|
|
40,533,334
|
|
|
$
|
0.02
|
|
Warrants issued three months ended March 31, 2014
|
|
|
-
|
|
|
|
-
|
|
Outstanding warrants March 31, 2014
|
|
|
40,533,334
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable upon exercise of warrants
|
|
|
40,533,334
|
|
|
$
|
0.02
|
|
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 7 – INCOME TAXES
The Company accounts for income
taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things,
an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities
A valuation allowance is provided
to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will
not be realized.
The Company follows the provisions
of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the
guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based
on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other
positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit
that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the
benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability
for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable
to the taxing authorities upon examination. The Company believes its tax positions will be highly certain of being upheld upon
examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25
Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled
upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. Management
has not filed tax returns for the year ended December 31, 2013.
As of March 31, 2014, the Company
had net operating loss carry forwards of approximately $7,870,000 that may be available to reduce our tax liability in future
years. We estimate the benefits of this loss carry forward at $2,557,000 if the Company produces sufficient taxable income. No
adjustments to the financial statements have been recorded for this potential tax benefit.
FRESH
PROMISE FOODS, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2014
NOTE 8 – GOING CONCERN
The Company’s consolidated
financial statements are prepared using accounting principles generally accepted in the United States of America applicable to
a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.
In order to continue as a going
concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources
for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating
expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the
Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on
terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from
business operations. However, there is no assurance that the Company will attain profitability. The accompanying consolidated
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 9 – SUBSEQUENT EVENTS
On April 10, 2014 the Company
issued 3,699,000 shares of common stock in conjunction with the partial conversion of a promissory note dated March 13, 2013 for
$4,000 face value.
In accordance with ASC 855-10,
the Company has analyzed its operations subsequent to March 31, 2014 to the date these consolidated financial statements were
issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.