UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2014

 

or

 

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 00-24723

 

FRESH PROMISE FOODS, INC.

(Exact Name of registrant as specified in its charter)

 

Nevada		88-0393257
(State or other Jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

 

1111 Alderman Drive, Suite 210

Alpharetta, Georgia 30005

(Address of Principal Executive Offices)

 

(770) 521-9826

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

 

[  ]	Large Accelerated Filer	[  ]	Accelerated Filer
[  ]	Non-Accelerated Filer	[X]	Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of May 06, 2014, there were 96,406,673 shares outstanding of the registrant’s common stock.

 

 

  

TABLE OF CONTENTS

 

			Page
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements		F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		6
Item 4.	Controls and Procedures		6
Part II. Other Information
Item 1.	Legal Proceedings		6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		7
Item 3.	Defaults Upon Senior Securities		7
Item 4.	Mine Safety Disclosure		7
Item 5.	Other Information		7
Item 6.	Exhibits		8
Signatures			9

 

 

PART I. FINANCIAL STATEMENTS

 

ITEM I. FINANCIAL STATEMENTS

 

Fresh Promise Foods, Inc.

Consolidated Balance Sheet

 

		Unaudited
		March 31, 2014				December 31, 2013
Assets
Current Assets
Cash		$	42,055			$	33,335
Current Assets			42,055				33,335
Website development			2,120				-
Total Assets		$	44,175			$	33,335
Liabilities and Stockholder’s Deficit
Liabilities
Current Liabilities
Accounts payable		$	241,899			$	236,797
Other liabilities			8,368				9,600
Accrued interest			24,743				23,358
Convertible note payable			272,884				228,615
Accrued salaries due officers			136,000				64,000
Amounts due former officers under consulting agreements			-				47,000
Convertible note derivative liability			301,741				156,549
Loan due related parties			3,600				-
Stock payable for acquisition			114,648				170,648
Total Current Liabilities			1,103,883				936,567
Common stock - par value $0.00001 475,000,000 shares authorized, 92,707,673 and 62,676,958 shares outstanding, respectively			927				627
Preferred stock series C - par value $0.00001 100,000,000 shares authorized, 308,180 and 341,180 shares outstanding, respectively.			3				3
Preferred stock series B - no par value, 10 shares authorized, and 2 and 1 share outstanding, respectively.
Additional paid In Capital			6,810,571				6,704,649
Accumulated deficit			(7,871,209	)			(7,608,511	)
Total Stockholders’ Deficit			(1,059,708	)			(903,232	)
Total Liabilities and Stockholders’ Deficit		$	44,175			$	33,335

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Fresh Promised Foods, Inc.

Consolidated Statement of Operations

Three Months Ended March 31,

Unaudited

 

		2014				2013
Revenues		$	-			$	64
Cost of Goods Sold			-				682
Gross Margin			-				(618	)
Operating Expenses
Professional fees			20,100				132,780
Consulting fees			39,166				16,664
Office expense			66				8,982
Investor and public relations			4,703				7,779
Communication			1,047				1,381
Bank services			-				636
Travel and entertainment			3,357				535
General and administrative expense			5,678				248
Payroll and related expense			95,000				125
Depreciation			-				100
Stock based compensation			2,950				29,570
Advertising and promotion			513				-
Total Operating Expenses			172,580				198,800
Loss from operations			(172,580	)			(199,418	)
Other expenses
(Gain) loss on note settlement			5,321				(13,782	)
Debt forgiveness (income)			(22,000	)			-
(Gain) on Change in value of derivative liability			(211,811	)			-
Derivative liability expense			233,293				-
(Gain) Loss on stock issuance			(16,000	)			18,000
Interest expense			101,315				30,188
Total other expenses			90,118				34,406
Loss before provision for income tax			(262,698	)			(233,824	)
Provision for income tax			-				-
Net Loss		$	(262,698	)		$	(233,824	)
Net Loss per share: Basic and diluted		$	(0.00	)		$	(0.00	)
Weighted Average Number of Shares Outstanding: Basic and diluted			76,133,463				33,047,990

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Fresh Promise Foods, Inc.

Consolidated Statement of Shareholder’s Deficit

Unaudited

 

		Common Stock								Preferred Stock A								Preferred Stock B								Preferred Stock C								Additional
		Number								Number								Number								Number								Paid in				Accumulated				Stockholders’
		of Shares				Amount				of Shares				Amount				of Shares				Amount				of Shares				Amount				Capital				Deficit				Deficit
Balance at December 31, 2013			62,676,958				627												2								308,180				3				6,704,649				(7,608,511	)			(903,232	)
																																											-
Stock issued for services			500,000				5				-				-				-				-				-				-				2,945				-				2,950
Stock issued for debt conversion			21,530,715				215				-				-				-				-				-				-				63,057				-				63,272
Stock issued under financing agreement			8,000,000				80				-				-				-				-				-				-				39,920				-				40,000
Net loss																																							(262,698	)			(262,698	)
Balance at March 31, 2014			92,707,673				927												2								308,180				3				6,810,571				(7,871,209	)			(1,059,708	)

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Fresh Promise Foods, Inc.

Consolidated Statements of Cashflows

Three Months Ended March 31

Unaudited

 

		2014				2013
OPERATING ACTIVITIES
Net loss from operations		$	(262,698	)		$	(233,824	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			62,000				16,404
Change in value of derivative liability			(211,811	)			(13,782	)
Derivative liability expense			233,293				11,236
Forgiveness of debt			(22,000	)			-
Loss on note conversions			5,321				-
(Gain) Loss on stock issuance			(16,000	)			18,000
Notes issued for professional services			20,000				109,500
Premium expense			32,769				-
Stock-based compensation			2,950				29,570
Depreciation & Amortization			-				100
Accrued interest on notes converted			5,162				-
Changes in working capital items
Accrued salaries			72,000				-
Decrease in other liabilities			(1,232	)			-
Settlement of amount due former officer			(3,000	)			-
Advances from related parties			3,600				-
Increase in accounts payable			5,102				44,430
Increase in accrued interest			1,384				2,548
Cash flow from operating activities			(73,160	)			(15,818	)
INVESTING ACTIVITIES
Website development			(2,120	)			-
			(2,120	)			-
FINANCING ACTIVITIES
Proceeds from note payable			84,000				10,500
Proceeds from stock sale			-				5,000
Cash flow from financing			84,000				15,500
Net change in cash			8,720				(318	)
Beginning cash			33,335				338
Ending Cash			42,055				20
Non-Cash Investing and Financing Activities:
Record derivative liability on notes		$	186,427			$	43,736
Conversion of note to common stock		$	46,500			$	8,339
Issuance of promissory note for accrued expenses		$	-			$	154,500
Issuance of shares under stock payable agreement (Note 4)		$	56,000			$	60,000

 

See accompanying notes to unaudited consolidated financial statements.

 

 

FRESH PROMISE FOODS, INC.

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.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q and other reports filed by Fresh Promise Foods, Inc. formally StaKool, Inc. (“we,” “us,” “our,” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Plan of Operations

 

Under the direction of Kevin Quirk, the Company’s Chief Executive Officer, the Company’s primary goal continues to be the leveraging of management’s experience and knowledge of the natural food and beverage industry to better deploy the Company’s “Natural plus Energy” product line and to allow for a more comprehensive understanding of the distribution channels and retail positioning. In addition, the natural food and beverage market continues to grow at a relatively substantial pace, and allows for the introduction of many functional food and beverage products.

 

Our management team will explore all aspects of the all-natural functional food and beverage industry in efforts to effectively integrate and develop products tailored to those markets. The management team feels confident that its understanding of the market will allow for the addition of several functional food and beverage products within the next 24-36 months that effectively capitalize on our knowledge and experience, and are capable of developing velocity throughout the all-natural retail market space. The Company has access to a talented packaging and design team that will assist in the future development of well-conceived products and the appropriate consumer packaging that will allow for rapid consumer interest, appeal and rapid adoption.

 

In 2013 the Company had suspended operations due to a lack of working capital.

 

 

Current developments include the following:

 

●	We anticipate moving into our production facility in May 2014 with the goal of being fully licensed with the FDA and USDA at such time.
●	We have acquired production equipment which will be shipped to our facility later this month.
●	We have completed 85-90 % of our newest consumer product and intent to announce the brand name in late May.
●	We continue to seek companies that would be viable acquisition candidate.

 

Results of Operations

 

For the Three Months Ended March 31, 2014 Compared to the Three Months Ended March 31 2013

 

Revenue

 

Total revenue for the three months ended March 31, 2014 was zero compared to $64 for the same period in 2013.

 

Total revenues were from the sale of health food products.

 

Gross Margin

 

Gross margin for the three months ended March 31, 2014 was $0 due to a lack of revenue. Revenue declined from $64 to $0 for the three month period ending March 31, 2013 and 2014 respectively, due to a shortage of working capital which caused the Company to suspend operations.

 

Operating Expenses

 

For the three month periods ending March 31, operating expenses declined $26,220, from $198,800 in 2013, to $172,580 in 2014. Of this decrease, $112,680 represented a reduction in professional fees, primarily legal expense. This expense reduction was partially offset by an increase in payroll of $94,875 and consulting fees of $22,502. Our stock based compensation also decreased from $29,750 in 2013 to $2,950 in 2014.

 

Loss from Operations

 

Loss from operations for the three months ended March 31, 2014 was $172,580, a decline from $199,418 for the same period in 2013. The loss was primarily attributable to a lack of revenue.

 

Other Income (Expense)

 

For the three month periods ended March 31, Other Expenses increased $55,712, from $34,406 in 2013 to $90,118 in 2014. In 2014 Other Expense included $233,293 in derivative liability expense, $101,315 in interest expense, and $5,321 in losses on note settlements. These expenses were offset by a gain on change in value of our derivative liabilities of $211,811, a gain of $22,000 on a forgiven debt, and a gain of $16,000 on stock issued under a financing agreement executed in 2012 in conjunction with our settlement with IronRidge Capital, as previously reported.

 

Net Loss

 

Net Loss for the three months ended March 31, 2014, was $262,598. The net loss was primarily attributable to a lack of revenue and the operating expenses and other expenses as described above.

 

Inflation did not have a material impact on the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

 

 

Liquidity & Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at March 31, 2014 and December 31, 2013

 

 

		3/31/2014				12/31/2013
Current assets		$	42,055			$	33,335
Current liabilities		$	1,103,882			$	936,567
Working capital deficit		$	(1,061,827	)		$	(903,232	)

 

At March 31, 2014, we had a working capital deficit of $1,061,827, as compared to a working capital deficit of $903,232, at December 31, 2013, an increase in the deficit of $158,595. The increase is primarily related to an increase in convertible notes payable issued in order to fund operating activities.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

 

The Company sustained a net loss of $262,698 for the three months ended March 31, 2014. Because of the absence of positive cash flows from operations, the Company requires additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

At March 31, 2014 we had minimal assets and a working capital deficit of $1,061,827. Our working capital deficit is due to the results of operations. However we are presently able to meet our short term obligations through the sale of convertible notes.

 

Net cash used in operating activities for the three months ended March 31, 2014 was $73,060. Net cash provided by financing activities for the three months ended March 31, 2014 was $84,000. Net cash provided by financing activities for this period consists primarily of the issuance of a convertible notes. Net cash used in investing activities was $2,120, which represented funds used to develop a new website for the Company.

 

We anticipate that our future liquidity requirements will arise from the need to fund operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated raising additional funds from the private equity sources and debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. In addition, our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. We are presently engaged in capital raising activities through several private offering of our company’s securities. See “Note 8 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”

 

Off-Balance Sheet Arrangements

 

As of March 31, 2014, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes in Internal Control over Financial Reporting.

 

No significant changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting were made in our internal control over financial reporting during the three month period ended March 31, 2014, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We, together with certain other parties (collectively, the “Defendants”), are currently involved in litigation against Kyle Gotshalk, Leonard Gotshalk, Clinton Hall, LLC, Richard Maher and Patrick O’Loughlin (collectively, the “Plaintiffs”). On April 25, 2013, the Plaintiffs filed a complaint with the United States District Court for the District of Nevada alleging claims including securities fraud and breach of contract. The Company believes these claims to be unfounded and the Company is prepared to file an answer with the United States District Court for the District of Nevada, together with counterclaims against the Plaintiffs The Company is continuing to vigorously defend itself against this lawsuit.

 

Except as described above, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations and there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on April 15, 2014.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the period ended March 31, 2014, the Company issued 7,260,813 shares of common stock in conjunction with the conversion of promissory note with a face value of $15,000 plus accrued interest of $663. This was exempt from registration under rule 144.

 

During the period ended March 31, 2014, the Company issued 8,060,000 shares of common stock in conjunction with the conversion of promissory note with a face value of $15,500 plus accrued interest of $686. This was exempt from registration under rule 144.

 

During the period ended March 31, 2014, the Company issued 3,666,667 shares of common stock in conjunction with the conversion of promissory note with a face value of $11,000. This was exempt from registration under rule 144.

 

During the period ended March 31, 2014, the Company issued 2,543,235 shares of common stock in conjunction with the conversion of promissory note with a face value of $5,000. This was exempt from registration under rule 144.

 

During the period ended March 31, 2014, the Company issued 500,000 shares of common stock for services provided. The Company recorded an expense of $2,950 for this transaction. This was exempt from the registration under rule 144.

 

During the period 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.

 

Item 3. Defaults upon Senior Securities.

 

There were no defaults upon senior securities during the quarter ended March 31, 2014.

 

Item 4. Mine Safety Disclosure.

 

Not applicable

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
31.2		Certification by the Principal Accounting Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification by the Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase**
101.DEF		XBRL Taxonomy Extension Definition Linkbase**
101.LAB		XBRL Taxonomy Extension Label Linkbase**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase**

 

* Filed Herewith.

 

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	FRESH PROMISE FOODS, INC.
Dated: May 15, 2014
	/s/ Kevin P. Quirk
	Kevin P. Quirk
	Principal Executive Officer