UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended September 30, 2014

 

¨	TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______to_______

 

Commission File No. 333-157281

 

GREENFIELD FARMS FOOD, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada		26-2909561
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

319 Clematis Street – Suite 400

West Palm Beach, Florida 33401

(Address of principal executive offices) (Zip code)

 

(561) 514-9042

(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 Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

 

Indicate by a check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Number of shares of common stock outstanding at November 1, 2014: 937,400,824

 

 

 

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

		September 30, 2014				December 31, 2013
ASSETS
Current Assets
Cash and cash equivalents		$	68,559				5,022
Prepaid expense			1,795				3,691
Credit card receivables			6,456				4,918
Inventory			8,472				8,486
Deferred charges			1,729				4,361
Total Current Assets			87,011				26,478
Property and Equipment
Equipment, computer hardware and software			149,289				148,390
Accumulated depreciation			(89,385	)			(72,806	)
Property and equipment, net			59,904				75,584
Other Assets
Security deposits			5,878				5,603
Total Assets		$	152,793			$	107,665
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current Liabilities
Checks written in excess of bank balance		$	-			$	13,555
Accounts payable			92,829				99,009
Accrued wages and payroll expenses			17,171				23,753
Accrued interest			12,734				9,742
Accrued interest – related parties			11,520				9,641
Accrued interest – convertible notes payable			14,767				19,290
Derivative liability			345,044				251,137
Notes payable			50,300				50,000
Notes payable – related parties			268,476				100,687
Convertible notes payable, net of debt discount			213,858				204,871
Total Liabilities			1,026,699				781,685
Stockholders’ Deficit
Preferred stock, par value $.001
50,000,000 shares authorized;
96,623 series A convertible shares issued and outstanding			97				97
44,000 series B convertible shares issued and outstanding			44				44
1,000 series D shares issue and outstanding			1				-
Common stock, par value $.001
950,000,000 shares authorized;
736,260,224 and 145,732,680 shares issued and outstanding, respectively			736,260				145,733
Warrants			507,280				507,280
Additional paid-in capital			211,177				-
Accumulated deficit			(2,328,765	)			(1,327,174	)
Total Stockholders' Deficit			(873,906	)			(674,020	)
Total Liabilities and Stockholders’ Deficit		$	152,793			$	107,665

 

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GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2014				2013				2014				2013
Sales
	Food and beverage		$	418,904			$	300,227			$	1,230,366			$	873,598
	Vending receipts			1,580				1,339				3,324				4,167
	Total sales			420,484				301,566				1,233,690				877,765
Cost of Goods Sold				348,526				215,824				1,020,701				633,884
Gross Profit				71,958				85,742				212,989				243,881
Operating Expenses
	Telephone and utilities		$	24,601				26,771				74,087				68,757
	Legal, accounting and professional fees			15,247				7,002				105,579				9,828
	Rent			11,100				14,950				52,953				45,424
	Advertising			6,173				11,421				17,149				36,208
	Repairs and maintenance			7,703				8,576				26,417				30,050
	Bank and credit card processing charges			7,423				5,141				26,252				15,595
	Wages and taxes			23,178				3,113				82,530				26,170
	Depreciation			5,262				4,431				16,579				13,293
	Other			39,359				23,780				108,838				78,852
Total Operating Expenses				140,046				105,185				510,384				324,177
Loss From Operations				(68,088	)			(19,443	)			(297,395	)			(80,296	)
Other Expenses (Income)
	Interest expense		$	8,619				-				17,866				-
	Derivative expense			49,542				-				242,804				-
	Change in derivative liability			31,208				-				(351,497	)			-
	Loss on conversion of debt			-				-				572,866				-
	Amortization expense on discount of debt			72,567				-				222,157				-
Total Other Expenses (Income)				161,936				-				704,196				-
Loss Before Provision for Income Tax				(230,024	)			(19,443	)			(1,001,591	)			(80,296	)
Provision for Income Tax				-				-				-				-
Net Income (Loss)			$	(230,024	)		$	(19,443	)		$	(1,001,591	)		$	(80,296	)
Weighted Average Number of Shares Outstanding:
	Basic and Diluted			361,978,707				53,965,942				610,182,063				53,965,942
Net Loss per Share:
	Basic and Diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)

 

3

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited)

AS OF SEPTEMBER 30, 2014

 

		Preferred stock								Common stock												Additional paid-in				Accumulated			Total stockholders'
		Shares				Par value				Shares				Par value				Warrants				capital				deficit			deficit
Balance at December 31, 2013			140,623			$	141				145,732,680			$	145,733			$	507,280			$	-			$	(1,327,174	)	$	(674,020	)
Issuance of common stock to convertible noteholders			-				-				590,527,544				590,527								211,178				-			801,705
Issuance of series D preferred stock			1,000				1				-				-				-				(1	)			-			-
Net loss			-				-				-				-				-				-				(1,001,591	)		(1,001,591	)
Balance at September 30, 2014			141,623			$	142				736,260,224			$	736,260			$	507,280			$	211,177			$	(2,328,765	)	$	(873,906	)

 

4

 

GREENFIELD FARMS FOOD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

			Nine Months Ended
			September 30,
			2014				2013
Cash Flows from Operating Activities
	Net loss for the period		$	(1,001,591	)		$	(80,296	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
	Depreciation			16,579				13,293
	Amortization of deferred financing costs			8,882				-
	Amortization of discount on debt			222,157				-
	Change in derivative liability			(351,497	)			-
	Initial derivative liability expense			242,804				-
	Loss on conversion of debt			572,866				-
Changes in Assets and Liabilities
	Decrease (Increase)  in prepaid expense			1,896				(437	)
	Decrease in inventory			14				-
	Decrease (Increase) in credit card receivable			(1,538	)			(8,541	)
	(Increase) in security deposits			(275	)			-
	(Decrease) in checks written in excess of cash balance			(13,555	)			-
	Increase in accounts payable			(6,179	)			6,102
	(Decrease) increase in accrued wages and payroll expenses			(6,583	)			(6,556	)
	Increase in accrued interest			2,992				-
	Increase in accrued interest – related parties			1,879				-
	(Decrease) in accrued interest – convertible notes payable			7,491				-
Net Cash used in Operating Activities				(303,658	)			(76,435	)
Cash Flows from Investing Activities:
	Purchase of property and equipment			(898	)			(5,299	)
	Payment of security deposit			-				(5,100	)
Net Cash Provided by (Used in) Investing Activities				(898	)			(10,399	)
Cash Flows from Financing Activities:
	Proceeds from notes payable - related parties			453,473				119,916
	Proceeds from notes payable			300				-
	Proceeds from convertible notes payable			200,005				-
	Payments of notes payable - related parties			(285,685	)			-
	Payments on capital leases			-				(5,670	)
	Payment of distributions to members			-				(31,501	)
Net Cash Provided by Financing Activities				368,093				82,745
Net Increase in Cash and Cash Equivalents				63,537				(4,089	)
Cash and Cash Equivalents – Beginning				5,022				4,089
Cash and Cash Equivalents End of Period			$	68,559			$	-
Supplemental Cash Flow Information:
	Cash paid for interest		$	1,274			$	-
	Cash paid for income taxes			-			$	-

 

5

 

GREENFIELD FARMS FOOD, INC.

NOTES TO THE FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

NOTE 1 – BASIS OF PRESENTATION

 

The following interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-K as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the period ended December 31, 2013. In the opinion of management, the interim unaudited financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

 

The consolidated financial statements for the nine months ended September 30, 2014 include the financial statement of the Company and its operating subsidiary Carmela’s Pizzeria. For the nine months ended September 30, 2013, the consolidated financial statements includes only Carmela’s. For the year ended December 31, 2013 the consolidated financial statements include the accounts of Carmela’s for the full year and the Company from October 1, 2013 through December 31, 2013.

 

For SEC reporting purposes, Carmela’s is treated as the continuing reporting entity that acquired GRAS. The reports filed after the transaction have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company pursuant to FASB ASC 805-40-45-1.

 

The statements of operations and cash flows reflect the results of operations and the changes in cash flows of the Company for the nine month period ended September 30, 2014. Operating results for the nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

NOTE 2 – GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. As of September 30, 2014 and December 31, 2013, the Company had a working capital deficit and has incurred significant losses since inception. Further losses are anticipated raising substantial doubt as to the Company’s ability to continue as a going concern. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company plans to acquire sufficient capital from its investors with which to pursue its business plan. There can be no assurance that the future operations will be significant and profitable, or that the Company will have sufficient resources to meet its objectives. There is no assurance that the Company will be successful in raising additional funds.

 

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NOTE 3 – ORGANIZATION AND NATURE OF BUSINESS

 

Greenfield Farms Food, Inc. (“GRAS” or the "Company") was incorporated under the laws of the State of Nevada on June 2, 2008. In October 2013, the Company entered into an Asset Purchase Agreement (the “Agreement”) with COHP, LLC (”COHP”) through which the Company acquired certain of the assets and liabilities of COHP including the operations of Carmela’s Pizzeria (“Carmela’s”) through a newly formed wholly-owned subsidiary Carmela’s Pizzeria CO, Inc. Carmela's Pizzeria presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores.

 

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 year end.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

The fair values of cash and cash equivalents pre-paid expenses, accounts receivable, inventory, deferred charges, accounts payable and accrued expenses, and notes payable approximate their carrying amounts because of the short maturities of these instruments.

 

The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.

 

Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).

 

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Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.

 

The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

The three hierarchy levels are defined as follows:

 

Level 1 – Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

The Company has determined that its derivative liabilities related to convertible notes payable fall under Level 2. Derivative liabilities were $345,044 and $251,137 at September 30, 2014 and December 31, 2013, respectively.

 

Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap market.

 

Income Taxes

 

The Company has elected to be taxed as a “C” corporation. Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income 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. There were warrants outstanding convertible into 53,965,942 shares of common stock at September 30, 2014. Basic and diluted loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.

 

8

  

Dividends

 

The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.

 

Impairment of Long-Lived Assets

 

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

 

Advertising Costs

 

The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $10,976 and $24,787 during the nine month periods ended September 30, 2014 and 2013, respectively.

 

Property and Equipment

 

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the three to five year estimated useful lives of the assets. Depreciation expense totaled $16,579 and $13,293 for the nine month periods ended September 30, 2014 and 2013, respectively.

 

Revenue Recognition

 

The Company records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product/service is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products/services.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. During the nine months ended September 30, 2014, the Company did not issue any stock-based payments to its employees.

 

Accounting Pronouncements

 

No accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.

 

NOTE 5 – NOTES PAYABLE

 

The Company has outstanding a promissory note for $50,000 issued in 2011. The note is secured by the Company’s common stock, bears 8% interest, and was due on January 26, 2012. The note is currently in default. Total interest expense on this note was $2,992 for the nine months ended September 30, 2014. Additional notes in the amount of $300 were issued in the nine months ended September 30, 2014 and accrued interest expense of $6 during the nine month period ended September 30, 2014.

 

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NOTE 6 – NOTES PAYABLE – RELATED PARTIES

 

Entities controlled by officers or directors have loaned monies to Carmela’s for working capital purposes. The loans are non-interest bearing and have no specific terms of repayment. A related party loan from KB Air is secured by all the assets of the Company. The total amount due under these notes was $100,687 as of December 31, 2013. An additional $136,389, net of payments, was loaned during the nine month period ended September 30, 2014 for total loans outstanding at September 30, 2014 of $237,076. In addition, there is $31,400 in notes payable to parties related to the Company with interest expensed during the nine month period ended of $1,879. Accordingly there was $268,476 in related party notes payable at September 30, 2014.

 

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

Effective with the Share Exchange at October 1, 2013, the outstanding convertible debt of GRAS was assumed by Carmela’s, the accounting acquirer, incorporating the following notes and transactions:

 

On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion. This note is currently in default. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the $6,350 remaining balance along with $3,340 in accrued interest on the this note to 27,685,715 shares at a price of $0.00035 per share. The remaining balance of the note after the conversions was $-0-. An $84,610 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On August 13, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $20,000 balance along with $1,600 in accrued interest on this note to 56,614,286 shares at a price of $0.00034 per share. The remaining balance of the note after the conversions was $-0-. A $123,850 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $53,000 with an interest rate of 8% per annum due on October 30, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $53,000 balance along with $2,120 in accrued interest on this note to 137,800,000 shares at a price of $0.0004 per share. The remaining balance of the note after the conversions was $-0-. A $259,903 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On April 15, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $15,500 with an interest rate of 8% per annum due on November 15, 2013. The note is convertible by the holder after 180 days at 40% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $15,500 balance along with $620 in accrued interest on this note to 40,300,000 shares at a price of $0.0004 per share. The remaining balance of the note after the conversions was $-0-. A $51,905 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

On May 14, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on February 13, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued notices of conversion to convert the entire $32,500 balance along with $1,300 in accrued interest on this note to 75,111,111 shares at a price of $0.00045 per share. The remaining balance of the note after the conversions was $-0-. A $111,209 decrease in derivative liability was recorded as a result of these conversions.

 

10

  

On June 24, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $7,500 with an interest rate of 8% per annum due on March 19, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert the entire $7,500 balance along with $300 in accrued interest on this note to 17,333,333 shares at a price of $0.00045 per share. The remaining balance of the note after the conversions was $-0-. A $27,314 decrease in derivative liability was recorded as a result of these conversions.

 

On September 19, 2013 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $32,500 with an interest rate of 8% per annum due on June 12, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. During the three month period ended March 31, 2014 Asher Enterprises issued a notice of conversion to convert $16,600 in principal on this note to 36,888,889 shares at a price of $0.00045 per share. The remaining balance of the note after those conversions was $15,900. In April 2014, the remaining balance of this note was acquired by CareBourn Capital, which converted the entire remaining balance of $15,900 plus $1,378 in interest into 38,395,133 shares at a price of $0.00045 per shares. The remaining balance of this note after these conversions was $-0- at June 30, 2014. A $52,025 decrease in derivative liability was recorded as a result of these conversions.

 

As of December 31, 2013 there was a total of $11,133 due to an unaffiliated Trust in convertible notes payable that were convertible at 45% of the lowest trading price in the thirty trading days before the conversion creating a derivative liability. During the nine months ended September 30, 2014 an additional $15,100 was loaned under the same conversion terms but are not convertible until six months following their issuance date. Also during that period a total of $7,043 was repaid on these notes. During the three month period ended March 31, 2014 the Trust issued a notice of conversion to convert $2,700 in principal on these notes to 6,000,000 shares at a price of $0.00045 per share. The remaining balance of these notes after the conversion and payments was $19,190 at September 30, 2014. A $14,013 decrease in derivative liability was recorded as a result of the conversion.

 

At December 31, 2013, an $18,000 unsecured demand promissory note was outstanding with an interest rate of 8% convertible to common stock at 45% of the lowest trading price in the thirty trading days before the conversion, creating a derivative liability. During the three month period ended March 31, 2014 the holder of this note issued notices of conversion to convert the entire $18,000 balance on this note plus $138 in accrued interest to 36,643,111 shares at a price of $0.0005 per share. The remaining balance of the note after the conversions was $-0-. A $61,473 decrease in derivative liability was recorded as a result of these conversions.

 

At December 31, 2013, the Company had an outstanding convertible promissory note to CareBourn Capital in the principal amount of $2,010 with an interest rate of 8% per annum due on December 19, 2013. During the quarter ended December 31, 2013, CareBourn Capital converted the $2,010 balance on this note plus $416 in accrued interest to 7,851,742 shares at a price of $0.0005 per share. The remaining balance of the note after the conversions was $-0-. A $22,915 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the time of conversions.

 

11

  

On October 1, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $9,300 with an interest rate of 8% per annum due on June 1, 2014 upon the conversion of $9,300 in accounts payable to Cresthill. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issuance date. During the quarter ended March 31, 2014 this note was assigned to CareBourn Capital, which converted the entire note balance of $9,300 along with $145 in accrued interest into 26,984,771 shares of common stock at $0.0005 per share. The remaining balance of this note was $-0- after this conversion and a loss on the conversion of $39,683 was recorded for the difference in the market value and the conversion price on the date of conversion.

 

On October 29, 2013, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $25,000 with an interest rate of 8% per annum due on October 29, 2014 in payment of a $25,000 fee for work performed to complete the acquisition of the assets of Carmela’s Pizzeria. This note is convertible by the holder at any time at 45% of the lowest trading price in the ninety trading days before the conversion beginning six months from the issue date. The entire balance of this note remained outstanding at September 30, 2014.

 

On November 25, 2013, the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $22,500 with an interest rate of 8% per annum due on August 27, 2014. The note is convertible by the holder after 180 days at 45% of the lowest trading price in the thirty trading days before the conversion. In April 2014, this note was sold and assigned to two entities unaffiliated with Asher or the Company. During the three month period ended September, 2014 one holder of this note issued a notice of conversion to convert $13,500 in principal and $657 in interest on this note to 62,919,453 shares at a price of $0.00023 per share. The remaining balance of the note after those conversions was $9,000. A $20,251 decrease in derivative liability was recorded as a result of this conversion.

 

On December 9, 2013, the Company issued a convertible promissory note to CareBourn Capital in the principal amount of $5,000 with an interest rate of 8% per annum due on June 9, 2014. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

In January 2014, the Company issued a total of $10,000 in convertible promissory notes to CareBourn Capital with an interest rate of 8% per annum due in July 2014. These notes are convertible by the holder at any time at 45% of the average of the three lowest trading prices in the ten trading days before the conversion. During the three month period ended September, 2014 CareBourn issued a notice of conversion to convert $3,966 in principal on these notes to 20,000,000 shares at a price of $0.0002 per share. The remaining balance of the note after those conversions was $6,034. An $8,782 decrease in derivative liability was recorded as a result of this conversion.

 

On February 18, 2014, the Company issued $62,500 in a convertible promissory note to CareBourn Capital with an interest rate of 8% per annum due in August 2014. This note is convertible by the holder at any time at 50% of the average of the three lowest trading prices in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

On March 3, 2014, the Company issued a convertible promissory note to LG Funding in the principal amount of $35,000 with an interest rate of 8% per annum due on February 25, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

12

  

On April 7, 2014, the Company issued a convertible promissory note to Adar Bays in the principal amount of $37,000 with an interest rate of 8% per annum due on April 1, 2015. The note is convertible by the holder after 180 days at 50% of the lowest closing bid price in the ten trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

On April 17, 2014, the Company issued a convertible promissory note to Beaufort Capital in the principal amount of $25,000 with an interest rate of 10% per annum due on October 17, 2014. The note is convertible by the holder after 180 days at 60% of the lowest closing bid price in the twenty trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

On July 15, 2014, the Company issued a convertible promissory note to Gregory Galanis in the principal amount of $13,500 with an interest rate of 8% per annum due on April 15, 2015, in exchange for $13,500 in debt owed Mr. Galanis for services rendered to the Company. The note is convertible by the holder after 180 days at 45% of the lowest closing bid price in the ninety trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

On September 1, 2014, the Company issued a convertible promissory note to Cresthill Associates in the principal amount of $12,500 with an interest rate of 8% per annum due on July 1, 2015, in exchange for $12,500 in debt owed Cresthill for services rendered to the Company. The note is convertible by the holder after 180 days at 45% of the lowest closing bid price in the thirty trading days before the conversion. The entire balance of this note remained outstanding at September 30, 2014.

 

Total interest expense on these notes was $10,589 for the nine months ended September 30, 2014.

 

A summary of the derivative liability related to convertible notes payable as of September 30, 2014 is as follows. These amounts do not include convertible notes that may not yet be convertible or that are currently in default. As of September 30, 2014, the total face value of convertible notes payable was $249,724.

 

Face Value		Balances 12/31/13				Issuance of new convertible notes				Amortization of discount on convertible Notes				Debenture conversions & payments nine months ended 9/30/14				Balances 9/30/14
2013 Notes		$	260,294				-				-			$	(217,204	)		$	43,090
2014 Notes			-			$	210,600				-				(3,966	)			206,634
Note discount		$	(55,423	)			(202,600	)		$	222,157				-				(35,866	)
Total		$	204,871			$	8,000			$	222,157			$	(221,170	)		$	213,858

 

NOTE 8 – DERIVATIVE LIABILITY

 

The Company has determined that the conversion features of certain of its notes represent an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, they are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the notes. Such discount will be accreted from the commencing date of conversion period to the maturity date of the notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet.

 

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The beneficial conversion feature included in the notes resulted in initial debt discounts of $243,600 and an initial loss on the valuation of the derivative liabilities of $218,492 based on the initial fair value of the derivative liabilities of $462,092. The fair value of the embedded derivative liabilities for notes not in default were calculated at the conversion commencement dates utilizing the following assumptions:

 

Note convertible date		1/30/14				2/5/14				2/21/14				3/3/14
Note amount		$	5,000			$	5,100			$	5,000			$	35,000
Stock price at convertible date		$	.0004			$	.0006			$	.0005			$	.0004
Expected life (years)			.24				.25				.25				.48
Risk free interest rate			.03	%			.03	%			.03	%			.05	%
Volatility			104.48	%			104.48	%			105.31	%			137.53	%
Initial derivative value		$	6,218			$	17,571			$	13,530			$	62,323

 

At September 30, 2014, the following notes remained convertible and not fully converted or in default. All convertible notes beyond their maturity dates totaling $111,624 in principal payable are valued assuming a six month term for purposes of calculating the derivative liability. The fair value of the embedded derivative liabilities on the outstanding convertible notes was calculated at September 30, 2014 utilizing the following assumptions:

 

Note convertible date		1/30/14				2/5/14				2/21/14				3/3/14				Matured
Note amount		$	5,000			$	5,100			$	5,000			$	35,000			$	111,624
Stock price at convertible date		$	.0003			$	.0003			$	.0003			$	.0001			$	0.001
Expected life (years)			.08				.10				.14				.041				.50
Risk free interest rate			.02	%			.02	%			.02	%			.04	%			.05	%
Volatility			103.73	%			146.69	%			146.69	%			116.04	%			120.52	%
6/30/14 derivative value		$	11,667			$	11,906			$	11,694			$	71,293			$	238,484

 

NOTE 9 – CAPITAL STOCK

 

Common Stock

 

The Company has authorized 950,000,000 common shares with a par value of $0.001 per share.

 

On October 31, 2013, the Company effected a 1 for 100 reverse split of its common stock whereby the 949,839,719 pre-split shares of common stock outstanding became 9,498,413 shares post-split. There was no change in authorized shares of the Company.

 

All share information presented in these financial statements and accompanying footnotes has been presented showing the historical changes in stockholders’ deficit of Carmela’s, the accounting acquirer in the Share Exchange, and including that of the Company following the Share Exchange as of October 31, 2013.

 

14

  

2014 Common Stock Issuances

 

During the nine months ended September 30, 2014, the Company issued 590,527,544 shares of common stock upon conversion of $228,839 in principal and interest payable on convertible notes representing a value of $0.00039 per share. In addition, we incurred loss on conversion of certain of the shares totaling $572,866 for a total cost to the Company of $801,705.

 

Preferred Stock

 

The Company has authorized 50,000,000 shares of preferred stock par value $0.001.

 

The Company authorized 100,000 Series A preferred shares and issued 96,623 Series A shares. The Series A shares have immediate voting rights equivalent to 7,000 shares of common stock for each Series A share and may be converted after a minimum one-year hold at the same rate. This gives effective control of the Company to the holders of the Series A preferred shares. The terms called for no conversion or Series A shares coming into the market from these sources until March 28, 2012 at the earliest. As of September 30, 2014 no conversion has taken place.

 

On July 15, 2013, the board of directors of the Company authorized the creation of the Series B Convertible Preferred Stock, which consists of up to 100,000 shares of preferred stock with par value of $0.001 per share and a stated value of $1.00 per share. A total of 44,000 shares of Series B Preferred Stock were issued on the conversion of debt payable by the Company, including $40,000 to the Company's then Chief Financial Officer, Henry Fong. The Series B Convertible Preferred is convertible to common stock at 100% of the stated value divided by 45% of the lowest trading price of the Company's common stock for the 90 trading days immediately preceding the Conversion Date. The Series B Preferred Stock has voting rights on an as if converted basis on the date of any vote to come before the Company's shareholders. As of September 30, 2014 no conversion has taken place.

 

On September 22, 2014, the Board of Directors approved the creation of the Series D Preferred Stock for the issuance of up to 1,000 shares of preferred stock with a par value of $0.001 per share. The terms of the series D preferred include the right to vote in aggregate on all shareholder matters equal to 51% of the total vote no matter how many shares of common stock or other voting stock of the Company are issued or outstanding in the future. The board approved the issuance of the 1,000 shares of series D preferred to Mr. Ronald Heineman, the Company’s Chief Executive Officer, or his assigns. This issuance was in consideration for services rendered to the Company and continuing to work for the Company without receiving significant payment for services and without the Company having the ability to issue shares of common stock as the Company does not have sufficient authorized but unissued shares of common stock to allow for any such issuances.

 

Warrants

 

In connection with the acquisition of the assets of Carmela’s Pizzeria, COHP, LLC and its assigns received warrants to purchase a total of 53,965,942 shares of the Company’s common stock for a period of five years in the amounts and exercise prices as follows: 17,988,648 at $0.015; 17,988,647 at $0.02; and 17,988,647 at $0.025. These warrants were valued utilizing the Black-Scholes pricing model for a total fair market value at issuance of $507,280.

 

NOTE 10 – SUBSEQUENT EVENTS

 

In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to September 30, 2014 to the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements other than those reported above.

 

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

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

Forward Looking Statements

 

We make certain forward-looking statements in this report. Statements that are not historical facts included in this Form 10-Q are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ from projected results. Such statements address activities, events or developments that the Company expects, believes, projects, intends or anticipates will or may occur, including such matters as future capital, debt restructuring, pending legal proceedings, business strategies, expansion and growth of the Company's operations, and cash flow. Factors that could cause actual results to differ materially ("Cautionary Disclosures") are described throughout this Form 10-Q. Cautionary Disclosures include, among others: general economic conditions, the strength and financial resources of the Company's competitors, environmental and governmental regulation, labor relations, availability and cost of employees, material and equipment, regulatory developments and compliance, fluctuations in currency exchange rates and legal proceedings. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions "Risk Factors," "Management's Discussion and Analysis or Plan of Operation," "Description of Business," as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "will," "would," and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by the Cautionary Disclosures. The Company disclaims any obligation to update or revise any forward-looking statement to reflect events or circumstances occurring hereafter or to reflect the occurrence of anticipated or unanticipated events.

 

The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the factors discussed in the section entitled "Risk Factors" and the following:

 

·	The effect of political, economic, and market conditions and Geopolitical events;
·	Legislative and regulatory changes that affect our business;
·	The availability of funds and working capital;
·	The actions and initiatives of current and potential competitors;
·	Investor sentiment; and
·	Our reputation.

 

We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this report.

 

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Overview

 

With the acquisition of the operation of Carmela’s Pizzeria in October 2013, our operations now consist of Carmela's Pizzeria’s, which presently has three Dayton, Ohio area locations offering authentic New York style pizza. Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Carmela’s has been noted in Dayton Daily News as one of “The Best Pizzerias” in Dayton.

 

Effective with the acquisition, Carmela’s is treated as the continuing reporting entity that acquired the Company. The quarterly and annual reports filed after the transaction, including this report, have been prepared as if Carmela’s (accounting acquirer) were the legal successor to the Company’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Carmela’s for all periods prior to the share exchange; and consolidated with the Company from the date of the share Exchange. All share and per share amounts of Carmela’s have been retroactively adjusted to reflect the legal capital structure of the Company.

 

LIQUIDITY AND CAPITAL RESOURCES

 

GENERAL. Overall, we had a net loss of $1,001,591 for the nine months ended September 30, 2014. During the nine month period, we had cash flow used by operations of $303,658, net cash used in investing activities of $898, and cash flows provided by financing activities of $368,093. At the end of the nine month period ended September 30, 2014, our cash balance was $68,559.

 

CASH FLOWS FROM OPERATING ACTIVITIES. Net cash flow used in operating activities was $303,658, which included non-cash adjustments to derivative liabilities from convertible notes payable totaling $122,345 and loss on conversion of debt of $572,866, all related to our convertible notes outstanding. The adjustments to reconcile the net loss to net cash for changes in assets and liabilities for the period ended September 30, 2014 totaled $(13,858) with the decrease in checks written in excess of cash balance of $13,555 as the single largest change.

 

CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities was $898 that included the purchase of equipment for the Carmela’s restaurants.

 

CASH FLOWS FROM FINANCING ACTIVITIES. For the nine months ended September 30, 2014, cash flows from financing activities was $368,093, which consisted primarily of proceeds from issuance of convertible notes payable of $200,005 and proceeds from notes payable related parties totaling $453,473 that was offset by $285,685 for payments made on notes payable related parties.

 

INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our operations will meet the requirements of our daily operations in the future. As we expect that funds from our operations will be insufficient to meet our operating requirements as a public company and for future expansion, we will need to seek other sources of financing to maintain liquidity. This will most likely include further convertible notes and other security instruments that will incur substantial dilution to our current stockholders.

 

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EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2014 as we look to secure additional funds to both stabilize and grow our business operations. Our management will review any financing options at their disposal and will judge each potential source of funds on its individual merits. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to or if we can, that the terms of such financing will be favorable or non-dilutive to us or our existing shareholders. We anticipate we will be required to issue additional promissory notes convertible into shares of our common stock at significant discounts to market prices that will result in significant dilution to our current stockholders.

 

INFLATION. Our management believes that inflation has not had a material effect on our results of operations, and does not expect that it will in the remainder of the fiscal year 2014.

 

OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet arrangements.

 

RESULTS OF OPERATIONS.

 

Nine month period ended September 30, 2014 versus September 30, 2013

 

We had a net loss of $1,001, 591 for the nine months ended September 30, 2014 as compared to a loss of $80,296 for the nine months ended September 30, 2013. Our gross sales in the nine months ended September 30, 2014 were $1,233,690 with cost of goods sold of $1,020,701 for a gross profit of $212,989. This compared to gross sales of $877,765, costs of goods sold of $633,884 and gross profit of $243,881 for the nine months ended September 30, 2013. Our sales in the 2014 period increased $355,925, or approximately 40% versus 2013 primarily due to sales at the Brookville location. Cost of goods sold increased by approximately 61% to approximately 83% of sales in 2014 versus 72% of sales in 2013 continuing a trend from the June 30 quarter. This increase is primarily the result of increased commodity prices including cheese and meat products. We can expect this trend to continue into the fourth quarter of 2014 and possibly 2015 if commodity prices maintain their current or higher levels.

 

Total operating expenses were $510,384 for the nine months ended September 30, 2014 versus $324,177 for the nine months ended September 30, 2013 resulting in loss from operations of $297,395 and $80,296 in the 2014 and 2013 periods, respectively. The single most significant factor for the increase in operating expenses was the consolidation of the operations of Carmela’s with that of the Company and the costs of operating a publicly traded entity. This included a roughly $95,700 increase in legal, accounting and professional fees. In addition, increases in wages and taxes, bank and credit card processing charges from operating up to four stores in the 2014 period also contributed to the increase.

 

Other Expenses

 

Other expenses were $704,196 for the nine months ended September 30, 2014 as compared to $0 for the nine months ended September 30, 2013. This is due to the addition of convertible promissory notes in the 2014 period with the combination of Carmela’s and the Company, as Carmela’s had no convertible debt prior to the transaction in October 2013. The primary expense for the corresponding derivative liabilities include derivative expense of $242,804 along with change in derivative liability of $(351,497); and amortization expense on discount of debt of $222,157. The most significant expense was loss on conversion of debt totaling $572,866 in the nine months ended September 30, 2014 as approximately $211,000 in principal and interest on convertible notes was converted to stock at significant discounts to market up to 65%. These losses applied only to convertible notes that are in default at the time of conversion. The derivative liability expenses will continue in future periods as the Company continues to issue convertible notes and those notes experience changes in derivative liabilities with changes in the market price of the Company’s common stock and those notes are converted at discounts to market causing losses on conversion. These losses may not be as large, however, as the conversion terms of the Company’s current convertible notes outstanding are slightly more favorable to the Company with discounts ranging from 65% to 40% off of market instead of predominantly 65%.

 

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Three month period ended September 30, 2014 versus September 30, 2013

 

We had a net loss of $230,024 for the three months ended September 30, 2014 as compared to a loss of $19,443 for the three months ended September 30, 2013. Our gross sales in the three months ended September 30, 2014 were $420,484 with cost of goods sold of $348,526 for a gross profit of $71,958. This compared to gross revenues of $301,566, costs of goods sold of $215,824 and gross profit of $85,742 for the three months ended September 30, 2013. Our sales in the 2014 period increased $118,918, or approximately 40% versus 2013 primarily due to increased store-to-store sales as well as more aggressive couponing in the 2014 period. Cost of goods sold increased by approximately 62% to approximately 83% of sales in 2014 versus 72% of sales in 2013. This increase is primarily the result of higher food commodity cost primarily for meat and cheese products.

 

Total operating expenses were $140,046 for the three months ended September 30, 2014 versus $105,185 for the three months ended September 30, 2013 resulting in loss from operations of $68,088 and $19,443 in the 2014 and 2013 periods, respectively. The single most significant factor for the increase in operating expenses was the consolidation of the operations of Carmela’s with that of the Company and the costs of operating a publicly traded entity. This included a roughly $8,000 increase in legal, accounting and professional fees. In addition, wages and taxes increased significantly in 2014 as a result of changes in locations and increased employee needs in the normal course of business.

 

Other Expenses

 

Other expenses were $161,936 for the three months ended September 30, 2014 as compared to $0 for the three months ended September 30, 2013. This is due to the addition of convertible promissory notes in the 2014 period with the combination of Carmela’s and the Company, as Carmela’s had no convertible debt prior to the transaction in October 2013. The primary expense for the corresponding derivative liabilities include derivative expense of $49,542 along with change in derivative liability of $31,208; and amortization expense on discount of debt of $72,567. This expense will continue in future periods as the Company continues to issue convertible notes and those notes experience changes in derivative liabilities with changes in the market price of the Company’s common stock and those notes are converted at discounts to market causing losses on conversion. These losses may not be as large, however, as the conversion terms of the Company’s current convertible notes outstanding are more favorable to the Company with discounts ranging from 65% to 40% off of market instead of predominantly 65%.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not Applicable.

 

ITEM 4T. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

 

19

  

To evaluate the effectiveness of our internal controls over financial reporting, we have adopted the framework prescribed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We believe that this framework will assist in the provision of reasonable assurance of the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations. In adopting the COSO framework, we maintain a control environment, perform risk assessments, carry out control activities, emphasize quality information and effective communication, and perform monitoring. In the maintenance of a control environment, we are committed to integrity and ethical values as well as to competence. We strive to assign authority and responsibility in a manner that supports our internal controls, and we also maintain human resources policies and procedures designed to support our internal controls. Our risk assessments are designed to ensure the achievement of company-wide and process-level objectives as well as to identify and analyze risks while managing change. We believe that all of these components together form a foundation for sound internal control through directed leadership, shared values and a culture that emphasizes accountability for control.

 

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

 

The Certifying Officers have also concluded, based on our evaluation of our controls and procedures that as of September 30, 2014, our internal controls over financial reporting are not effective and provide a reasonable assurance of achieving their objective.

 

Due to the small size and limited financial resources, we have inadequate segregation of duties within accounting functions and results in an overall lack of internal control. As a result, there is little segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of a few individuals. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements under all potential conditions. Therefore, effective internal control over financial reporting provides only reasonable, and not absolute, assurance that a restatement of our financial statements would be prevented or detected.

 

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

 

20

  

PART II

 

ITEM 1. LEGAL PROCEEDINGS.

 

We are not presently involved in any litigation that is material to our business. We are not aware of any pending or threatened legal proceedings. In addition, none of our officers, directors, promoters or control persons has filed or been involved for the past five years:

 

·	in any bankruptcy petition
·	in any conviction of a criminal proceeding or involved in a pending criminal proceeding (excluding traffic violations and minor offenses)
·	is subject to any order, judgment or decree enjoining, barring suspending or otherwise limiting their involvement in any type of business, securities, or banking activities,
·	or has been found to have violated a federal or state securities or commodities law.

 

We may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the three month period ended September 30, 2014, we issued 82,919,453 shares of our common stock upon the conversion of convertible notes payable totaling $18,123 in principal and interest or $0.0022 per share.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

None

 

ITEM 5. OTHER INFORMATION.

 

None

 

21

  

ITEM 6. EXHIBITS.

 

Exhibits:
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

 

Exhibits required to be filed by Item 601:

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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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, there unto duly authorized. 

 

	Greenfield Farms Food, Inc.
Date: November 19, 2014	By:	/s/ Ronald Heineman
		Ronald Heineman Principal Executive Officer
Date: November 19, 2014	By:	/s/ Henry Fong
		Henry Fong Principal Financial Officer

 

 

 

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